Employers who seek to regulate or monitor their workers’ electronic communications could be stepping into a legal quagmire. Lest they get their shoes muddy (and mess up their legal standings, too), employers should be up to date on court rulings on employee communications. The latest ruling comes from the 9th Circuit Court of Appeals in California.
Smart Business asked Michael A. McCabe, a shareholder at the Dallas law firm of Munck Carter, P.C. with expertise in e-discovery and labor and employment law, to help sort out the situation.
Let’s cut to the chase; can I legally monitor workers’ e-mail accounts?
Yes, in most states. But, you have to go about it in the right way. The key is to defeat the employee’s expectation of privacy in his or her workplace communications.
Employers can do this by distributing a policy that clearly and unambiguously states that any communication made over the company’s e-mail system is not private and will be monitored by the employer. Having established no expectation of privacy to workplace communications, the employer is on solid ground to legally monitor the communications.
Does that mean I can monitor personal communications on company computers?
This is a relatively new and dynamic area of the law that is constantly being fine-tuned. However, most courts have consistently ruled that so long as an employer’s policy dispels any expectation of privacy, it is fair game for the employer to review communications made over the employer’s e-mail system.
Some courts have gone so far as to hold that communications between employees and their lawyers cannot be privileged if the employer retains the right to review communications sent or received over the company’s e-mail system. In the words of one court, a properly drafted policy is equivalent to notifying employees that ‘the employer [is] looking over your shoulder each time you send an e-mail.’
How about monitoring other technology like cell phones, voice mail, BlackBerrys?
Written communications, in whatever form, that are transmitted over the employer’s computer system can be monitored if the employer’s policy eliminates any expectation of privacy. This same rule should apply to voice-mail communications that are transmitted over an employer’s e-mail system.
Monitoring cell phone conversations is a different story altogether. The law of most states and the federal government is that telephone conversations can be monitored if proper notice is given and consent received. In some states, only one person to the conversation needs to consent to being monitored, while in other states, all parties to the conversation must consent. That’s why you’re informed that your telephone conversation is being recorded when you call a customer service hot line.
To monitor employee’s cell phone calls, you would have to receive consent from both the employee and whomever he or she calls because you don’t know if he or she is calling one of the more restrictive states.
For all practical purposes, it would be very difficult to implement such a policy with cell phones.
But didn’t the 9th Court’s June decision draw some lines?
Not as much as you might think. The 9th Circuit ruled that Arch Wireless, a text message provider, violated the federal Stored Communications Act (SCA) by disclosing a police officer’s sexually explicit text messages to his employer, the City of Ontario Police Department, even though the city was the subscriber on the service contract. In the court’s view, Arch Wireless violated the SCA because it disclosed stored text messages to a third party without the consent of either party to the communications.
This does not, however, stop employers from monitoring e-mails that are sent entirely over their own e-mail and computer systems. The easiest way for employers to avoid the 9th Circuit’s ruling is to limit business communications to those devices that can be monitored by the employer, such as BlackBerrys and traditional e-mail.
Can I take disciplinary action against an employee for a post to an industry blog?
Probably, but it can differ from one state to the next and between public and private employers. There are several cases in which employees were fired or disciplined for material they posted on an industry or personal blog that was critical of their employer. Other employees have been disciplined for making statements online that appear to be the employer’s official position on a topic.
To avoid these problems, all employers should have a policy that prohibits employees from blogging about their employer without making their employment status known and without stating that the espoused views are personal to the employee and not the views of the employer. Furthermore, the policy should remind employees that they can be disciplined if they paint the company in a bad light.
MICHAEL A. McCABE is a shareholder at Munck Carter, P.C. and a member of the firm's labor and employment and litigation sections. He can be reached at (972) 628-3609 or firstname.lastname@example.org.
Scott Driggers is a master at finding different roads that lead to the same destination, something he’s had to do as he’s opened offices in other countries.
In 2001, the co-founder and CEO of Gemini Mobile Technologies Inc. established his company in Silicon Valley and Japan, and the wireless software company has since added a third office in China. His greatest challenge with those locations is getting 150 employees across three cultures to achieve a common vision to move the company forward, and he frequently meets with the company’s leaders in each region to discuss the specific challenges they face.
“You have to be frank and honest and create an environment where the senior management team feels comfortable talking about that,” he says.
Smart Business spoke with Driggers about how to use different methods to achieve the same goal and how to know which method to use when.
Q. How do you plan a strategy that works across different cultures?
One of the key points would be, ‘Where’s the starting point?’ If you start with collaborative management soliciting ideas from the other senior managers you need to start at a point that is relevant to them and the context of their environment.
In the U.S., we might come up with a list of draft ideas. The CEO might come to his team and say, ‘Here are five goals we’re thinking about for this year. Let’s brainstorm around that.’
In Japan, you would collaborate from the bottom up. You would let the managers know, ‘Get together with your team. Bring to me what you think the top challenges or goals are for the upcoming year.’ So the managers there would go to their junior team members, who would solicit ideas. And when it comes back down in Japan, people have all felt they have participated.
In the U.S., it would be OK for the senior managers to come up with some specific ideas, then explain that to the team members and allow them to have their buy-in.
Q. How do you execute the strategy in each culture?
We may have a goal in Japan, which would be very similar to the goal in the U.S. The way we might approach that in the U.S. is ask a junior person to write up a strategy on paper, some targets, get together at a meeting, logically go through A, B, C, D, then call the meeting closed and everybody goes out and executes.
In Japan, we would spend a lot more time upfront. There would be a larger meeting; there might be 20 to 25 people involved depending on the size of the project. You might bring a vendor or a partner or a customer to the meeting. You might have to go through a number of these meetings. It’s not a linear process to reach consensus; it’s a very circular process.
It would seem very frustrating, but the value system in Japan is, we spend more time upfront, but then the execution is a lot faster on the back end because there are fewer unknowns to resolve along the way.
But as an American, you just say, ‘Hey, let’s just get the idea; we’ll solve things as we go along.’
Both approaches are OK; you just need to recognize what’s going to work in that environment. You would create a lot of stress if you tried to fit one of those processes into the other location.
Q. How do you tailor the vision to each group?
It’s not so much a tailoring of the vision; it’s a tailoring of the delivery, acknowledging what’s important to an engineer in Silicon Valley may not be as important to an engineer in Japan. In Japan, something else may be emphasized that would be de-emphasized or a nonissue in the U.S.
For example, in the U.S., people are very interested in how our technology differs from the competition. What are we doing that’s different than the company two miles down the road? We talk enough about the product that they have an understanding.
In Japan, the team members are aware of the competitors. But at the same time, it’s more focused how we are going to do this internally. It’s more focused on the process and less on exactly what this product is going to do.
Q. What’s your advice to a business that is expanding to China or Japan?
The first thing is, the senior person you hire in those markets is very critical. No. 1, make the choice of, ‘Will we open an office, or will we work through a local agent or partner in some way?’
Then if you decided to open your own office, see if you can work with someone who has had a bicultural experience. There is a certain threshold you step over once you’ve worked overseas. Rather than intellectually, it becomes a more intuitive or emotive response to understand what it’s like when you’re in another country.
That allows you to open up and be able to work across these cultural boundaries.
HOW TO REACH: Gemini Mobile Technologies Inc., (650) 227-2380 or www.geminimobile.com
Andrew Housser and Brad Stroh have created a business to make a profit but also to help tens of thousands of customers.
One of the biggest issues facing Americans is their rising debt. Housser and Stroh recognized two unmet needs in this market: for consumers to easily learn about personal finance and for debtors to have their own representatives in the collections process. They also realized that creditor funding was the norm for debt relief and a huge conflict of interest for the consumer.
The two co-founded and serve as co-CEOs of Bills.com. The company serves as a howto resource for customers to learn about and actually reduce their debt. It aims to help consumers prevent financial chaos and offers alternatives to bankruptcy, credit counseling and debt consolidation for those already in trouble. Bills.com is the online portal for Freedom Financial Network, the country’s largest pure debt resolution company.
While it hasn’t been an easy trip for them, the two have worked hard to distinguish their debt resolution services from the credit counseling industry, which has been under intense legal scrutiny. To do that, they developed a clear brand and are now sought-after experts in the personal finance field.
Housser and Stroh manage $1 billion in consumer debt for more than 40,000 consumers, and as they look toward the future, they plan to grow organically by adding new products. Additionally, this year they expect to grow revenue by 83 percent.
HOW TO REACH: Bills.com, (800) 544-7211 or www.bills.com
In 1993, Pete Cittadini took one of the hugest risks of his life when he move from Boston to San Mateo to join Actuate Corp. He left behind an influential position running worldwide operations for a company with more than 500 employees to work alongside 15 product engineers in a startup.
His passion for business intelligence and database technologies led him to the company, and throughout the years, he has been able to identify opportunities and viabilities for the company. Seven years ago, he was named CEO, and today, he’s regarded as a “re-entrepreneur” at Actuate because of the new life he’s breathed into the company by broadening its business model to leverage opportunities.
In addition to growing and strengthening the business side of the company, he has also created a culture of giving back, even from the early days when the company wasn’t financially stable. The company gives substantially to Science Buddies and Peninsula Habitat for Humanity, having donated money to build three homes in the area in the past seven years. But it’s not just the money that speaks. Every year, Cittadini and a handful of employees also volunteer their time to build houses in South San Francisco.
Cittadini has proven himself a solid leader and looks forward to future possibilities.
This president and CEO says, “Transforming the way Actuate is modeling itself to do business in the future is what gets me started in the morning.”
HOW TO REACH: Actuate Corp., (650) 645-3000 or www.actuate.com or
One of Jim Weiss’ favorite slogans is “Drive or be driven,” and it’s that philosophy that has gotten him where he is today.
After nearly 15 years of working in the health care public relations field, including time at some of the largest firms and internally at companies like Genentech, Heartport and Aventis, Jim Weiss decided he was ready to drive on his own.
He started consulting in late 1999, working from the basement of his San Francisco loft, and within a couple of years, his services were in great demand, so he incorporated WeissComm Partners in 2001.
Not long after, he bought 1,200 feet of space and hired a few employees, while also starting to market the firm nationally. Today, that business has grown into 80 employees with multiple offices around the United States and in London.
His services continue to be in high demand. In fact, when one company had a patient die in a gene therapy clinical trial, its first call was to Weiss because of his reputation in the industry of managing crises with level-headed thinking and sound judgment. He worked with that company to attack the issue head-on instead of hiding from it. It’s this value of wanting to drive instead of be driven that has helped this chairman and CEO succeed and will help him grow WeissComm into an even larger domestic and international player.
HOW TO REACH: WeissComm Partners Inc., (415) 362-5018 or www.wcpglobal.com
Lars Dalgaard doesn’t just want to succeed he wants to make a difference in people.
He formed SuccessFactors back in 2001 when he brought together two struggling start-up companies. Those businesses, combined with his vision, formed an on-demand software company that could help companies revolutionize the way their employees worked.
Dalgaard had just a few principles by which he runs his business: No jerks allowed, insist on customer success and strive for constant improvement. These principles have been his focus, and he also credits his success to them. Every employee who comes to SuccessFactors pledges his or her commitment to upholding these ideals, and they are active in building their own careers.
The company uses its own software to maintain its culture, and employees are in consistent contact and alignment with management. These factors combined have allowed the company to be recognized as one of the best small to midsized companies to work for in America by the Society for Human Resource Management and the Great Place to Work Institute.
In addition to his commitment to his employees, this CEO is also committed to giving back and mentoring young people. He volunteers as a big brother and mentor for Crossroads Café/Delancy Street Foundation. He also has provided paid internships to for graduating high school students who are college-bound from East Palo Alto Tennis & Tutoring. The program provides these students with work and life experience, and maybe one day, they’ll return to SuccessFactors to help Dalgaard take his business to the next level.
HOW TO REACH: SuccessFactors, (650) 645-2000 or www.successfactors.com or
In 1999, Philippe Courtot had a vision for a business that would use the Internet to deliver its product instead of software installed on a computer, but with the dotcom bubble burst, venture capitalists were running in fear from Internet businesses.
Despite pressure to develop enterprise software, Courtot stood his ground with his idea, and instead of securing funds from venture capitalists, he used his own money to form Qualys Inc. and the software-as-a-service (SaaS) model.
Nearly a decade after his original vision, Courtot has seen his share of success. He has more than 3,000 customers throughout 85 countries, and on top of that, 25 percent of the Fortune 1,000 companies use his services. While a lot of people were skeptical when he first started, they’re giving him the respect he’s earned by realizing that having software in your Internet browser is more effective than having it on your hard drive. The numbers back him up, as well, as he grew Qualys’ revenue by 40 percent last year, and it has achieved gross margins of 80 percent.
As he looks toward the future, Courtot shows no signs of slowing down. This chairman and CEO has been quoted comparing himself to Picasso in that the famous painter was painting until his last day on earth, and he’ll continue to work in that same regard.
HOW TO REACH: Qualys Inc. (650) 801-6100 or www.qualys.com
Hans Peter Michelet has been called a serial entrepreneur because he’s constantly starting and developing a variety of businesses, but one of his most ambitious efforts is as chairman of Energy Recovery Inc., which manufactures energy recovery devices used in seawater reverse osmosis desalination plants.
Michelet was an early investor in ERI back when it had only two employees and was still just an R&D venture, and he’s overcome many obstacles to ensure the company’s success today.
Michelet was originally told by engineering experts that ERI couldn’t manufacture a pumping device out of available ceramics technology that could withstand the pressure and tolerance specifications required. He and the inventor defied their expectations and proved them wrong.
He also had to make changes to ERI’s management team. He believed that the company needed the right team for the right time, and that meant ousting the founder of the company. On top of that, he moved the company from Virginia to California to be near a new management team.
Then financially, the company was burning through cash as it developed its technology. Michelet was able to convince a small group of investors to commit to the process more than most venture capitalists would probably tolerate.
Today, as a result of Michelet’s leadership, the company is a market leader and changed the economics of desalination. On top of that, this executive chairman has created jobs. What started out as a two-person start-up has turned into 54 employees in the United States and another 13 in offices in Shanghai, Dubai and Madrid.
HOW TO REACH: Energy Recovery Inc., (510) 483-7370 or www.energyrecovery.com
Data Domain was founded in late 2001, and when Frank Slootman left a larger, more established company to hop on board as CEO in 2003, it already had its share of young company issues. At that time, the business didn’t have a sales staff or customers, and Slootman himself had to sell the first half dozen or so customers.
To make Data Domain a player in the data storage market, Slootman articulated a set of values for everyone including himself to live by. He also created a plan and vision for the company, which didn’t include being acquired or any other exit strategy. Instead, he focused on making Data Domain an independent and self-sustainable business.
He also defied conventional wisdom. Instead of bringing on a team of managers with a trail of accolades following them, he chose to hire people who showed great potential and whose greatest accomplishments were yet to come. He also ruffled some feathers by choosing to go overseas early in the company’s life instead of establishing itself here first. While many thought this was a mistake, it allowed the company to diversify its revenue streams, accelerate growth and block competition.
Slootman’s vision and risks have paid off. The company’s revenue grew 1,450 percent from 2005 to 2007, and at of the end of last year, it had 1,500 customers in 23 countries.
HOW TO REACH: Data Domain, (408) 980-4800 or www.datadomain.com
The hardest work involved in running a business may be closing it, which is the ultimate end point of the life cycle of a business: birth, growth, maturation and decline. Owners who are not prepared for a formal closing process and even those who are will find the job daunting.
But, closing a business is a common occurrence, whether it is by choice or circumstance, and there are professionals who can simplify the myriad steps involved based on extensive opportunities and experience.
Nationally, about 75,000 businesses fail each year, closing with unpaid debts which is approximately half the number that opens each year. And of those 150,000 annual start-ups, approximately one-third will close within two years of opening. These figures suggest that every business owner should be prepared for that eventuality.
Smart Business spoke with Russ Burbank, a partner with Burr Pilger Mayer, to learn more about the formal business closing process and the risks associated with sidestepping it.
What risks do business owners who do not follow the formal closure process face?
Businesses close for good reasons. They can range from acquisition or owner retirement to consolidation or business failure. In any case, the formal closure process has to be completed. Otherwise, owners run risks like incurring personal liability for taxes, assessments, fines as well as loss of protection under state statutes against future claims until a certification of dissolution is issued by the Secretary of the State.
Are all business closures the same?
Not at all. The process varies, depending on factors such as whether the company is insolvent or solvent when it is closed, the reason it closed, the complexity of the business and the level of cooperation among the creditors. The more complex the company and the more contentious the creditors, the more likely it is that they will seek the strong arm of the bankruptcy court to maintain an orderly process.
How important is the role creditors play in the closing process?
That depends somewhat on whether the business is solvent or insolvent. When a business is solvent, the owners decide how and when to close. In this case, the closure process typically consists of an orderly wind down of operations, settlement of all outstanding liabilities and a formal dissolution of the business entity. But, it is different when there is the possibility that creditors may not be paid in full at closure because the company is insolvent. In those cases, creditors ultimately decide how the business will be closed, either in or out of court. The court might involve Chapter 7 or Chapter 11 bankruptcy filings. Deciding out of court might mean that an Assignment for Benefit of Creditors (ABC) specialist will distribute the proceeds from liquidation of the business to creditors. Either way, the closing process can be tedious, time-consuming and costly when not done properly.
What steps exist when a business closes?
Here are just a few: Owners must terminate and pay employees; issue or make arrangements for wage and withholding information (W2s); provide information to subcontractors (1099s); notify vendors of ceased operations, request them to submit final invoices and ask them to indicate final bills were paid; notify tax authorities of the closure in accordance with state, federal and local procedures; cancel state and local permits, including business licenses, sellers permits and fictitious names; and deal with landlords regarding lease terminations. The list goes on.
The process is often made more complex because owners let their employees go as part of the closing process and are faced with doing many of these tasks themselves. That explains in part why professional ‘closers,’ such as attorneys, accountants and turnaround specialists can be valuable assets in the process.
Why hire a professional to help with a business closure?
It can be as difficult to close a business as it is to start one. Depending on the complexity of the organization, its number of locations and the kinds of liabilities that must be terminated such as employee pension plans, tax accounts and insurance claims a complete closure can take a year or more. So, there is a point in the closure process when the owners are better off turning it over to professional ‘closers’ who do that kind of work more economically and efficiently.
For one thing, professional ‘closers’ cut business owners’ costs. The neutral third parties to whom they hand over the closure will typically be working on an as-needed basis, rather than full time. That speeds up the process and increases productivity. Third-party professionals will focus their attention on the closure details, sometimes on an hourly paid basis, which may not be true with the company’s management team or employees who milk their final days or may be more concerned with finding their next job than they are with terminating their soon-to-be ending position. Either way, they are less productive and that costs the owners money that could be better used to pay creditors or themselves.
RUSS BURBANK is a partner and Certified Turnaround Professional (CTP) with Burr Pilger Mayer’s Consulting Group. Reach him at email@example.com or (415) 677-4530.