Employer Social Networking Policies: Part II

The following was written by franchisEssentials Guest Author, Megan Erickson of the Dickinson Law Firm as follow up to Employer Social Networking Policies that we reposted on this site last week. As you may know, Megan is the author behind the recently launched Social Networking Law Blog.

In response to last week’s post, one of our readers commented, “I look forward to your further insights in this area. It is something that “MUST” be thought out by companies today. They really have two choices. A policy of engagement in the Social Networks or staying out altogether. And if they engage they need to seriously engage their employees and impress upon them how being active in social networking sites means that they are a representative of their company and that in the long term their actions will affect the company’s rep in the world.”

Employer Social Networking Policies: Pre-Drafting Considerations, Part II
by Megan Erickson of the Dickinson Law Firm

As [recently] noted, I plan to write a series of posts addressing social networking policies in the workplace. In [recent post] post, I discussed some things an employer may want to think about before drafting social networking policies — including some things to keep in mind when starting with a sample policy. I’ll build upon that by offering a few considerations here for employers to ponder as they begin thinking about drafting, updating, or maintaining a social media policy. This list is by no means exhaustive, but is meant to help employers focus on personalizing social networking policies (and hence, make them more effective).

* Don’t be afraid to take care of some groundwork before involving an attorney, but focus these initial efforts on identifying the company’s business interests, needs, goals, and expectations as they relate to the policy. This will make your lawyer’s job much easier, and may save your company time and money. For example, if you want to encourage social media use among your employees for marketing purposes, your policy will set the parameters within which your employees operate. The framework for such a policy will significantly differ from an employer whose primary goal in establishing a policy is something else (such as the protection of confidential information).

* Brainstorm how the policy should address both: (1) online activity which occurs on company time or using company resources (i.e., blogging at work, Facebooking on company laptops, etc.), and (2) online activity, regardless of when or where, which may have implications for your business (i.e., complaining about work on personal blog from personal computer after-hours that discloses trade secrets).

* Thoughtfully consider how far the restrictions should go. Keep in mind practical considerations. Not only do many studies suggest it’s not good for morale or recruiting to ban all social networking sites or Web 2.0, an all-out ban will be difficult to enforce. Take a realistic approach, and bear in mind ad-hoc policing could easily lead to selective enforcement issues down the road.

* How do you monitor employee technology use? Federal and state privacy laws should shape your policy.

* Consider quirks of your particular workplace technology that might present special considerations. For example: Do employees have company-issued web-enabled cell phones? Do you want policies addressing text messaging? Pagers? Off-duty conduct on company laptop during non-work hours?

Employer Social Networking Policies

The following was written by franchisEssentials Guest Author, Megan Erickson of the Dickinson Law Firm. Megan recently started Erickson’s Blog on Social Networking and the Law. The blog addresses legal issues relating to social media and Web 2.0. Megan states, “This blog is in its early stages, so I hope you’ll continue to check back as I add content and get a chance to make improvements.”

Rush Nigut, who publishes the blog, Rush on Business, recently posted, “Now that’s a blog that will have a never ending flow of posts. She already has an interesting array of posts… This is one blog I’ll be sure to follow.”

Employer Social Networking Policies: Pre-Drafting Considerations & Dangers of Sample Policies
by Megan Erickson of the Dickinson Law Firm

Employers often want to know more about permissible or effective social networking policies for their employees. Of course, there’s no such thing as a “one size fits all” social media policy for employers, but I think readers might find it helpful if we took some time to address important considerations involved in drafting, updating, or maintaining a policy addressing employees’ online activities. With that goal in mind, I’m going to begin a series of entries specifically tackling some of those issues.

Pre-Drafting Considerations

These issues arise even before the policy drafting begins — so that’s where we’ll start. The planning stage of an employer’s social networking policy defines the later effectiveness of the policy. It may be wise for information technology personnel, human resources professionals, other internal company decisionmakers, and legal counsel to sit down together to determine the employer’s business interests, needs, goals, and expectations under the yet-to-be-drafted policy.

Sample Policies or Model Guidelines: Don’t Forget to Assess the Company’s Unique Needs

It’s important to keep in mind that although model policies or sample guidelines may offer some helpful “nuggets,” those policies derive from unique business considerations – which may or may not align with the business interests of other companies. For example, many employers look to the IBM Social Computing Guidelines – one of the first publicly available social media policies. While I do think IBM’s policies are lovely, all the attention given to IBM’s guidelines (and model policies in general) easily distracts employers and discourages them from carefully analyzing their own unique objectives.

As a technology company, IBM has been motivated to actively encourage employee use of social networking. Other employers probably do not have the same motivations. More than 10 years ago, when most employers were trying to limit employees’ online activity, IBM was encouraging its employees to use, learn, and participate in online activity; the company continues to advocate its employees’ participation in Web 2.0. The overarching business interests of a technology company like IBM (i.e., promoting use of online media for marketing and business reasons) may conflict with the overarching business interests of other employers (i.e., perhaps a greater need to protect proprietary business information).

In sum, if human resources professionals at Acme, Inc. look to a sample policy for drafting guidance, they should always bear in mind that the fundamental principles underlying IBM’s (or anyone else’s) guidelines may not best serve the interests of Acme. At the risk of sounding very “lawyer,” I now point out the obvious: social networking policies, as with most employment policies, require individualized attention and should be specifically tailored to the needs of each employer.

Sample Policies or Model Guidelines: Quality Control

The other problem with examples found online is quality control. Googling “social networking policies” may give an internet user a list of results, but it generally doesn’t disclose things like: who drafted the samples, the employer’s jurisdiction and applicable law, or the business interests driving the policy. In other words, the policy could have been drafted by an idiot, it might address too much or too little, and Company A may be focused on helping its sales team effectively use Facebook as a marketing tool while Company B just wants to keep its associates from divulging confidential financial information on MySpace.

Without properly assessing the business interests and concerns the employer wants or expects its social media policy to address, the resulting policy will be of little value to the employer. Before drafting any guidelines, employers should focus on the fundamental framework for and guiding principles behind their anticipated policies.

New York State Tax Law Update and Changes

Recently, franchisEssentials Guest Author, Kathryn Rookes, submitted an article New York State Tax Law, which was posted on this site on July 23, 2009. The article was about a tax law passed by New York State that establishes specific reporting requirements for franchisors in the State of New York. Subsequently, Kathryn submitted a follow up article regarding updates to the state law. The update was posted on this site on August 6, 2009.

In her continuing efforts to keep the franchise community updated with additional changes to the New York State Law, Kathryn has detailed the recent changes accordingly.

New York Tax Law Changes
as submitted by Kathryn Rookes, Attorney, FSB Legal

The New York State Department of Taxation and Finance has made some changes to its new reporting requirements for franchisors.

First, the NYSDTF has implemented an extension procedure for franchisors that are unable to meet the deadline. The extension must be filed before the due date (first due date is September 20, 2009) and once filed, is automatic. The extension is for 90 days.

Next, the NYSDTF has waived some of the information that it previously required, including audited gross sales of a franchise if the franchisor has audited and found gross sales to be different from what the franchisee reported and the amount of sales that a designated supplier has made to a franchisee.

The NYSDTF also has made changes to reporting requirements if the royalties are not paid as a percentage of gross sales.

Finally, the NYSDTF will waive penalties in some situations, when the information filed is incorrect because the franchisee supplied incorrect information to the franchisor without the franchisor’s knowledge.

Kathryn is an experienced franchise attorney and a member of FSB Legal, a virtual law firm. She is one of the very few franchise attorneys in the United States with experience in a government regulatory practice (Maryland Division of Securities), private practice, and as in-house counsel. With this diversity of experience, Kathryn understands the issues that franchisors face on a daily basis.

New York Tax Law Update

The following article was submitted by Guest Author, Kathryn Rookes, as a follow up to her previously submitted article, New York State Tax Law, which was posted on this site on July 23, 2009.

Kathryn is an experienced franchise attorney and a member of FSB Legal, a virtual law firm. She is one of the very few franchise attorneys in the United States with experience in a government regulatory practice (Maryland Division of Securities), private practice, and as in-house counsel. With this diversity of experience, Kathryn understands the issues that franchisors face on a daily basis.

New York Tax Law Update
as submitted by Kathryn Rookes, Attorney, FSB Legal

The IFA has received a response from the New York State Department of Taxation and Finance to its July 20 letter.

Reporting Deadlines: The Department is creating an automatic 90-day extension process for the initial as well as all future reporting deadlines. Prior to the initial deadline (set by the Legislature for September 20) the Department will post on its website instructions to request an automatic 90-day extension to December 20, 2009. All future annual deadlines, which were to be due March 20, will be given similar treatment, meaning that if a franchisor requests the extension all annual reports will be due June 20. Permanently moving these deadlines, rather than creating an extension process, would have required an act of the New York State Legislature.

Forms: In the coming days, the Department will post on its website the standardized form franchisors must use to report the required information.

Supplier Sales: The Department has dropped the requirement that franchisors report to the state sales made by “designated” or approved suppliers to New York franchisees. However, sales of supplies from a franchisor or its affiliates directly to a New York franchisee must still be reported.

Franchisee Gross Sales: If the franchisee currently reports gross sales to the franchisor, this information must be supplied to the state in the required reports. If a different performance measure is used (such as room-nights in lodging or cents-per-gallon of product in food service) that calculation must be explained and, where possible, the quantitative data for the relevant reporting period supplied to the state.

Franchisee Identifying Information: The requirement that franchisors report to the state the name, address and New York certificate of authority or federal tax identification number of the franchise remains in effect.

New York State Passes Tax Law For Franchisors

The following article was submitted by Guest Author, Kathryn Rookes. Kathryn is an experienced franchise attorney and a member of FSB Legal, a virtual law firm. She is one of the very few franchise attorneys in the United States with experience in a government regulatory practice (Maryland Division of Securities), private practice, and as in-house counsel. With this diversity of experience, Kathryn understands the issues that franchisors face on a daily basis.

New York State Tax Law
as submitted by Kathryn Rookes, Attorney, FSB Legal

New York state has become the first state to pass a law that requires franchisors to provide detailed information on their franchisees and their franchisees’ operations to the state, so that the state can compare the submitted information to the tax returns that the franchisees file with the state. Complying with this new law can be quite burdensome and many franchisors do not even collect some of the information that must be submitted to the state of New York.

Who Must File?

The New York law applies to every franchisor that has at least one franchise in New York state that is required to be registered as a sales tax vendor. The law does not require that the franchisor itself be physically present in New York and applies even if the franchisor does not conduct any business in New York, other than having New York franchises.

The actual franchisees have no reporting responsibility under this new law, however, each reporting franchisor should let its franchisees know that it will be providing information on its New York franchises in its annual report.

What Must Be Reported?

The information that franchisors must report on their New York franchises includes:

· Each franchisee’s legal name
· Each franchisee’s phone number
· Each franchisee’s d/b/a name, if different from its legal name
· The owners’ names of each franchisee (e.g., principal shareholder, LLC member)
· Each franchisee’s Federal Employer Identification number (for an individual franchisee, this will be each franchisee’s social security number)
· Each franchisee’s New York Sales Tax Certificate of Authority number
· The beginning date of each franchisee’s unit
· Each franchise unit’s physical address
· Each franchise unit’s mailing address, if different
· Each franchisee’s gross sales, as reported under each franchise agreement
· Any discrepancies between each franchisee’s reported gross sales and gross sales of any audit that the franchisor conducted
· If known, the amount of New York state and local sales tax that each franchisee collected at each franchised unit
· The amount of royalty payments each franchisee paid to its franchisor
· The percentage of royalty that each franchisee pays to its franchisor
· The amount of sales the franchisor or its affiliates made to each franchisee
· The amount of sales each of the franchisor’s designated suppliers made to each franchisee

As you can see, the information required is quite extensive. Many franchisors will have to amend the manner in which they capture data on each New York franchise, as they may not currently be gathering all of the required information.

When Are Reports Due?

The first report under this new law is due September 20, 2009 and must contain information from March 1, 2009 to August 31, 2009. After that, franchisors must file by March 20 of each year, and each report must contain information from the end of the previous report to February 28 of that year.

Franchisees Must Be Notified

By March 20 of each year, the franchisor must provide each New York franchisee with a statement that includes all of the information that the franchisor submitted as part of its report. The statement may be in summary form, as long as certain of the required information is included. Each franchisor should send this statement to its franchisees in such a manner as to be able to verify that each statement was sent in a proper and timely manner.

Where Do You File?

Franchisors must file their information return electronically with the New York State Department of Taxation and Finance. To file a return and for additional information go to the Tax Department’s Web site. Information on how to file will be available at this site after September 1, 2009.

What Happens If You Don’t File?

Violations of the law can result in a penalty of $500 for 10 or fewer failures and up to $50 for each additional failure. If a franchisor fails to timely file an information return under the new law, additional penalties of not less than $500 but up to $2000, will apply to each failure. The total penalties assessed for each reporting period may not exceed $10,000.