Maryland Business Law Blog

Fed-Ex Case Highlights Risks of Classifying Workers as Independent Contractors

Posted by Edward Sharkey on Thu, 09/25/2014 - 04:00

A federal court in California recently rejected the independent contractor model that Fed-Ex has been using to employ about 2300 drivers in the state for years. Fed-Ex classified them as independent contractors. The drivers all agreed when they signed up. No matter. In every jurisdiction, the terms of the relationship determine the status, not the parties - even if everyone agrees.

The consequence? Fed-Ex is exposed to multiple millions of dollars of liability for all sorts of costs associated with having employees - overtime, health care, retirement benefits, workers comp, paid time off. Could it all have been avoided? The answer is complicated.

The law in every jurisdiction provides that the parties do not determine the status. The circumstances of the relationship do. The criteria to determine who may be classified as an independent contractor vary between the states and the federal government, and between different agencies within those governments. Those criteria typically are geared to discern the extent to which the employer controls the worker's performance.

In Maryland, the process for determining a worker's classification begins here. For purposes of federal law, the process would begin with this website.

It is important to get it right because the cost of misclassification is high and anyone, including the worker who agreed to the classification, can complain at any time, even years after the fact. If a business currently has workers that are misclassified, there is good reason to fix it. The IRS, and some other government agencies, offer incentives for reclassification, i.e. no penalties and no payroll audits for prior years.

Can I Put Website Terms of Use In a Browse-wrap Agreement?

Posted by Edward Sharkey on Wed, 09/17/2014 - 04:00

Businesses may want to consider reviewing their website terms of use in light of a Ninth Circuit court ruling about browse-wrap agreements. In the case, the defendant retailer tried to compel a complaining consumer to arbitrate his claim according to the applicable website terms of use. The court refused to grant the motion because there was no evidence the plaintiff read or agreed to the terms of use.

As discussed in a previous blog post, browse-wrap terms are those that are usually posted on a website via a hyperlink at the bottom of the screen. The defining feature, in comparison to click-wrap terms, is that the terms are usually agreed to simply by using the site. Yet, this is what gave the Ninth Circuit pause before enforcing the terms.

Even though users assented to the site's terms of use by using the site, the court stated the standard for determining whether the contract is valid would still depend on whether the user had actual or constructive knowledge of the terms and conditions.

In answering this question, the court considered the design and content of the website to determine if the user was on inquiry notice. The website used a hyper-link in a contrasting color to the background and displayed the terms of use near the button to be clicked when completing the online purchase. That, however, was not enough. Although the court did not establish a bright-line test, it said that the location and color of the link alone were not enough to capture a user’s attention and secure assent to the terms.

What is enough to put a user on notice? I could argue that, at this point, all online consumers know websites have terms of use. Accordingly, they are on notice and should examine them if they care. Without a bright-line test from a court, however, businesses are left without clear guidance on what satisfies the standard.

The key take-away for companies is to avoid hiding terms and using fine print. In addition, where users are expected to interact with the site, putting a click-wrap "I agree to the terms of use" in the chain of actions required to complete a transaction will greatly improve the likelihood of enforcement.

Why Does Hershey Care if a State Politician Mimics Its Candy Wrapper in Ads?

Posted by Edward Sharkey on Fri, 09/12/2014 - 04:00

A lawsuit recently filed in federal court in Maryland highlights one of the largest burdens faced by trademark owners: protecting the mark. The Hershey Company filed the suit, alleging that campaign materials used by Senator Stephen S. Hershey, Jr., a candidate for state office, too closely mimic the famous chocolate maker’s candy bar packaging. Senator Hershey’s logo, like that of the chocolate bar, uses the word “Hershey” in white capital letters on a brown rectangular background. Beneath that, the candidate’s materials contain the text “state senate” in lieu of the candy’s “milk chocolate.”

The dispute dates back to 2002 when the Senator used campaign materials with a similar logo in a run for county commissioner. Back then, the Hershey Company asked the Senator to stop using the materials, and he did so. In 2010, he renewed use of the logo during a campaign for state delegate. The Hershey Company again asked the Senator to stop and, this time, he promised to change the font and color in the future. The newest incarnation of the Senator’s logo, the one at issue in the lawsuit, has a two-tone brown background in the pattern of the state flag underneath the “Hershey” imprint.

To succeed on its claim of trademark infringement, the candy company must prove that the Senator’s use of materials containing the current logo is likely to cause confusion among consumers regarding its support of him or the source of the materials. The Senator maintains that the changes to the background of his materials make them sufficiently distinct from the Hershey Company’s mark.

Why does the Hershey Company care about the candidate’s materials so much that it has monitored him for ten years and willingly became involved in costly and time consuming litigation? There are real consequences to permitting others to use your mark, ranging from weakening the strength of the mark to losing trademark rights all together.

The news sometimes runs articles about large multi-national corporations suing mom-and-pop stores and even lemonade stands who use their trademark. The theme is typically "how mean." But a company that does not police and prevent misuse of its trademark by others will lose the trademark. All trademark owners should take steps, such as policing the internet for use of their mark, to prevent weakening or losing their rights.

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