The legal risks that come with using social media as a hiring tool

When you turn to Facebook and Twitter to learn more about an individual you are considering for a job, you open yourself up to substantial legal risk, says Kailee Goold, an associate at Kegler, Brown, Hill + Ritter.

“Social media forums — Facebook, Twitter, LinkedIn and others — can reveal what is referred to in the legal world as an applicant’s protected status,” Goold says. “Gender, pregnancy, race, disability and even religion are bits of information you can collect about a person by way of a social media search.”

If you decide not to hire the applicant, and there is reason to believe you were negatively influenced by a protected status revealed in your social media research, your company could be looking at a discrimination lawsuit.

“People just don’t understand the liabilities and risks they are taking when they do this without a sound process in place,” Goold says.

Smart Business spoke with Goold about how to legally protect your business when using social media to make personnel decisions.

Is it legal to use social media to check out job candidates?

There is nothing outright illegal about viewing publicly available information as part of an informed hiring process and then making a hiring decision based on legitimate factors (e.g., not race or gender). But there are ways snooping on social media can easily go awry. For starters, it’s very dangerous to look through these sites and make assumptions if you are not familiar with them or don’t understand how they work.

So you should get educated on the various platforms and their purpose or get someone in your company who has that knowledge to do your social media research.

In fact, the solution that affords you the most protection against a lawsuit is to appoint a neutral nondecision-maker to handle this task.

How does using a nondecision-maker protect you legally?

It gives you a good defense. Let’s say you (as the hiring decision-maker) Google someone’s Facebook page and you see that the person is blind (or part of another protected class). You may be biased, even implicitly, against that person as a result of viewing this information. Even if you are not biased against the applicant, the applicant could still make the argument if you hire someone not similarly disabled.

So set up a barrier to avoid this issue altogether. To start, identify the legal disqualifiers that are valid reasons to not hire someone for the specific job. If violative of company policy, things like illegal drug use and use of hate speech may qualify and give you a nondiscriminatory reason to deny employment.

Once you have identified these legal disqualifiers, hand them off to someone who is not involved in the hiring decision. If the candidate is ultimately denied the job and says it was because you found something about his or her disability on their Facebook page, you can honestly say that it wasn’t a factor in your decision.

What else do employers need to know?

First, you can’t ask for passwords to someone’s social media accounts. You can’t interview the applicant and say, ‘Give me your password to Facebook,’ nor can you have the person sit at a computer in front of you and watch over his or her shoulder as they enter it. Similarly, you can’t create a false identity and try to friend the person on Facebook or connect on LinkedIn to gain access to information that is not publicly available.

Second, if you do find something in your research that you think is a valid disqualifier, print it out because this information can disappear in an instant. You want to have some evidence or documentation in the event the applicant brings a discrimination claim. You want proof that they were denied the job for a legitimate nondiscriminatory reason.

Third, and maybe most important, you should ask yourself if social media research is really necessary when it comes to hiring. Is what you’re going to find on Facebook or Twitter relevant to the job? If you’re looking for someone to manage your social media presence, maybe that makes a lot of sense. Otherwise, what are you looking for that you couldn’t get in an interview? Sometimes, you’re just asking for trouble.

Insights Legal Affairs is brought to you by Kegler Brown Hill + Ritter

How to prepare for death or disability

Preparing a will is one of the most valuable gifts you can leave for your loved ones.

A will insures that your estate will be distributed according to your wishes upon your death, and not pursuant to state intestacy law. And a power of attorney is imperative in the event of your disability to avoid an incapacity proceeding. You also need continuation plans for your business and home.

“It’s never too early to start the planning process,” says Howard Greenberg, managing member at Semanoff Ormsby Greenberg & Torchia, LLC. “You may think you’re too young to be concerned about preparing for death or disability, but anyone can have an accident or become ill, so it’s important to be prepared.”

Smart Business spoke with Greenberg about the importance of having a will and power of attorney, how to create business and household transition plans, and the value of providing information to family members and business associates.

Why is it important to have a will and power of attorney?

To insure that the right people and institutions receive what they’re supposed to, when they’re supposed to, and that the right people and institutions administer your estate, it’s important to have a will, as well as ancillary documents, including a power of attorney.

Otherwise, you will be subject to state intestacy laws, which may not accord with the way you want your assets distributed.

And if you’re disabled, it could become necessary to have a guardian appointed in an expensive incompetency proceeding if you have no power of attorney directing who can handle your assets.

How have new technologies affected how wills are accessed?

Most people have accounts with vendors, banks, security firms, etc.

Many access their records online.

Many people don’t receive paper statements. If someone passes away or becomes disabled, there is a significant chance that until tax season — when you might get 1099 forms and the like — you would have no idea about a person’s account information.

It’s important to have a list of accounts and password information in a secure place, like a safety deposit box, or secure storage site, known to your heirs or advisers.

What about business and household transition plans?

A business transition plan requires being prepared with a management plan for your company to function without you in the event of death or a disability.

Do you want the business to continue, or be sold or liquidated? Who is going to manage the business? Is that future management in place and what steps have you taken to induce them to stay in place? Who will make policy and strategic decisions?

If you die or become disabled and don’t have a plan that addresses these questions, it might be too late, managers may leave, no one will step in to direct the business and your thriving business will suffer. Unfortunately, your family, and your employees will suffer with it.

For household transition plans, similar principles to business transition apply. In most families one person handles bill paying, makes sure that repairs are done, contacts the plumber, makes sure that the gardener comes, etc.

Another family member should be aware of these household functions in case the responsible manager passes away, or is not functioning.

Similarly, one family member is often responsible for dealing with family accountants, lawyers and investment advisers.

These professionals need to be ready to act in the event of a death or disability. It’s crucial that the survivor knows who to contact and how to contact those advisers should it become necessary.

How should one provide directions to family?

You should write a letter to your spouse, children, or other loved ones outlining a plan in the event you become disabled or die. The plan should cover your spouse, household, family and business.

The letter should be concise and address who will be in charge of various functions and what assets are available and what professionals will assist.

If you don’t provide directions to your loved ones, locating assets and professional advisers will be a major problem, will cause them to incur needless professional expenses, and could result in losses to your estate and business. ●

Insights Legal Affairs is brought to you by Semanoff Ormsby Greenberg & Torchia, LLC

Joint ventures work when companies take time to evaluate a path to success

One of the biggest impediments to the proper structuring of a joint venture is impatience, says Mark E. Krohn, a Partner at Brouse McDowell.

“So many companies become enamored with the perceived benefits that they rush to a contract or mobilizing instead of fully evaluating the opportunity from each organization’s perspective,” Krohn says.

It’s really the early-stage conversations about the mechanics of how the partnership works, what each team will do, how each party benefits, and how the partners will monitor success and react to adversity that often make or break a joint venture.

“Companies often underestimate what’s really involved in a joint venture and bringing two disparate companies together,” Krohn says.

Working within your own organization can be difficult at times, and as such, building a partnership with someone else who has needs, wants, concerns and organizational challenges as well, can really add to the complexity.

Smart Business spoke with Krohn about how to overcome these challenges and to achieve a stronger and successful joint venture.

What are some key motivating factors for pursuing a joint venture?

Gain. Joint ventures allow two companies to identify opportunities for additional sales, revenue and profitability.
Many times, the opportunities presented are ones that the other partner might not otherwise be aware of or have an avenue of attack, absent the joint venture.

Where do companies get into trouble?

The trouble begins when companies unrealistically believe that the joint venture will be easy and discount the planning, attention and thought that must go into a joint venture on the front end.

Early on in the discussions, parties need to get company executives, key company stakeholders, accountants, lawyers and other relevant business advisers involved in those joint venture discussions so that these advisers can create a comprehensive road map to success and create a contract that clearly details the execution strategy going forward.

When the proper planning has not happened, you are in the middle of it and you realize there’s more to it, the results are always destructive.

Expectations are not met, feelings get hurt and stress increases. At that point, it’s much more difficult to iron out those details without causing significant delay and organizational dysfunction.

That dysfunction is not just at the joint venture level, it is also within the joint venture companies’ core businesses.

As such, it is imperative that you have leaders and advisers from your company who are going to be impacted or will have a part in driving the joint venture on the evaluation side and work through these issues upfront.

Once you get your own house in order, go over the same questions and issues with the other side, as they will have the same or similar concerns and challenges.

How can you increase the odds of success with your joint venture?

It’s pretty simple, don’t be penny-wise and pound-foolish.

People occasionally avoid getting advisers involved early because they want to save on costs. The worst thing a company can do is try to save a few dollars on the front end, only to realize after several months that the joint venture didn’t work, you didn’t structure it properly or the documents weren’t well-crafted.

Engage in proper planning to avoid an unproductive or worse, destructive, joint venture. You could be saving the company exponentially more time, money and resources in the long run.

Taking the time to understand what is important to both parties and what effort is needed is critical.

Creating a pathway to success by educating team members of their roles at every level, and establishing performance indicators or checkpoints as you would for other critical aspects of your business helps you monitor, manage and adjust.

It’s important to start monitoring the metrics right away. You can’t jump on problems fast enough in a joint venture.

Not everything is going to run smoothly.

But if you feel like you have a true partner that is firmly committed to bringing value to the partnership on all levels — that’s where relationships can become very special, long term and productive. ●

Insights Legal Affairs is brought to you by Brouse McDowell

My company has been served with a subpoena. What should I do?

Just because you or your company has been served with a subpoena does not mean that you have done something wrong or that you will be sued.

Often it simply means that you or the company may have information or documents that relate to a dispute between two or more other parties. Sometimes, however, a subpoena can be a precursor to bigger problems.

Regardless, don’t ignore it. Failure to appear at the stated time or otherwise respond to the subpoena could subject you or your company to punishment by the court.

Smart Business spoke with Julie Johnston-Ahlen, of counsel at Novack and Macey LLP, to learn more about the best way to respond to a subpoena.

What is a subpoena?

A subpoena is a writ, or written order, issued by a court, administrative body or attorney, that commands a person or entity to appear and testify, to produce documents or both. The subpoena should clearly state what it is seeking and when and where you must respond, so review the subpoena and any attached documents carefully.

Should an attorney be consulted before responding to a subpoena?

It is always a good idea to seek legal advice before responding to a subpoena. Moreover, there are certain circumstances in which you should almost certainly retain legal counsel to assist you. For instance:

■  You or your company might be subject to liability related to the litigation. Before you respond to a subpoena, you need to make sure you understand the subject matter of the litigation or proceeding so that you can determine why you or your company is being subpoenaed. This may require reviewing the documents that have been filed in the case, seeking information from the parties in the case, or both. If there is any risk that you or your company might be subject to liability, you should retain counsel.

■  The scope of the subpoena is very broad, and it will be costly to comply. Often when attorneys issue subpoenas, they ask for more documents than they actually need. In this case, you can and should ask the attorney to narrow the scope of the documents requested. If he or she won’t, you can retain counsel to serve objections or file an appropriate motion with the court. But don’t delay. In some jurisdictions you only have a short period of time to take action with respect to the scope of the subpoena.

■  The subpoena is seeking information that is privileged, confidential or competitively sensitive. Typically, private conversations with lawyers are not subject to disclosure pursuant to a subpoena. In addition, sometimes information that is confidential, proprietary or competitively sensitive can be protected from disclosure, or can be disclosed pursuant to a protective order issued by the court. If the subpoena is seeking this type of information, you should retain counsel to assist you.

■  Complying might open you or your company up to liability unrelated to the litigation. Sometimes a subpoena will request documents or information that, by law or by contract, you are not permitted to release, or are not permitted to release without permission from another person or entity. For example, you might be subject to Securities and Exchange Commission regulations or Health Insurance Portability and Accountability Act requirements, or bound by a contract where you agreed to keep certain information private. In this case, you should seek legal advice.

■  The subpoena may be invalid. Perhaps service was improper, required fees were not paid, the subpoena commands you to produce documents or appear too far away, or the court issuing the subpoena does not have the authority to compel you to respond. If so, you should consult counsel before responding.

■  You do not understand what the subpoena is requesting. In this case, you should consult with counsel. Your attorney is likely to understand what is being requested, but if not, he or she can consult with the party that issued the subpoena to better understand what is being sought. ●

Insights Legal Affairs is brought to you by Novack and Macey LLP

Why your offer of free entertainment to the public could get you in trouble

Your community is sponsoring a free movie night at the local park featuring “Guardians of the Galaxy,” and you’re excited. As attendees, you and your family have little to no risk. But what if you are the company, nonprofit or person organizing this fabulous family night that will undeniably generate a great deal of good will in the community?

Potential copyright infringement is lurking in the midst if proper measures are not in place. Copyright law protects creative works such as books, music and movies, and most people know that blatant copying of a CD, MP3 file or DVD is against the law.

But copyright law does more than prevent mere copying.

“The owner of a copyright enjoys many rights, including the ability to stop others from reproducing, distributing, preparing derivative works, or publicly displaying or performing a copyrighted work,” says Heather M. Barnes, a patent attorney at Brouse McDowell.

“It is the public performance right that catches many business owners, including nonprofits, off guard.”

Smart Business spoke with Barnes about what you need to know before scheduling your own free movie or music night for the public.

What constitutes a copyright law violation?

Owning a lawfully purchased CD, DVD or digital file is not enough when it comes to playing that particular movie or song in a public place. Owners of restaurants, entertainment venues, hotels and local governmental entities need to ensure that proper licenses are in place to show a movie or play music to the general public.

Many business owners are unaware they may be out of compliance with the copyright laws. Others wonder if their lack of intent will help negate or minimize potential liability. Copyright infringement is a strict liability offense, meaning intent will not negate a violator’s liability.

It could, however, come into play to determine how much money would be owed to the copyright owner. With respect to movies and music, organizations exist that offer licenses and calculate the amount of money owed.

The cost of a license is usually reasonable compared to the potential penalties, which vary. A copyright owner could be awarded lost profits and receive damages ranging from $750 to $150,000 per violation, plus their attorney fees. In certain instances, criminal liability could be attached to the violation.

What if you’re accused of copyright infringement?

Upon receipt of a letter claiming copyright infringement for showing movies in a common space to the general public or playing CDs for an exercise class, the worst action is to dismiss the letter. Movie and music agencies will not go away. They have field agents viewing the Internet and driving around in your community.

It may take time to investigate, but the allegations very well could have a basis. If there is no liability, it is best to communicate with these agencies, preferably through an IP lawyer, and address the concerns sooner rather than later. Hundreds of copyright infringement lawsuits for movies and music are filed every year resulting in unneeded exposure to the business owner.

How can you protect yourself?

An experienced copyright lawyer will be able to help a business owner identify if there is a violation. They will also be able to identify any exceptions to the law that could minimize any damages owed.

Further, a lawyer who is familiar with these processes may have a rapport with representatives of agencies such as the Motion Picture Licensing Corp., Broadcast Music Inc., or the American Society of Composers, Authors and Publishers. That rapport helps streamline negotiations.

Like anything else, the best defense against any claim is a great offensive strategy. Seek out IP counsel to talk about your business. Identify common gathering places in your business. Do you intend to invite the general public? Will a fee be collected? Copyright law is complex and rarely intuitive. Discussing business goals with an experienced lawyer and how movies or music play into the business plan will help you avoid common pitfalls, which could save your business thousands of dollars.

Insights Legal Affairs is brought to you by Brouse McDowell

How to avoid the hazards of misclassifying workers

The misclassification of workers as employees or independent contractors is widespread among all types of organizations and it’s a practice that’s receiving increased scrutiny.

“Although it occurs in all industries, construction in particular is an industry in which misclassifying employees is a common practice and Pennsylvania is cracking down in this area,” says Stephen Goldblum, a member at Semanoff Ormsby Greenberg & Torchia, LLC.

Smart Business spoke with Goldblum about the risks of misclassifying workers and how to safeguard against penalties.

Why are employees misclassified?

Using independent contractors rather than employees makes sense for employers that are trying to save money. By doing so, employers avoid the expense of health benefits, unemployment and workers’ compensation contributions, insurance premiums and overtime pay, all while reducing administrative costs.

What are the potential dangers?

Problems arise if the government determines that a worker is an employee, and the employer has been treating the worker as an independent contractor. The employer could be responsible for the payment of years of unpaid federal, state and local income tax withholdings, social security and Medicare contributions and unpaid workers’ compensation and unemployment insurance premiums. Class action lawyers also have been targeting companies that have incorrectly classified workers.

How is the federal government addressing the situation?

The federal government has been cracking down on the misclassification of workers in recent years and the Department of Labor (DOL) has been hiring more investigators to ‘detect and deter’ companies from misclassifying employees as independent contractors. The pending Payroll Fraud Prevention Act of 2014 would make misclassification of employees a federal labor offense. The act would expand the Fair Labor Standards Act to cover a new category of workers called ‘non-employees’ and make it a prohibited act to ‘wrongly classify an employee as a non-employee.’

The most significant provision of the act would require every employer to issue a classification notice to each worker stating they’ve been classified as either an employee or a non-employee. The notice will also direct workers to the DOL for additional information and advise them to inform the department if they suspect they’ve been misclassified. Violations for failure to comply with the new notice rule include civil penalties in the amount of $1,100 for a first offense and up to $5,000 for a second offense or a willful violation. These penalties would be multiplied by the number of employees or non-employees who did not get the required notice or who did not receive it in a timely manner.

How are state governments cracking down?

Each state has its own laws regarding the misclassification of employees. For example, in 2011 Pennsylvania enacted the Construction Workplace Misclassification Act, which makes it a violation of the law to misclassify employees as independent contractors in the commercial and residential construction industry. Intentional violations of this law are deemed a criminal offense. Violations can also include civil fines of up to $1,000 for the first violation and $2,500 for each subsequent violation and can include a court-issued stop work order.

How can companies protect themselves?

It can be difficult for an employer to properly classify a worker as an employee or independent contractor. Many factors go into the determination, and no single factor is dispositive. An important factor in the determination is control — does the employer retain control over how the work is being performed and the manner in which it is being completed? The more the employer exerts control, the more likely the worker will be deemed an employee. Other examples include monitoring, training and exclusivity. Does a supervisor within the company normally direct the individual’s work? Does the employer provide training to an individual? Is the individual prohibited from performing similar work for other companies?

It’s important to talk to an employment lawyer who can analyze the relevant factors and assist in the proper classification of workers to avoid potentially significant risks and liabilities to the organization.

Insights Legal Affairs is brought to you by Semanoff Ormsby Greenberg & Torchia, LLC

How there are still ways for creditors to recoup funds in bankruptcy court

Bankruptcy can be a lifeline to those individuals trying to get out from under a mountain of debt, but it becomes a point of frustration for the companies forced to move on without collecting the money they were owed.

“When an individual files for personal bankruptcy, the discharge they receive at the end of the process releases them from any personal liability from the specific debts that they have,” says Sara J. Radcliffe, an associate at Kegler, Brown, Hill + Ritter. “A discharge prohibits creditors from ever taking any action against them to collect on those debts.”
Bankruptcy protection forbids creditors from initiating any contact with a debtor, even if they have good intentions.

“The creditor would be violating the discharge injunction and they would be subject to sanctions,” Radcliffe says.

The law favors the debtor in most instances, but there are some cases where creditors can recover at least some of the funds they are owed.

Smart Business spoke with Radcliffe about exceptions in the bankruptcy code and how companies can still find ways to collect funds they are owed.

How can a creditor collect on a debt that falls under bankruptcy protection?

If you know the person’s debt is dischargeable because the bankruptcy code has made a ruling that states this is the case, there’s not much you can do. But if the person accrued that debt with some criminal intent or purpose, or is believed to have moved assets around in anticipation of filing for bankruptcy, you as the creditor can file a complaint with the court.

The court can look at the case and either conclude that you deserve to get your debt repaid or find that the debt is dischargeable for a reason.

The first step in seeking to recover this kind of debt is to file a proof of claim with the court saying, ‘We have an interest in this debt and it should not be dischargeable. It should survive the bankruptcy.’ It’s important to know that there is a certain window of time in which you are allowed to file your proof of claim. If you miss that window, the court can rule that it is dischargeable and you lose your chance to recover the funds.

What is another way a creditor can recover debt in a bankruptcy case?

When someone files for bankruptcy, one of the questions that is asked is have you paid any single creditor more than $600 within the past 90 days before you filed for bankruptcy? If the person says yes, the bankruptcy court is allowed to go to that creditor, take that money that was paid and disburse it amongst all of the person’s creditors.

That also applies to family and friends. If they were paid within a certain amount of time of filing, the bankruptcy court can take that money and disburse it among all that person’s creditors.

Debtors also have the option of voluntarily paying back a creditor after the bankruptcy process is over.

In these cases, there is no law against choosing a certain creditor to pay back. But other creditors are still not allowed to follow up and seek their own debt repayment.

How can a creditor get an enforceable obligation to make a debtor repay a debt?

The most common example is with a car loan. At some point before a debtor is granted a discharge, the debtor and a creditor can enter into an agreement which states the debtor is willing to reaffirm that specific debt.

It’s an enforceable obligation that the creditor is allowed to then enforce against that debtor on that loan even when the bankruptcy is over. If the loan can be renegotiated with the lender, it provides an opportunity for the debtor to get a fresh start without having to go out and secure a new car loan so soon after filing for bankruptcy.

In the end, however, the court gets the final say as to whether this is in the debtor’s best interest.

On the creditor side, it’s an option to recover funds that would have otherwise been irretrievable.

Insights Legal Affairs is brought to you by Kegler Brown Hill + Ritter

Negotiate photograph rights in advance to avoid costly copyright violations later

Companies may assume that when paying for a professional photograph, the photos that are taken can be used for any purpose — marketing, websites and annual reports. However, without carefully negotiating a license or an assignment, they may find that their rights are limited.

“Even sophisticated companies may run into trouble because they either overlook or don’t fully understand the legal implications of using photographs in connection with their businesses,” says Aaron Moss, partner and copyright expert who chairs Greenberg Glusker’s Litigation Department.

“Just because a company hires a photographer or owns a particular copy of a photo does not automatically mean that the company has the right to reproduce or distribute copies of that photograph.”

Smart Business spoke with Moss about the proper uses of copyrighted images.

When a company hires a photographer for marketing materials or other purposes, who owns the photos?

In the absence of any written agreement, the photographer usually owns the copyright in the photos. If the company wants to obtain the right to use or reuse those photos in whatever ways it wants, it should get an assignment or license at the outset of the engagement that spells that out.

The photographer may ask for contractual limitations as to how the images can be used. But to have the most flexibility, the business will want to negotiate an assignment.

If this is not spelled out, what problems could arise?

Companies that hire photographers don’t always know how the resulting photos might be useful in the future. Unless the company acquires the copyright or gets a broad license in advance, it might need to go back to the photographer later on to seek permission and pay compensation for another use.

For example, a photographer may take some pictures based on the understanding that they will be used for the company’s website.

The parties may never discuss what happens if the business wants to use them in marketing brochures. If this happens later, the photographer may feel that his or her rights have been violated and may assert an infringement claim against the company.

What else is beneficial to negotiate when first hiring a photographer?

If a company can’t negotiate an outright assignment, the parties should at least come to an agreement as to the type, extent and duration of the use in advance.

Rights acquired at the outset of the engagement, before any disputes arise, are going to be less expensive than if they are obtained after an infringement claim is asserted. In negotiating a retroactive license, the photographer will have more leverage and will usually be able to extract a higher price.

What are some misconceptions about using photographs and other images on a company’s website?

Companies often obtain these photos from stock photo agencies. There are usually restrictions in those licenses, either as to the extent or duration of the use, or as to whether the license to use the photos includes the right to use the likenesses of any models appearing in the photos.

Using photos for commercial purposes without permission could implicate the models’ right of publicity, even if the company has a copyright license.

I just handled a matter in which the photo agency only had the right to license an image for editorial uses, but the licensing company thought it was getting commercial rights. If the photo agency hasn’t actually obtained the ability to license the model’s likeness, both the agency and the company using the photos may be held liable.

Another common misconception is that a company engaging a photographer owns the copyright in a photograph as a ‘work made for hire.’ Unless the photographer is the company’s employee, the company will need a written assignment, signed by the photographer, in order to acquire rights in the photo.

Copyright is a much more complicated subject than some companies realize. If a business does not have experience in this area, it should consult with legal counsel before beginning a new campaign or hiring a photographer to ensure there aren’t any unpleasant surprises later. ●

Insights Legal Affairs is brought to you by Greenberg Glusker

Revisions to receivership statute in Ohio brings clarity to the process

Changes to Ohio’s receivership statute will expand the circumstances under which a receiver may be appointed, as well as authorize “free and clear” sales, which is perhaps the most anticipated aspect of the revision, says Matthew A. Salerno, a director at Kegler, Brown, Hill + Ritter.

“Seeking approval of ‘free and clear’ sales is not new, but the explicit authority to do so was not found in the current version of the receivership statute,” Salerno says. “The revised statute expressly provides a receiver with the ability to sell property free and clear of liens through a private sale, a public or private auction, or by any other means that the court determines to be fair.”

These changes are scheduled to take effect March 23.

“The revisions create certainty with respect to what a receiver can do, they create clarity of process and in theory, you’re creating some guidelines and procedures that should make the process more efficient for the parties involved,” Salerno says.

Smart Business spoke with Salerno about the revisions to the statute and the role receivership plays in the business sector.

What factors drove the new revisions to Ohio’s receivership statute?

As the number of receivership cases grew, so did concerns about clarity of process. Differing interpretations of a receiver’s ability to sell property developed. All of this contributed in some way to the changes.

For a lot of years, people have said receivership is sort of like bankruptcy outside of bankruptcy. The bankruptcy code and the case law that has come out of it is very well developed. Questions about what you can and cannot do have already been litigated, thought through and dealt with. More specifically, the ‘free and clear’ sale process in bankruptcy is well developed. This is very useful because the more certainty you can offer, the better for all involved.

Buyers want to know that they are getting what they are getting free of claims against the asset that might have been held against the prior owner or the seller. Sellers want to know that the process used to sell the property was valid and authorized. Title companies want to be able to insure title without concerns about process or the authority underlying the sale. Lenders and creditors want an efficient and effective process. Bankruptcy gives you that, but it can be expensive.

There are quarterly fees for a company operating while in bankruptcy. There can be legal fees for parties that don’t exist in receivership proceedings. It follows logically, then, that receiverships have grown in popularity as a restructuring alternative to be considered.

But unlike the bankruptcy code, the Ohio receivership statute was relatively short. The translation most people took from it was you can do pretty much whatever the court says you’re allowed to do. The changes to the statute provide more clarity and guidance.

How have the circumstances under which a receiver may be appointed been expanded?

Under the revised statute, a court can appoint a receiver if the mortgagor has consented or there has been an assignment of rents and leases. Furthermore, a receiver can be appointed to manage the affairs of a corporation, a partnership, a limited partnership or a limited liability corporation.

In addition, ‘priority consideration’ is to be given to the proposed receiver that is suggested by the party seeking the receivership.

How does the revised receivership statute help the business sector?

Ohio’s revised receivership statute can help the business sector because it provides a process that can be used to stabilize or revive a business. It can be used to preserve or protect asset value, or to continue business operations in order to find a way to create value on a go-forward basis. It can be used to buy and sell property, and to protect collateral and creditors.

If you need to make use of a judicial proceeding for any of these purposes, then you should be happy with the changes to Ohio’s receivership statute.

Insights Legal Affairs is brought to you by Kegler Brown Hill + Ritter

Careful when performing employee background checks

Employee background checks are an effective way for an employer to learn more about a job applicant. Inquiring about a person’s education, general work history, criminal records, credit history and references may be important, but obtaining such information could lead to serious legal issues. There are, however, ways to avoid trouble with the law and get the necessary information.

“Employers should obtain proper signed authorization from applicants before conducting employee background checks or investigations,” says Alfredo Sergio, an attorney in the Employment Law and Commercial Litigation groups of Semanoff Ormsby Greenberg & Torchia, LLC. Doing so, he says, may save a company from defending itself against a lawsuit.

Smart Business spoke with Sergio about background checks, social media and the importance of obtaining consent.

How should an employer go about obtaining background checks?

Employers often want to obtain consumer reports about potential employees’ credit, financial history, education and general background information. Because many of these areas of inquiry fall under the Fair Credit Reporting Act (FCRA), it’s important for employers to inform applicants what type of information they are going to seek and then get written permission from the applicant before obtaining it. Also, under FCRA, the applicants must be provided with a summary of their rights.

If an employer plans to take action based on the information they receive — for instance, not hiring someone because there is a blemish on their record — the employer must notify the applicant that they are not being hired because of something that was identified on a background check. A procedure should be in place where the applicant can be provided an opportunity to clarify or explain the situation within a certain timeframe.

How should criminal history background checks be handled?

In Pennsylvania, the Criminal History Record Information Act defines what employers are legally permitted to ask applicants regarding their criminal history. In many cases, in order for criminal history to be considered in the hiring process, candidates’ transgressions must be related to their job function — for instance, if someone with a drunk driving conviction is applying to be a truck driver.

Also, it is important to be careful when asking about criminal history in the beginning stages of the application process. Some states and municipalities have adopted ‘ban the box’ initiatives that make it illegal to ask an applicant about arrest or conviction information early-on in the application process. In such jurisdictions, the employer should notify those applicants who are top contenders for a position that an offer will be contingent upon passing a background check.

Can employers use social media when conducting a background check?

Some employers are turning to the Internet to find out more information about their applicants. It is important to note, however, that an employer must handle information discovered through social media appropriately and with caution, as findings related to an applicant’s race, age, gender identity or preference, religion or disability could lead to allegations that the consideration of such personal information in the hiring process amounts to discrimination. Social media can be used as a tool during a background check, but it needs to be used carefully.

Can you call an applicant’s previous employer for a reference?

Yes. And in some states, like Pennsylvania, a former employer is protected by law when it provides an honest assessment of their former employee. Many employers, however, choose to give just the most basic of information, such as dates of employment, confirmation of title and salary information, to avoid a potential defamation claim.

What advice would you give about asking for employee references?

Laws regarding employee references vary from state to state. Employers should only obtain the background information they reasonably believe they need to assess an applicant without overreaching, and obtain authorizations from applicants before conducting background checks.

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