Tag: Regulatory

Wisconsin Eliminates Income Tax Disparity on Health Coverage for Adult Children

Posted on November 9, 2011 in the National Law Review an article by attorneys Kelli A. Toronyi, Charles P. Stevens and Kirk A. Pelikan of Michael Best & Friedrich LLP regarding Wis. Act 49.:

On November 4, 2011, Governor Walker signed into law 2011 Senate Bill 203 now known as 2011 Wis. Act 49. The bill, which received large bipartisan support among Wisconsin legislators, exempts from Wisconsin income tax the value of health coverage provided to certain adult children.

Background

Prior to 2010, most employers’ health plans provided coverage for children of employees up to age 19, or up to age 23 if the child was a full time student. Effective January 1, 2010, Wisconsin imposed a new rule requiring insurance carriers and certain self-funded governmental plans to provide eligibility for coverage for children through age 26 (up to the day before the child’s 27th birthday).

On March 23, 2010, the federal Patient Protection and Affordable Care Act (“PPACA”) was enacted. It required employer health plans to cover older children through age 25 (up to the day before the child’s 26th birthday), effective for calendar year health plans on and after January 1, 2011. Under the then current federal Internal Revenue Code, however, this coverage would be considered taxable income to some parents.

Then a week later on March 30, 2010, Congress amended the federal Internal Revenue Code to exclude from taxable income health coverage that a taxpayer receives for a child up to the end of the calendar year in which the child reaches age 26. Thus, the imputed income problem was solved for federal tax purposes.

In June of 2011, Wisconsin modified its insurance eligibility rules to adopt the federal eligibility rules under PPACA, effective January 1, 2012 (or upon expiration, extension, modification or renewal of an applicable collective bargaining agreement, if later). Thus, under both Wisconsin and federal law health coverage must be made available for children up through age 25. However, Wisconsin did not modify its tax rules, which continued to observe the previous version of the federal Internal Revenue Code, so the coverage of an employee’s child subject to Wisconsin income tax in some circumstances. To the extent such coverage has been taxable for Wisconsin income tax purposes, employers have been required to report this coverage as income on the employee’s W-2 form and to withhold the appropriate amount from wages.

Amendment to Wisconsin Tax Code Eliminates Obligation to Impute Income for Adult Child Health Coverage

With the enactment of 2011 Wis. Act 49, the Wisconsin Tax Code and the federal Internal Revenue Code are again consistent. Wisconsin employees are no longer subject to taxation for this coverage and Wisconsin employers are no longer required to impute as income the value of such coverage for tax withholding and W-2 reporting purposes. The new law is effective retroactive to January 1, 2011. This may result in some over withholding for some employees to date, but with a reduction in taxable income, this provides for a somewhat lower Wisconsin tax liability when tax returns are filed next year.

A copy of 2011 Wis. Act 49 can be found here.

© MICHAEL BEST & FRIEDRICH LLP

OSHA Seeking Comment on SOX Whistleblower Complaint Rules

 

 

 

 

Posted in the National Law Review an article by attorney Virginia E. Robinson of  Greenberg Traurig regarding OSHA  seeking public comment on interim final rules that revise its regulations on the filing and handling of Sarbanes-Oxley Act (SOX) whistleblower complaints

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The U.S. Department of Labor’s Occupational Safety and Health Administration (OSHA) is seeking public comment on interim final rules that revise its regulations on the filing and handling of Sarbanes-Oxley Act (SOX) whistleblower complaints.

OSHA, the entity charged with receiving and investigating SOX whistleblower complaints, issued the interim rules in part to implement the amendments to SOX’s whistleblower protections that were included in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Those amendments include an extension of the statute of limitations period for filing a complaint from 90 to 180 days. They also clarify that nationally recognized statistical rating organizations and subsidiaries of publicly traded companies are covered employers under SOX.

In addition to implementing the Dodd-Frank amendments, the interim rules also seek to improve OSHA’s handling of SOX whistleblower complaints, and will permit the filing of oral complaints and complaints in any language.

The planned amendments to those regulations were published in the Nov. 3 Federal Register. Comments must be received by Jan. 3, 2012, and may be submitted online, by mail, or by fax. The Depatment of Labor’s recent news release provides additional details.

©2011 Greenberg Traurig, LLP. All rights reserved.

Department of Labor Revises Conflict Disclosure Requirements for Labor Union Officials

Barnes & Thornburg LLP‘s Labor and Employment Law Department recently posted in the National Law Review an article about the United States Department of Labor’s Office of Labor-Management Standards adopted a final rule revising the information that union officials must disclose on Form LM-30, the Labor Organization Office and Employee Report.:

 

 

On Oct. 26, 2011, the United States Department of Labor’s Office of Labor-Management Standards adopted a final rule revising the information that union officials must disclose on Form LM-30, the Labor Organization Office and Employee Report. The new rule reverses the rule published by the agency in 2007 that significantly expanded the financial disclosure requirements of union officials. Effective Nov. 25, 2011, union officials are now required to disclose only payments and interests that involve “actual or likely” conflicts between the official’s personal financial interests and his or her duties to the union. The DOL explains that such conflicts include “payments, interests and transactions involving the employers whose employees the union represents or actively seek to represent, vendors and service providers to such employers, the official’s union or the union’s trust and other employers from which a payment could create a conflict.” The new rule applies to reports required by union officials with fiscal years beginning on or after Jan. 1, 2012.

Use of Form LM-30 for reporting purposes began in 1963 pursuant to Section 202 of the Labor-Management Reporting and Disclosure Act. Although the reporting requirements for Form LM-30 were significantly expanded in 2007, the DOL had issued a non-enforcement policy in 2009 that allowed filers to use either the 2007 expanded version of Form LM-30 or the 1963 version of the Form to disclose potential conflicts.

© 2011 BARNES & THORNBURG LLP

CMS Releases its CY 2012 OPPS Final Rule

Posted recently in  the National Law Review by Scott J. Thill of von Briesen & Roper, S.C.  regarding  CY 2012 Outpatient Prospective Pzyment System:

 

CMS has released its CY 2012 Outpatient Prospective Payment System (OPPS) Final Rule, effective January 1, 2012.  Notable provisions of the Final Rule include:

  • A market basket update of 1.9%.
  • Adjustment to payment rates for certain cancer hospitals.
  • A process for the APC Panel to evaluate requests for alternative supervision levels for hospital outpatient therapeutic services and issue recommendations to CMS on the same.
  • The addition of three quality measures for hospital outpatient departments to report for purposes of the CY 2014 and CY 2015 payment determinations.  The new measures include: (i) a measure relating to cardiac rehabilitation patient referrals; (ii) a measure relating to the use of a safe surgery checklist; and (iii) a measure relating to hospital outpatient department volume for selected surgical procedures.
  • A reduction in the number of randomly selected hospitals (from 800 to 450) for validating hospital outpatient quality reporting data for the CY 2013 payment determination.
  • Revisions to the hospital value-based purchasing program.
  • A process for physician-owned hospitals to apply for an exception to the federal prohibition on expanding facility capacity in physician-owned hospitals.

Medicare Part B premiums for 2012 lower than projected

Recently posted in the National Law Review an article by U.S. Department of Human & Health Services regarding Medicare Part B premiums:

Health & Human Services

Affordable Care Act helps keep Medicare affordable 

The U.S. Department of Health and Human Services (HHS) announced that Medicare Part B premiums in 2012 will be lower than previously projected and the Part B deductible will decrease by $22. While the Medicare Trustees predicted monthly premiums would be $106.60, premiums will instead be $99.90. Earlier this year, HHS announced that average Medicare Advantage premiums would decrease by four percent and premiums paid for Medicare’s prescription drug plans would remain virtually unchanged.

Thanks to the Affordable Care Act, people with Medicare also receive free preventive services and a 50 percent discount on covered prescription drugs when they enter the prescription drug “donut hole.”  This year, 1.8 million people with Medicare have received cheaper prescription drugs, while nearly 20.5 million Medicare beneficiaries have received a free Annual Wellness Visit or other free preventive services like cancer screenings.

“The Affordable Care Act is helping to keep Medicare strong and affordable,” said HHS Secretary Kathleen Sebelius. “People with Medicare are seeing higher quality benefits, better health care choices, and lower costs. Health reform is also strengthening the Medicare Hospital Insurance Trust Fund and cracking down on Medicare fraud.”

Medicare Part B covers physicians’ services, outpatient hospital services, certain home health services, durable medical equipment, and other items. In 2012, the “standard” Medicare Part B premium will be $99.90. This is a $15.50 decrease over the standard 2011 premium of $115.40 paid by new enrollees and higher income Medicare beneficiaries and by Medicaid on behalf of low-income enrollees.

The majority of people with Medicare have paid $96.40 per month for Part B since 2008, due to a law that freezes Part B premiums in years where beneficiaries do not receive cost-of-living (COLA) increases in their Social Security checks. In 2012, these people with Medicare will pay the standard Part B premium of $99.90, amounting to a monthly change of $3.50 for most people with Medicare. This increase will be offset for almost all seniors and people with disabilities by the additional income they will receive thanks to the Social Security cost-of-living adjustment (COLA). For example, the average COLA for retired workers will be about $43 a month, which is substantially greater than the $3.50 premium increase for affected beneficiaries. Additionally, the Medicare Part B deductible will be $140, a decrease of $22 from 2011.

“Thanks in part to the Affordable Care Act, people with Medicare are going to have more money in their pockets next year,” said Centers for Medicare & Medicaid Services (CMS) Administrator Donald Berwick, M.D. “With new tools provided by the Affordable Care Act, we are improving how we pay providers, helping patients get the care they need, and spending our health care dollars more wisely.”

Today, CMS also announced modest increases in Medicare Part A monthly premiums as well as the deductible under Part A. Monthly premiums for Medicare Part A, which pays for inpatient hospitals, skilled nursing facilities, and some home health care, are paid by just the 1 percent of beneficiaries who do not otherwise qualify for Medicare. Medicare Part A monthly premiums will be $451 for 2012, an increase of $1 from 2011. The Part A deductible paid by beneficiaries when admitted as a hospital inpatient will be $1,156 in 2012, an increase of $24 from this year’s $1,132 deductible. These changes are well below increases in previous years and general inflation.

For more information on how seniors are getting more value out of Medicare, please visit:http://www.healthcare.gov/news/factsheets/2011/10/medicare10272011a.html

For more information about the Medicare premiums and deductibles for 2012, please visit:https://www.cms.gov/apps/media/fact_sheets.asp

© Copyright 2011 U.S. Department of Human & Health Services

IRS Announces Retirement Plan Limitations for 2012 Tax Year – Most Limits Increased

Recently posted in the National Law Review an article written by Alyssa D. Dowse of von Briesen & Roper, S.C. regarding the cost of living adjustments for the 2012 tax year:

The Internal Revenue Service (“IRS”) has announced the cost of living adjustments for the 2012 tax year, which affect various dollar limitations for retirement plans. The IRS increased many of these limitations for the first time since 2009. Some limitations remain unchanged. The following chart highlights many of the noteworthy limitations for the 2012 tax year.

Plan Limit

2011

2012
Social Security Taxable Wage Base $106,800 $110,100
Annual Compensation (Code Section 401(a)(17)) $245,000 $250,000
Elective Deferral (Contribution) Limit for Employees who Participate in 401(k), 403(b) and most 457(b) Plans (Code Sections 402(g), 457(e)(15)) $16,500 $17,000
Age 50 Catch-Up Contribution Limit (Code Section 414(v)(2)(B)(i)) $5,500 $5,500
Highly Compensated Employee Threshold (Code Section 414(q)(1)(B)) $110,000 $115,000
Defined Contribution Plan Limitation on Annual Additions (Code Section 415(c)(1)(A)) $49,000 $50,000
Defined Benefit Plan Limitation on Annual Benefit (Code Section 415(b)(1)(A)) $195,000 $200,000
ESOP Distribution Period Rules—Payouts in Excess of Five Years (Code Section 409(o)(1)(C)) $985,000

$195,000

 $1,015,000

$200,000
Key Employee Compensation Threshold for Officers (Code Section (416(i)(1)(A)(i)) $160,000 $165,000

Plan sponsors should review employee communications and update such communications as appropriate based on the 2012 cost of living adjustments. Other cost of living adjustments can be found on the IRS  website: http://www.irs.gov/retirement/article/0,,id=96461,00.html.

©2011 von Briesen & Roper, s.c

 

 

Dodd-Frank Update — Several Regulatory and Legislative Proposals of Note

Recently posted in the National Law Review an article by attorneys  Sylvie A. Durham, Genna Garver and Dmitry G. Ivanov of Greenberg Traurig, LLP regarding  the OCC, FDIC and SEC’s proposed a joint rule implementing theVolcker Rule:

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REGULATORS PROPOSE VOLCKER RULE:

On October 11, 2011, the Office of the Comptroller of the Currency, Treasury (OCC), Board of Governors of the Federal Reserve System (Board), Federal Deposit Insurance Corporation (FDIC), and Securities and Exchange Commission (SEC) issued a joint proposed rule implementing the long awaited Volcker Rule. This proposal establishes exemptions from the prohibition on proprietary trading and restrictions on covered fund activities and investments as well as limitations on those exemptions. In addition, the proposal requires certain banking entities to report quantitative measurements with respect to their trading activities and to establish enhanced compliance programs regarding the Volcker Rule, including adopting written policies and procedures. Appendices to the proposal provide the quantitative measurements to be used to report trading activities, commentary regarding the factors the agencies propose to use to distinguish permitted market making-related activities from prohibited proprietary trading and the minimum requirements and standards for compliance programs. Comments should be received on or before January 13, 2012. A copy of the proposed rule is available here.

FSOC PROPOSES RULE TO SUPERVISE AND REGULATE CERTAIN NON-BANK FINANCIAL COMPANIES:

On October 11, 2011, the Financial Stability Oversight Council (FSOC) issued its second proposed rule and interpretive guidance to provide additional details regarding the framework that FSOC intends to use in the process of assessing whether a nonbank financial company could pose a threat to U.S. financial stability, and further opportunity for public comment on FSOC’s approach to making determinations to require supervision and regulation of certain nonbank financial companies in accordance with Title I of Dodd-Frank, previously proposed on January 26, 2011. The proposed rule, previously proposed on January 26, 2011, has been modified to provide additional details about the processes and procedures through which FSOC may make this determination under Dodd-Frank, and the manner in which a nonbank financial company may respond to and contest a proposed determination. Importantly, the interpretive guidance sets out a three-stage process of increasingly in-depth evaluation and analysis leading up to a proposed determination that a nonbank financial company could pose a threat to the financial stability of the United States. The first stage would involve a quantitative analysis by applying thresholds that related to the framework categories of size, interconnectedness, leverage and liquidity risk and maturity mismatch. A company will be evaluated further in stage 2 only if it both meets the total consolidated assets threshold ($50 billion in global consolidated assets for U.S. global financial companies or $50 billion in U.S. total consolidated assets for foreign nonbank financial companies) and any one of the other enumerated metrics. Stage 2 would involve a wide range of quantitative and qualitative industry-specific and company-specific factors. Stage 3 would focus on the company’s potential to pose a threat to the U.S. financial system. Comments are due by December 19, 2011. A copy of the proposed rule is available here.

PROPOSED LEGISLATION ON TO EXTEND DEADLINE FOR DERIVATIVES RULEMAKING:

A bill was introduced in the Senate to extend the deadline for rulemaking on derivatives to July 16, 2012. The Dodd-Frank Improvement Act of 2011 (S. 1650) would require the SEC, the CFTC and other relevant regulators to jointly adopt an implementation schedule for derivatives regulations by December 31, 2011, which would, among other things, specify schedules for publication of final rules and for the effective dates for provisions in Dodd-Frank on derivatives. The proposed bill would also allow the regulators to issue exemptions with respect to swap transactions, activities or persons from the Dodd-Frank Act derivatives provisions, would exempt end-users of swaps from margin requirements, would revise the definition of major swap participants to “prevent Main Street businesses that are using derivatives to hedge business risks from being regulated like swap dealers,” and would exempt inter-affiliate transactions from the definition of “swaps.” The bill would also create the Office of Derivatives within the SEC to “administer rules, coordinate oversight and monitor the developments in the market.” The text of the bill is available by clicking here.

PROPOSED LEGISLATION TO FREEZE REGULATORY RULEMAKING:

Two bills were introduced in the House of Representatives to freeze regulatory rulemaking actions during a “moratorium period” and to repeal certain existing regulations. The Job Creation and Regulatory Freeze Act of 2011 (H.R. 3194)would establish a moratorium period until January 20, 2013, prohibiting regulators from adopting any “covered regulations,” which would include final regulations that, among other things, would have an adverse effect on employment, economy or public health or are likely to “have an annual effect on the economy of $100,000,000 or more.” At the same time, the bill would allow rulemaking, to the extent necessary “due to an imminent threat to human health or safety, or any other emergency” or if it promotes “private sector job creation,” encourages economic growth or reduces “regulatory burdens.” The Stop the Regulation Invasion Please Act of 2011, or STRIP Act of 2011 (H.R. 3181) would also establish a two-year moratorium period for all new rulemaking, except in certain limited circumstances. In addition, that bill would repeal, with certain exceptions, all rules that became effective after October 1, 1991. The existing rules that would continue in effect would need to be justified before the Congress based on cost-benefit analysis. The H.R. 3194 is available by clicking here; and the H.R. 3181 is available by clicking here.

©2011 Greenberg Traurig, LLP. All rights reserved.

EEOC and Cracker Barrel Sign National Mediation Agreement

Recently posted in the National Law Review an article by U.S. Equal Employment Opportunity Commission regarding Cracker Barrel Old Country Store signing of a National Universal Agreement to Mediate:

WASHINGTON – Cracker Barrel Old Country Store, Inc. and the U.S. Equal Employment Opportunity Commission (EEOC) today announced the signing of a National Universal Agreement to Mediate (NUAM) to streamline the handling of employment discrimination claims.

With the signing of this agreement, Cracker Barrel joins more than 200 national and regional private sector employers, including several Fortune 500 companies, who have made similar arrangements with the EEOC. This agreement provides the framework for both organizations to informally resolve any workplace issues that may arise from time to time through Alternative Dispute Resolution (ADR) rather than through a traditional lengthy, formal EEOC investigation or potential litigation. The NUAM includes all Cracker Barrel locations.

“Nationwide mediation agreements like this are a classic win-win,” said Nicholas Inzeo, Director of the EEOC’s Office of Field Programs. “NUAMs are a non-adversarial and efficient way for companies to handle discrimination charges using the EEOC as a partner and advisor. EEOC mediation encourages a positive work environment, and the company saves time and money. Everyone benefits. We are gratified that a major employer such as Cracker Barrel has joined the growing ranks of companies that are making use of this innovative system.”

Cracker Barrel Vice President and General Counsel Michael J. Zylstra said, “Cracker Barrel is committed to providing a fully inclusive workplace, where diversity is welcomed and everyone is treated with courtesy and respect. This innovative agreement builds upon our existing policies and procedures to effectively and fairly resolve employee concerns and demonstrates our shared goal to create a bias-free workplace. We look forward to developing an even stronger relationship with the EEOC.”

Under the terms of the NUAM, any eligible charges of discrimination filed with the EEOC in which Cracker Barrel is named as an employer/respondent will be referred to the EEOC’s mediation unit. The company will designate a corporate representative to handle all inquiries and other logistical matters related to potential charges in order to facilitate a prompt scheduling of the matter for EEOC mediation.

Expanding mediation is a key component of the EEOC’s efforts to improve operational efficiency and effectiveness. The EEOC has entered into 233 national and regional Universal Agreements to Mediate (UAMs) with private sector employers, including several Fortune 500 companies. Additionally, EEOC district offices have entered into 1,743 mediation agreements with employers at the local levels within their respective jurisdictions. Since the full implementation of the EEOC’s National Mediation Program in April 1999, more than 136,000 charges of employment discrimination have been mediated, with nearly 70 percent being successfully resolved.

Cracker Barrel Old Country Store, Inc. (Nasdaq: CBRL) was established in 1969 in Lebanon, Tenn., and operates 604 company-owned locations in 42 states. For more information, visit www.crackerbarrel.com.

The EEOC enforces federal laws prohibiting employment discrimination. Further information about the EEOC and its mediation program is available on its web site at www.eeoc.gov.

HHS Halts Implementation of the CLASS Program

Recently posted in the National Law Review an article written by Meghan C. O’Connor of von Briesen & Roper, S.C. regarding HSS’ announcement regarding CLASS Act:

The U.S. Department of Health and Human Services (HHS) announced plans today (October 14, 2011) to halt implementation of the Community Living Assistance Services and Supports (CLASS) Act. The CLASS Act is a voluntary, federally administered long-term care insurance program introduced in theAffordable Care Act (ACA). The program would have provided benefits to purchase long-term services and supports. Details regarding implementation and enrollment were to be announced by October 1, 2011.

Secretary Sebelius sent a letter to congressional leaders today noting no “viable path forward for CLASS implementation at this time.” The ACA conditioned implementation of the CLASS program on certification that the program would be actuarially sound and financially solvent for 75 years. However, HHS actuaries and the Congressional Budget Office could not find a way to meet these contingencies

Secretary Sebelius emphasized the continued need for affordable long-term care services and the lack of viable options in the current market.

©2011 von Briesen & Roper, s.c

Legal Issues Surrounding Social Media Background Checks

Posted in the National Law Review an article by Michelle Sherman of Sheppard Mullin Richter & Hampton LLP regarding establishing an internal procedure for using the Internet to make employment decisions is one more piece of a sound ethics and compliance program that addresses how your company is using social media.

Agatha Christie had a novel take on invention being the mother of necessity. She disagreed and said, “[I]nvention, in my opinion, arises directly from idleness, possibly also from laziness. To save oneself trouble.” She may have been onto something when you think about businesses that are turning to outside vendors to research employees and job candidates for them. Whether or not these outside vendors are the best solution, however, remains to be seen.

  1. Companies Should Have An Internal Procedure For Researching Job Candidates And Employees On The Internet

We recommended earlier this year that businesses establish an internal procedure for making employment decisions based on Internet research, so they would not run afoul of state and federal laws that prohibit job discrimination based on protected factors. The protected factors include, for example: (1) Race, color, national origin, religion and gender under Title VII of the Civil Rights Act of 1964; and (2) Sexual orientation, marital status, pregnancy, cancer, political affiliation, genetic characteristics, and gender identity under California law. Most states have their own list of protected factors, which should be considered depending on where your company has employees.

Not surprisingly, the legal risks of making employment decisions using the Internet have become a real concern for businesses, especially when you consider that 54% of employers surveyed in 2011 acknowledged using the Internet to research job candidates. The actual number of employers using the Internet is probably higher, and sometimes companies may not even be aware that their employees are researching job candidates and factoring that information into their evaluations. This is yet another reason to establish an internal procedure for researching job candidates, and communicating your procedure to employees who are participating in the employment process.

There is nothing wrong with researching people on the Internet so long as it is done properly. The Internet has a wealth of useful information, some of it intentionally posted by job applicants for employers to consider such as LinkedIn profiles.

With this “necessity” to do Internet searches properly, some businesses have turned to outside vendors to do the research for them, and, thereby, try to reduce their legal exposure and the administrative inconvenience of doing it themselves. At least one of these vendors has received letters concerning its business practices from the Federal Trade Commission (“FTC”) and, more recently, two U.S. Senators.

  1. The Business Practices Of Outside Vendors That Provide Social Media Background Checks Are Being Examined For Compliance With Privacy And Intellectual Property Laws

On May 9, 2011, the staff of the FTC’s Division of Privacy and Identity Protection sent a “no action” letter to Social Intelligence Corporation (“Social Intelligence”), “an Internet and social media background screening service used by employers in pre-employment background screening.” The FTC treated Social Intelligence as a consumer reporting agency “because it assembles or evaluates consumer report information that is furnished to third parties that use such information as a factor in establishing a consumer’s eligibility for employment.” The FTC stated that the same rules that apply to consumer reporting agencies (such as the Fair Credit Reporting Act (“FCRA”)) apply equally in the social networking context. These rules include the obligation to provide employees or applicants with notice of any adverse action taken on the basis of these reports. Businesses should also be mindful of similar state consumer protection laws that may be applicable (e.g. California Investigative Consumer Reporting Agencies Act).

The FTC concluded by stating that information provided by Social Intelligence about its policies and procedures for compliance with the FCRA appears not to warrant further action, but that its action “is not to be construed as a determination that a violation may not have occurred,” and that the FTC “reserves the right to take further action as the public interest may require.” This FTC “no action” letter was reported fairly widely, and probably increased the comfort level of businesses that wanted to use an outside service for Internet background checks.

On September 19, 2011, Senators Richard Blumenthal (D-Conn) and Al Franken (D-Minn) sent a letter to Social Intelligence with 13 questions regarding whether the company is taking steps to ensure that the information it is gathering from social networks is accurate, whether the company is respecting the guidelines for how the websites and their users want the content used, and whether the company is protecting consumers’ right to online privacy. The letter raises some legitimate concerns, and requests a prompt response from Social Intelligence to the questions presented.

  1. Legal Assurances That Your Company May Want To Seek If Using An Outside Vendor

Some of the questions also warrant due consideration on the part of businesses receiving reports from outside vendors about how much weight they want to give the information provided. Further, what the business may want in the form of legal assurances from the outside vendor that no laws (e.g. FCRA, privacy, copyright, or other intellectual property laws) have been violated in gathering the information or providing screenshot copies of pages from social networking sites.

Some of the questions from the Senators which raise these concerns include, for example:

1. “How does your company determine the accuracy of the information it provides to employers?” [Social Intelligence is reportedly collecting social networking activity dating back 7 years, and, therefore, may capture something that was later removed, or was a “tag” post through a picture that the job candidate was not responsible for making public, and may have removed once it came to his attention.]

2. “Is your company able to differentiate among applicants with common names? How?” [e.g. Have they researched the correct “Jane Smith” of the hundreds on Facebook since social security numbers or other specific identifying information is not useful on social networking sites as it is with the standard background check.]

3. “Is the information that your company collects from social media websites like Facebook limited to information that can be seen by everyone, or does your company endeavor to access restricted information.”

4. “The reports that your company prepares for employers contain screenshots of the sources of the information your company compiles…These websites are typically governed by terms of service agreements that prohibit the collection, dissemination, or sale of users’ content without the consent of the user and/or the website….. Your company’s business model seems to necessitate violating these agreements. does your company operate in compliance with the agreements found on sites whose content your company compiles and sells?”

5. There appears “to be significant violations of user’s intellectual property rights to control the use of the content that your company collects and sells. …. These pictures [of the users], taken from sites like Flickr and Picasa, are often licensed by the owner for a narrow set of uses, such as noncommercial use only or a prohibition on derivative works. Does your company obtain permission from the owners of these pictures to use, sell, or modify them?”

  1. Conclusion

Establishing an internal procedure for using the Internet to make employment decisions is one more piece of a sound ethics and compliance program that addresses how your company is using social media. If using an outside vendor to perform social media background checks is part of that policy, you should assure yourself that the company is acting in compliance with the relevant laws.  

Copyright © 2011, Sheppard Mullin Richter & Hampton LLP.