The National Law Review is pleased to bring you information regarding the upcoming ABA Conference on Business Acquisition Negotiations:
When
November 01 – 02, 2012
Where
The National Law Review is pleased to bring you information regarding the upcoming ABA Conference on Business Acquisition Negotiations:
When
November 01 – 02, 2012
Where
The National Law Review recently published an article by David M. Katz of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. regarding the NLRB and Costco:
There is no denying that the NLRB has recently devoted significant attention to employee’s use of social media. Since August 2011, the Board’s Acting General Counsel, Lafe Solomon, issued three reports outlining his view of how the NLRA applies to employers’ social media policies and employees’ social media postings. Click here and here for our commentary on those GC reports and for links to the reports themselves. Until earlier this month, however, the Board itself had not weighed in on social media policies.
On September 7, the NLRB issued a Decision and Order (which you can access here) invalidating Costco Wholesale Corporation’s electronic posting rule, found in its employee handbook, that prohibited employees from making statements that “damage the Company, defame any individual or damage any person’s reputation.” With little analysis, the Board found Costco’s policy overly broad, concluding that “the rule would reasonably tend to chill employees in the exercise of their [NLRA] Section 7 rights,” as employees would “reasonably construe the language to prohibit Section 7 activity.” Section 7 of the NLRA provides to all employees—unionized and non-unionized—the right to engage in protected “concerted activities for the purpose of collective bargaining or other mutual aid or protection.” Such protected concerted activity includes, for example, the right to protest an employer’s treatment of its employees or other working conditions.
The Costco decision adopts the legal reasoning set forth in the three GC reports, much of which is based upon traditional principles developed prior to the advent of social media as we know it. And, similar to the three GC reports, the Board’s decision in Costco fails to articulate any social media-specific criteria to assist employers in crafting policies that do not inhibit employee rights under the NLRA, although it does offer a couple of hints.
First, the Board distinguished prior cases addressing rules prohibiting employee “conduct that is malicious, abusive or unlawful,” including rules concerning employees’ “verbal abuse,” “profane language,” “harassment,” and “conduct which is injurious, offensive, threatening, intimidating, coercing, or interfering with” other employees. Criticizing Costco’s electronic posting rule, the Board stated that its social media policy “does not present accompanying language that would tend to restrict its application.” If Costco had been more specific, then, by providing examples of prohibited conduct, its policy may have passed muster. . In doing so, employers should focus on the types of electronic postings that they truly seek to prohibit, such as defamatory, harassing or other egregious comments, or disclosure of employer trade secrets, proprietary information, or co-workers’ private information.
The second hint dropped by the Board in Costco is the suggestion that an employer’s inclusion of a savings clause or disclaimer may protect the employer from allegations that a social media policy inhibits employees’ protected concerted activities. The Board concluded that Costco’s “broad” prohibition against making statements that “damage the Company” or “damage any person’s reputation” “clearly encompasses concerted communications,” but continued by noting that “there is nothing in the rule that even arguably suggests that protected communications are excluded from the broad parameters of the rule.” This statement signals that the Board may have found Costco’s electronic posting rule acceptable had the rule included language specifically exempting protected concerted activities under the NLRA, which is in contrast to the GC’s position on such savings clauses.
As we noted in our previous postings on the subject, in light of the Board’s clear stance on social media policies (now confirmed in its Costco decision), and its application to both unionized and non-unionized employers, we recommend that all employers rigorously review their social media policies to ensure that they do not contain “broad” prohibitions that would not survive NLRB scrutiny.
©1994-2012 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
The National Law Review is pleased to bring you information regarding the upcoming ABA Conference on Business Acquisition Negotiations:
When
November 01 – 02, 2012
Where
The National Law Review is pleased to bring you information regarding the upcoming ABA Conference on Business Acquisition Negotiations:
When
November 01 – 02, 2012
Where
The National Law Review recently published an article regarding Unions and Michigan Ballots written by Gerald F. Lutkus of Barnes & Thornburg LLP:
The union-backed “Protect Our Jobs” initiative took two steps closer Monday to being on the November ballot in Michigan. The initiative would make collective bargaining a constitutional right under the Michigan Constitution for both public and private employees.
After the Michigan Board of Canvassers originally stalemated on whether the initiative could go on the ballot, the Protect Our Jobs Committee filed suit and Monday afternoon, the Michigan Court of Appeals by a 2-1 vote ordered the Board of Canvassers to proceed with putting the initiative on the ballot.
Though an appeal to the Michigan Supreme Court seems likely, on Monday evening, the state Board of Canvassers certified the proposition for placement on the November ballot. A coalition of union groups lead by the AFL-CIO, the United Auto Workers and the Michigan Education Association had previously submitted petitions with nearly 700,000 signatures — twice the number needed.
A Reuters News Service report quotes critics who have attacked the proposition as a “death warrant” for Michigan’s economy. Sara Wurfel, a spokeswoman for Michigan Gov. Rick Snyder, told Reuters that the governor remained opposed to the measure because “it has potentially far-reaching implications and ramifications to numerous existing statutes that would turn back progress and appear to go well beyond what paid petition gatherers portrayed.”
© 2012 BARNES & THORNBURG LLP
The National Law Review is pleased to bring you information regarding the upcoming ABA Conference on Business Acquisition Negotiations:
When
November 01 – 02, 2012
Where
Four years ago, New York enacted a Social Security Number Protection Law, N.Y. Gen. Bus. Law, §399-dd, aimed at combating identity theft by requiring employers to better safeguard employee social security numbers in their possession. (Click here for our summary of the law). Now, New York is going one step further with its passage of two new Social Security Number Protection laws.
First a note: as of November 12, 2012, §399-dd – the original Social Security Protection Law – will be re-codified as new §399-ddd, and it will also add the statutory language of the first of these two new laws, which prohibits employers from hiring inmates for any job that would provide them with access to social security numbers of other individuals.
The second law, which is codified as a separate new §399-ddd, enhances the requirements for safeguarding employee social security number while also adding similar protections for consumers. This law prohibits companies from requiring employees and consumers to disclose their social security numbers or to refuse any service, privilege or right to the employee or customer for refusing to make that disclosure, unless (i) required by law, (ii) subject to one of its many exceptions, or (iii) encrypted by the employer. This law also applies to any numbers derived from the individual’s social security number, which means that it extends, for example, to situations where the company asks the individual for the last four digits of their number. It is unclear whether this law will prove effective in accomplishing its objectives.
First, it contains an exception with the potential to swallow the rule – where the individual consents to the use of the social security number, which many individuals may freely provide absent knowledge of this law’s protections. Even with an employee’s consent, however, employers must still be mindful that other provisions of the original Social Security Number Protection Law requires them to institute certain safeguards to protect against the number’s disclosure. And further, even if the employer obtains the employee’s consent, the original law still prohibits employers from utilizing an employee’s social security account number on any card or tag required for the individual to access products, services or benefits provided by the employer.
Second, the penalties for violations are minimal – up to $500 for the first violation and $1,000 for each violation thereafter, and can be avoided where the employer shows the violation was unintentional and occurred notwithstanding the existence of procedures designed to avoid such violations. Further, there is no private right of action, and only the Attorney General can enforce the law.
Governor Cuomo signed the acts into law on August 14, 2012. The inmate law will take effect on November 12, 2012 and the disclosure law will take effect thirty days later on December 12, 2012. Now if he would only sign the recently passed wage deduction law.
©1994-2012 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
The National Law Review is pleased to bring you information regarding the upcoming ABA Conference on Business Acquisition Negotiations:
When
November 01 – 02, 2012
Where
The Public Companies Group of Schiff Hardin LLP recently had an article regarding Derivatives published in The National Law Review:
Over the last several decades, the use of derivatives as a tool to mitigate and control risk has expanded significantly. Despite well-publicized abuses involving derivatives, the efficacy of derivatives as a means of managing economic and other forms of risk remains widely accepted. The evolving mix of users of derivatives in the last ten years has also impacted the derivatives landscape. Traditionally, commercial hedgers such as processors, mills and large corporations used derivatives to manage risks; today, while commercial hedgers remain active,much of the increase in volume in derivatives is attributable to non-traditional end-users, such as public companies, which have been active users of derivatives, most notably interest rate and foreign currency hedging instruments.
This article provides a brief primer on the various uses of derivatives, including the use of derivatives by public companies to manage risks. It also addresses a number of questions arising out of the Dodd-Frank Act, which provides a new level of regulation over derivatives.
Put simply, a derivative is a contract whose value is based upon (or derived from) the value of something else. Virtually every derivative, from the most complex to the most mundane, falls within this definition. The “something else,” which is often referred to as the “underlying” or the “commodity,” can be a security (e.g., a share of company stock or a U.S. Treasury note), a commodity (e.g., gold, soybeans or cattle), an index (e.g., the S&P 500 index), a reference rate (e.g., LIBOR), or virtually anything else to which a value can be assigned and validated. As long as the value of the contract is based on or “derived” from the value of something else, the contract is a derivative.
Conceptually, derivatives take many different forms. At the highest and broadest level, there are two types of derivatives: (1) exchange-traded derivatives, and (2) over-the-counter, or “OTC,” derivatives, which are not traded an exchange.
Exchange-traded derivatives include futures, options on futures, security futures and listed equity options. OTC derivatives are privately negotiated contracts conducted almost entirely between institutions on a principal-to-principal basis and designed to permit customers to adjust individual risk positions with greater precision. OTC derivatives include swaps, options, forwards and hybrids of these instruments.
In July 2010, President Obama signed into law the Dodd-Frank Act. Title VII of the Dodd-Frank Act imposes a new regulatory regime on OTC derivativesand the market for those derivatives. The primary regulators are the Commodity Futures Trading Commission (“CFTC”) for “swaps” and the SEC for “security-based swaps.” Subject to certain exceptions, [1] the term “swap” is broadly defined to include most types of products now known as OTC derivatives, including interest rate, currency, credit default and energy swaps. “Security-based swap” is a much narrower category of transactions based on a single security or loan or a “narrow-based security index” (as defined under the Commodity Exchange Act or “CEA”).
The CFTC’s general directive from Congress under the Dodd-Frank Act is to cause as many swaps as possible to be cleared by central clearing entities in order to reduce “systemic risk” to the financial markets, and to have as many swaps as possible traded on CFTC-regulated exchanges, or on or through other CFTC-regulated entities, in order to increase transparency in the markets. The Dodd-Frank Act thus makes it unlawful for a person to enter into a swap without complying with the Commodity Exchange Act and the rules published by the CFTC.
Fortunately, most public company users of derivatives can make use of an exemption under the Dodd-Frank Act. Under Title VII, an “end user” generally means a company that is not a “financial entity” and that uses derivatives to hedge or mitigate commercial risk. The concept is intended to include industrial corporations and other non-financial enterprises that use swaps on interest rates, foreign currencies, energy, commodities and other derivatives, as appropriate to their businesses, to hedge their business risks. A so-called “end-user exemption” from the clearing and exchange trading requirements is generally available to counterparties that (1) are not financial entities, (2) are hedging their own commercial risks and (3) notify the CFTC or SEC, as applicable, how they generally meet their financial obligations associated with entering into uncleared swaps. A public company that relies on the exemption is also required to obtain the approval of its board of directors or other governing body.
As end-users, public companies often use derivatives to manage various risks associated with running a large enterprise, including interest rate, foreign currency and commodity risk. According to a recent study, 29 of the 30 companies that comprise the Dow Jones Industrial Average (DJIA) use derivatives. Similarly, a study has found that two-thirds of companies with sales of more than $2 billion use OTC derivatives and more than half of all companies that have sales between $500 million and $2 billion are “very active” in derivatives markets.
Further, the International Swaps and Derivatives Association conducted a survey on the use of derivatives by Fortune Global 500 companies and found that 94% of these companies use derivatives to manage business and macroeconomic risks. According to the survey, the most widely used instruments were foreign exchange and interest rate derivatives. Many industries reported participation at rates greater than 90%, including financial companies (98%), basic materials companies (97%), technology companies (95%), and health care, industrial goods and utilities (92%).
Public companies typically use derivatives to manage interest rate risk and foreign currency risk and to minimize accounting earnings volatility and the present value of their tax liabilities. A company, for instance, may use derivatives to offset increases in the price of commodities it uses in manufacturing or its other operations. Further, large public companies borrow and lend substantial amounts in credit markets. In doing so, they are exposed to significant interest rate risk — they face substantial risk that the fair values or cash flows of interest sensitive assets or liabilities will change if interest rates increase or decrease. These companies also have significant international operations. As a result, they are also exposed to exchange rate risk — the risk that changes in foreign currency exchange rates will negatively impact the profitability of their international businesses. To reduce these risks, companies enter into interest rate and foreign currency swaps, forwards and futures as a hedge against potential exposures.
As a result of the Dodd-Frank Act’s regulation of derivatives, a number of questions arise that public companies must consider (and revisit often as the regulatory landscape changes):
In light of the Dodd-Frank Act and various rulemakings of the CFTC and SEC since its passage, the derivatives markets are undergoing an unprecedented regulatory and structural evolution that will present public company end-users of derivatives with both compliance and disclosure challenges, as well as new opportunities. Public companies should continually assess their use of derivatives and the potential implications under the Dodd-Frank Act as this regulatory regime continues to evolve.
1 Among the excepted categories are options on securities subject to the Securities Act of 1933 and the Securities Exchange Act of 1934, contracts for the sale of commodities for future delivery and certain physically settled forward contracts.
© 2012 Schiff Hardin LLP
