As an owner of any business, large or small, you need to be aware and compliant with your legal rights and responsibilities. The United States follows the common law system, which means the law is constantly evolving with judicial decisions. Consequently, your business model and strategy will most likely be affected at some point by a change in the law. Below, we’ve listed the five most need-to-know legal issues of 2014.
THE Legal Issues of 2014
1. Hobby-Lobby and a Company’s Right to Religious Freedom
In what was perhaps the most controversial decision of 2014, the Supreme Court ruled in Burwell v. Hobby Lobby that closely held, for-profit businesses were entitled to religious freedom, and were, therefore, not required to pay for insurance coverage for contraception under the Affordable Care Act.
The most relevant questions for your business are what “small, closely held businesses” mean and how broad the decisions reach. The Internal Revenue Service defines a closely held business as a business where five or fewer shareholders control at least half the stock, meaning, as in this case, that the actual size of the business is irrelevant. Instead of size, the Court focused on whether the company is operated by a small group of individuals with strong religious beliefs and reaffirmed that natural persons could exercise rights, like freedom speech and religion, through a corporate form.
The Court declined to address whether large, publically traded corporations could assert such rights. Moreover, the Court further limited its decision to contraception coverage under the Affordable Care Act–distinguishing other laws such as immunization and nondiscrimation mandates.
For these reasons, despite its controversial nature, the decision’s immediate impact on business is rather limited. However, if you are considering limiting coverage to your employees, it’s important to consult a lawyer to ensure you don’t run afoul of applicable laws or employee rights.
2. The EU’s Right to Erasure
In March 2014, the European Parliament voted to adopt the new EU Data Protection regulation, including “the right to erasure.” The Right to Erasure allows the subject of data to request its erasure when the purpose for which it was collected no longer exists or when they withdraw consent. The controller of the data must immediately delete all personal data relating to the data subject and also arrange for its third-party service providers to do the same.
The penalty for non-compliance could be a whopping fine of up to 100 million Euros or 5% of the company’s annual revenue. The European Court of Justice also ruled that Google can be required to delete links to content when requested by European individuals. These developments in Europe could have repercussions for American companies that collect information across the globe. It remains unanswered whether a whether information need to be removed from Google sites in individual countries, or whether it would be also erased from Google.com.
The Right to Erasure is not only enforced overseas. As of January 2015, California is the first state to enforce an “Eraser Button Law," which allows users under the age of 18 “to remove, or to request and obtain removal of” posts they regret on social media. In this new and developing area of law, consulting a legal expert when collecting personal data of any kind is the best way to proceed.
3. AT&T’s Settlement with the FTC for Consumer-Related Issue
The FTC went after the nation’s second largest carrier AT&T for “cramming” its subscribers with third party services that they did not request, and then charging them for it. The services included random horoscopes, flirting tips, ringtones and celebrity gossip, commonly referred to as “Premium SMS,” for which customers were charged $9.99 a month, seemingly masked in AT&T bills.
The FTC took action against the company when an investigation revealed that AT&T had received over 1.3 million calls to its customer service department about the unauthorized charges. AT&T eventually settled the case for an eye-popping $105 million, of which $80 million was paid to the FTC to refund consumers for these unauthorized charges. The investigation highlights the importance the FTC places on matters of consumer fraud and deception.
4. Anti-poaching Agreements: eBay
In May 2014, eBay settled a lawsuit with the DOJ over allegations of an anti-poaching agreement between eBay and Intuit. The agreement prevented each company from recruiting employees from the other and prohibited eBay from hiring Intuit employees that approached eBay.
Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division said “eBay’s agreement with Intuit served no purpose but to limit competition between the two firms for employees, distorting the labor market and causing employees to lose opportunities for better jobs and higher pay.”
Part of eBay’s $3.75 million settlement will be used to compensate the employees of both companies, especially those that were considered for positions but not hired by other company. It is important to note that the DOJ found an agreement in the e-mail exchange between eBay’s CEO and Intuit’s founder. With the DOJ keeping an eye on the labor marketplace in the tech industry, it is important to steer clear of an agreement (formal or informal) to refrain from poaching employees from competitors.
5. Aereo’s Big Loss in the Supreme Court
Aereo is (was) a startup company that allowed its subscribers to watch live broadcast television on any Internet enabled mobile device. When a subscriber made a request to watch a particular program, Aereo rented the subscriber one of its many antennas, from which the subscriber received his own individual copy of the program she requested. Aereo did not pay any royalty or re-transmission fees to the broadcasters of content. Believing this to be an infringement of copyright in their content, the broadcasters sued Aereo.
Unfortunately for Aereo, the Supreme Court found that it functioned as a cable company and that its “technological model is based solely on circumventing legal prohibitions that you don’t want to comply with.” The decision has sparked criticism within the tech community on its effect on cloud computing, which functions in a similar technological capacity: allowing users to access individual copies of files from the cloud.
The decision does create a substantial amount of ambiguity for small business on how courts will deal with new and emerging technology that push the boundaries of the law. While the court did state that other technologies would not be affected, the decision demonstrates the importance of understanding the impact of regulations on your business. Therefore, it is crucial to consult a lawyer prior to conducting business to ensure that your company is in compliance with relevant regulations.
This post lists only a few of the major legal issues that have been in the limelight in 2014. Based on the sensitivities of your business, a Priori Legal attorney can help you navigate the constantly evolving legal system.