California passed more than 800 new laws in 2012, and Shane P. Criqui, litigation attorney at Stradling Yocca Carlson & Rauth, says, “It’s virtually impossible for any business person to keep track.”
He says among those of interest to businesses are new laws that govern social media in the context of an employee and employer relationship, and broad legislative changes regarding California LLCs.
“That’s why it’s important to have a discussion with your counsel and make sure you understand how these laws may affect your business,” Criqui says.
Smart Business spoke with Criqui to better understand two of California’s law changes.
What is changing regarding social media?
California has added protections for employees using social media to the state’s labor code, which establishes privacy protections for individuals and limits what employers can lawfully demand of employees. It helps avoid situations where employers demand private social media passwords and take adverse actions against an employee based on the content of his or her account. The law also applies to job applicants.
Specifically, an employer can’t require an employee to disclose username or password information for personal social media accounts; require an employee to access his or her social media accounts in the presence of the employer; or otherwise divulge personal social media information. Further, employers can’t discharge, discipline or retaliate against employees for not complying with such requests.
There are, however, exceptions. An employer can go after information on a social media account that’s reasonably believed to be relevant to investigations of employee misconduct or a violation of law. Employers also may require employee disclosure of passwords necessary for accessing an employer-issued electronic device.
What constitutes social media?
The definition of social media as it applies to this law is very broad and can include any electronic service, account or content such as videos, photos, blogs, podcasts, text and instant messages, and websites.
Further, while the law applies to accessing ‘personal social media,’ the term ‘personal’ is not further defined, which may create ambiguity. For example, an employee’s LinkedIn account could be used to promote his or her employer’s business but is also ‘personal’ to the employee.
What changes are coming for limited liability companies?
A 2012 bill that becomes effective Jan. 1, 2014, repeals California’s Beverly-Killea Limited Liability Company Act and replaces it with the California Revised Uniform Limited Liability Company Act. It will apply to all California LLCs existing on Jan. 1, 2014, and no LLC can opt out.
The new law presumes an LLC is member managed, unless the company’s articles of incorporation and operating agreement specifically provide otherwise. In member-managed agreements, all members can act as agents of the LLC, where in manager managed arrangements, it’s only the managers.
Other provisions are specific to fiduciary duties. Expressly, the law says managers can’t eliminate the duty of loyalty, which a manager typically owes to the LLC along with the duty of care. However, duties of care and loyalty can be modified ‘in a written operating agreement with the informed written consent of the members.’ For instance, the duty of care can be lowered, although not ‘unreasonably reduced.’
The new act also states that while an operating agreement may ‘eliminate or limit’ a member or manager’s liability for monetary damages with respect to a breach of the duty of care, it cannot do so with respect to a breach of the duty of loyalty.
What should affected companies do?
While prior operating agreements will remain in effect after Jan. 1, 2014, the new act will apply to ‘acts,’ ‘transactions’ and ‘contracts’ entered into on or after that date. Accordingly, it makes sense for LLCs to talk with counsel to make sure the new default rules don’t change an LLC’s understanding of its existing rights and obligations.
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