Does the Seattle Paid Sick/Safe Time Ordinance Apply to Your Business?

All employers with employees working in Seattle, even those who only work in Seattle occasionally, need to read-up on Seattle’s Paid Sick/Safe Time ordinance (PSST for short). If PSST applies to your business, it establishes minimum standards for paid sick leave and safe time for most of your Seattle employees.

These minimum standards do not apply to employers uniformly across the board. Instead, degree of compliance with PSST varies based on a 3-tier system corresponding to an employer’s total number of “full-time equivalent” employees.

This full-time equivalent employees concept can be confusing and calculating the total number is the tricky part. Basically, to arrive at the number of your full-time equivalent employees, factor in all hours worked by employees in a preceding year and divide by the hours amounting to work performed by 1 full-time employee.

I thought it would be helpful to visualize what is meant by full-time equivalent along with basic steps for determining PSST compliance. Please feel free to pass around the cheat sheet below, your feedback is welcomed as well.

Before you examine the cheat sheet below and the subsequent PSST links, there are two crucial pieces of information that I need to clarify.

  1. The term “full-time equivalent employee” does not interchangeably mean or equal “full-time employee“.
  2. PSST only applies to employees working in Seattle while working in Seattle, but to determine compliance an employer must factor in all of its employees even those who work outside of Seattle.

Resources and Additional Information

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Social Purpose Corporation, Maximizing Sustainable Business in Washington State

Social Purpose CorporationIn Washington State, being socially conscious doesn’t mean choosing between doing good and doing good business.

Incorporating or reorganizing as a social purpose corporation (SPC) allows socially conscious businesses greater flexibility to support social and environmental goals.

What makes this emerging corporate entity unique is that maximizing the financial bottom line isn’t a social purpose corporation’s sole and primary objective.

Potentially as an SPC, a business could more easily go green, help give back to communities, require fair trade practices, invest in their employees, or engage in many other sustainable and social goods.

Required General Social Purpose and Optional Specific Social Purpose
The foundational elemental of all SPCs is the same, ultimately the business purpose must promote the general social purpose mandate. Washington State law states:

[SPC must] promote positive short-term or long-term effects of, or minimize adverse short-term or long-term effects of, the corporation’s activities upon any or all of

(1) the corporation’s employees, suppliers, or customers;
(2) the local, state, national, or world community; or
(3) the environment.

This is pretty broad and allows an SPC to the freedom to define and implement its social or environmental goals. In addition to the general social purpose, a corporation can choose to promote one or more specific social purposes. Quite simply, an SPC would need to articulate the specific social purpose in a statement as part of its articles of incorporation.

SPCs and Shareholders

The mission of this social purpose corporation is not necessarily compatible with and may be contrary to maximizing profits and earnings for shareholders, or maximizing shareholder value in any sale, merger, acquisition, or other similar actions of the corporation.

Traditionally, a corporation’s duty to its shareholders means means increasing the bottom line above all else. In contrast, the director of an SPC will not incur liability for acting in support of the corporation’s social purpose. Instead, actions intending to promote the corporation’s social purpose are in line with its best interets.

While this alternative may not appeal everyone, an SPC can draw in likeminded investors. For one, the SPC must demonstrate its commitment to social good through transparency.

The SPC must make available an annual social purpose report that details efforts to promote its social purposes and assesses the effectiveness of those efforts. Shareholders are able to monitor and evaluate whether the SPC truly reflects its social purpose as intended.

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Navigating Pinterest and Its Copyright Challenges

Pinterest Logo

In the 2 years since Pinterest launched itself as an invite-only social bookmarking service, the size of its user base and web traffic have made Pinterest into a social network heavy weight. Consequently, we need to understand how Pinterest handles third-party intellectual property. In relation to such content, in this post we discuss how is used on the website, Pinterest’s relevant policies towards such content, and what options are available to rights holders.

How It Works

Pinterest has been categorized as a virtual pinboard or image-based social bookmarking system. However, in a lot of ways Pinterest functions more similarly to the microblogging service Tumblr as opposed to a website like del.icio.us. Users can upload or link to media content (i.e. images and videos), and then organize and tag the content based on a category of interest. Other users can follow, like, or re-link the content.

Similar to Facebook or Twitter’s newsfeed, users can follow content streams or lookup certain categories of content based on how its tagged. Clicking through the content may credit or link back to the original source, but that depends on the user to do so.

Terms of Use and User-Submitted Content

Pinterest’s terms of use and related policies are under a lot of heat of late. While Cold Brew Labs, Inc., the company that provides Pinterest, does not claims any ownership rights in user-submitted content, it does retain a broad license to use such content.

“…[Y]ou hereby grant to Cold Brew Labs a worldwide, irrevocable, perpetual, non-exclusive, transferable, royalty-free license, with the right to sublicense, to use, copy, adapt, modify, distribute, license, sell, transfer, publicly display, publicly perform, transmit, stream, broadcast, access, view, and otherwise exploit such Member Content only on, through or by means of the Site, Application or Services.”

Claiming such licensing rights is typical of social networking services. However, problematically, Pinterest seeks to retain a license that is irrevocable and perpetual. The license will not expire once a user removes submitted content or deletes his or her account. Pinterest further explains this in the following provision:

“Following termination or deactivation of your account, or if you remove any User Content from your account or your boards, Pinterest may retain your User Content for a commercially reasonable period of time for backup, archival, or audit purposes. Furthermore, Pinterest and other Users may retain and continue to display, reproduce, re-pin, modify, re-arrange, and distribute any of your User Content that other Users have re-pinned to their own boards or which you have posted to public or semi-public areas of the Service.”

Options Available to Rights Holders

Legally, content owners and rights holders can scour Pinterest regularly and submit DMCA takedown notices to Pinterest directly or its web host, Amazon Web Services (for more information on issuing alleged infringement complaints, please see our past post here). Although time consuming, this is the legal option available to rights holders. Also, follow this link to Pinterest’s page for alleging copyright infringement and submitting DMCA takedown notices.

Another available option is for content owners and right holders to preempt any potential infringement by joining Pinterest and maintain an account. The goal is to establish some control over how the content is displayed. A rights holder can upload the content and ensure that it has proper attribution, tags, watermarks, and website links back to them or their business. That way any re-linking of the material will anchor back to the original content owner and allow other users to see the owner’s information (i.e. website, where to purchase, etc.). The added benefit is gauging trends and the popularity of one’s content through the responses of other users.

This option has its inherent risks along with the broad licensing rights issue. If rights holders go this route, they should keep in mind that Pinterest’s terms of use discourage soliciting and self-promotion. Like most social media, Pinterest is better suited to organic interactions as opposed to solely treating it as marketing vehicle. Also, rights holders should avoid re-pinning content submitted by other users where the source is unknown. It’s better to seek permission or collaborate with other content owners interest. Lastly, rights holders should regularly review Pinterest’s terms of use, which are likely to be updated again as the service continues to grow.

 

Disclaimer
The content of this blog is for informational purposes only and does not constitute legal advice. This author, website, and MK Singh Law Office make no representations as to accuracy, completeness, currentness, suitability, or validity of any information on this site and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All information is provided on an as-is basis.

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Crowdfunding Act: What could it mean for the Entrepreneur or Startup?

The Crowdfund Act is an amended version of the JOBS ACT that will permit the SEC to allow for certain types of investments by individuals who don’t normally qualify as qualified investors under the SEC to make investments through SEC Approved websites. The Act has successfully passed both the House and the Senate. There is a long road ahead for actually enacting the bill but its allowances could be huge for Entrepreneurs and Startups.

In short, the bill will allow entrepreneurs to raise up to one million ($1,000,000) dollars per year through a special SEC registration for crowdfunding. This means that a regular person who normally doesn’t qualify as an Angel Investor will have the opportunity to invest in private entities. Investors who have an annual income of less than $100,000 will be able to invest up to $2,000 or 5% of their income. Investors who have income of more than $100,000 will be able to invest up to $100,000 or 10% of their income.

Stay tuned for more updates.

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SOPA and PIPA: Breaking Down the Bills and Possible Affects on Internet Piracy

With the recent Internet-based blackout by big names in protest of the two bills, it’s worth going over the proposed law and its potential impact on online piracy.

Targeting Piracy With Digital Millennium Copyright Act (DMCA)

The current mechanism for addressing internet piracy utilizes takedown notices through the Digital Millennium Copyright Act (DMCA). This allows rights holders to ask for the removal of specific infringing content. Generally, this approach narrows itself to specified content and it recognizes that online service providers may not be culpable for the actions of their users.

Most notably, under § 512 of the DMCA service providers hosting the infringing content may be exempt from liability upon meeting certain requirements. This safe harbor applies if the content host:

  • Lacks actual knowledge of infringing use; or
  • Lacks awareness of facts or circumstances that make infringing use apparent; or
  • Removes or disables access to infringing material upon knowledge or awareness; and
  • Informs users of its copyright infringement policy; and
  • Complies in good faith with the takedown notice; and
  • Does not receive a direct financial benefit from infringing use if it has the right and ability  to control such activity.

Targeting Piracy Through Stop Online Piracy Act (SOPA) and Protect IP Act (PIPA)

SOPA is the House bill and PIPA is the Senate version. Both seek to address Internet piracy differently from the DMCA approach. Instead of content removal and focusing on users, the bills propose targeting websites. This will widen the net beyond safe harbor such that content hosts must be more vigilant and self-police.

In relevant portion, under SOPA the Attorney General may take action against a website if at least a portion of it is directed to the U.S. and is used by users within the United States; offering goods or services in a manner that engages in, enables, or facilitates copyright infringement; or takes steps to avoid confirming a high probability of infringing use. In addition, SOPA also targets foreign websites or portion of such sites availing themselves to the U.S. that commit or facilitate infringing use or trafficking of counterfeit goods or services.

Upon a website allegedly falling under the aforementioned criteria, notified payment network providers (like credit card companies and PayPal) and internet advertising services would have 5 days within delivery of notification to suspend any services providing financial support to the website. Furthermore under SOPA, notified internet search engines have 5 days within delivery of notification to remove direct links to an allegedly infringing foreign website or a portion of such a site.

As of January 18, due to mounting pressure, legislators scrapped SOPA’s requirements for ISPs to block the domains for websites allegedly found in violation. Similarly, legislators are reconsidering this issue in regards to PIPA, which is quite similar to SOPA in it’s aim and enforcement measures. It specifically acts as a tool for rights holders to target foreign “rogue” websites. Like SOPA, measures include sending notices to suspend Internet financial services and transactions, and removal of direct links.

The Division Amongst Companies

Some of the biggest support for the bills comes from U.S. entertainment content providers who would be able seek enforcement against piracy by foreign websites, which generally remain outside U.S. jurisdiction.  The proposed bills would offer rights holders more options in terms of enforcement measures. Also, extending beyond removal of specific content, the measures would ostensibly throttle foreign “rogue” websites dedicated overall to piracy.

Part of the the opposition is comprised of U.S. tech and social media companies because Internet-based businesses will have to increase policing of suspected infringing use, and also comply with enforcement measures against alleged violating websites. Additionally, investors of Internet startups (such as these 55 venture capitalists in this letter) have expressed concern that enacting such measures will stymy innovation and growth, and be cost-prohibitive for legitimate ventures.

See below for links to the text
  • H.R. 3261: Stop Online Piracy Act
  • S. 968: Preventing Real Online Threat to Economic Creativity and Theft of Intellectual Property Act of 2011

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    Effective Date 2012: Local and Federal Legislation Changes and Extensions

    With the New Year in full swing, it’s a good time to consider new laws that will take effect in 2012 (and to be reminded of some that remain in effect).

    • Effect of Washington State’s new liquor law on local restaurants, bars, and craft distilleries.
    • The annual adjustment of Washington’s minimum wage.
    • New employment-related changes in Seattle.
    • Requirement to post employee rights poster.
    • Extension of tax rate for long-term capital gains and qualified dividends, along with a brief explanation of those terms.

     
    Continue reading

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    Incentives for Seeking Copyright Registration

    Before we get into this blog post, I want to point out that copyright registration is optional and it is not a requirement for copyright protection.

    So why seek copyright registration at all? There are three key incentives to register your work:

    1. Filing for copyright registration is a prerequisite for bringing a lawsuit for infringement.
    2. Registration creates the presumption that the copyright is valid.
    3. Most importantly, timely registration is a prerequisite for seeking certain remedies for infringement. (See 17 U.S.C. § 412 of the Copyright Act)

    This third incentive is particularly beneficial because a copyright owner with timely registration may elect for statutory damages and may seek attorney’s fees. Copyright registration is timely if the filing occurred before the infringement of the published work, or the filing occurred no later than 3 months after first publication of the work.

    Generally in an infringement suit an award of actual damages and any profits is available as one of the monetary remedies. Actual damages can consist of lost revenue, fair market value of a copyright license, or the actual price of the work and so forth. Calculating profits is more nuanced and it consists of examining gross revenue and deducting infringer’s costs and portion of profits not attributable to infringement of the copyrighted work. (See 17 U.S.C. § 504)

    Electing for statutory damages can be a better incentive than actual damages and profits because the latter may be harder to show or be a smaller award than statutory damages. An award for statutory damages can be between $750 to $30,000 per infringed work in an action. Furthermore under statutory damages, if the court finds that the infringement was willful, then the award for statutory damages could be increased up to $150,000 per infringed work in an action.

    However, where the court finds that the infringement was innocent (infringer was not aware and had no reason to believe that his or her acts constituted an infringement of copyright), then the court may reduce an award for statutory damages down to $200. To counteract the innocent infringer defense, it’s best to affix a copyright notice in a position that will give reasonable notice. Generally for most works, copyright notice requires: the copyright symbol (c), the word “Copyright”, or abbreviation “Copyr.”; the year of first publication of the work; and the copyright owner’s name, abbreviation, or designation.

    As for the copyright registration filing itself, the electronic filing fee for a basic copyright claim is currently at $35. So while not necessary, timely registration of a copyright is less burdensome, helps with copyright enforcement, and is a prerequisite for statutory damages and attorney’s fees in the event of infringement.

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    What’s In a Name? Tips for a Protectable Trademark

    Before becoming dead set on adopting a particular word trademark, make sure it is worthy of protection first. Doing your homework can both inspire during the naming process and later decrease the chances of discarding a weak word mark.  This is where the spectrum of distinctiveness comes into play.

    The spectrum of distinctiveness illustrates the strength of a mark. The more distinct the word mark is, the stronger it is in terms of legal protection. The reason for this is that a trademark is meant to identify the source of the goods or services being offered. A generic or descriptive term refers to the goods or services, but does not call to mind the source providing them.

    Generic
    A generic term is not distinctive and thus cannot be protected as a functioning trademark or registered as a trademark. A name is generic if it is the common term for a class of goods or services. Some examples of generic terms would “Coffee” for coffee, “Furniture” for furniture, or “Accounting Services” for accounting services.

    A generic term is not distinctive and thus cannot be protected as a functioning trademark or registered as a trademark. A name is generic if it is the common term for a class of goods or services. Some examples of generic terms would “Coffee” for coffee, “Furniture” for furniture, or “Accounting Services” for accounting services.

    It’s worth noting that if you offer a product or service first of it’s kind, avoid turning your trademark into a generic term. Come up with a generic term to use and promote separately so that your trademark doesn’t become the commonly used term. For example, Rollerblade is Rollerblade, Inc.’s trademark and “inline skate” is the generic term for its product. The term “escalator” is now a generic term, but it was the trademark of Otis Elevator Co. for their product “moving stairs”. The company’s interchangeable use of their trademark as a generic term lost it exclusive use of “escalator” as a trademark.

    Descriptive
    Descriptive terms are trickier because on the whole they are not distinctive if they are merely descriptive or deceptively misdescriptive. A merely descriptive term describes an aspect of the goods or services such as “an ingredient, quality, characteristic, function, feature, purpose or use of the specified goods or services.” TMEP §§1209.01(b). For example “Quick Copy” to describe copying services or “Cozy Comforters” for blankets. Other types of descriptive terms include surnames, geographic identifiers, and foreign translations.

    A descriptive term may be adopted as a trademark if it acquires distinctiveness through a secondary meaning. In other words, the descriptive term is used continuously and exclusively such that the consuming public’s primary significance with the term is not the specified goods or services but with their source. See TMEP §§1212. An example of a descriptive mark with secondary meaning would be “Raisin Bran” or “Bank of America”.

    Suggestive
    Suggestive marks are inherently distinctive and require an extra step to connect the source to its goods or services.  Unlike descriptive terms, there is no immediate idea that calls to mind the goods or services. See TMEP §§1209.01(a). “Mustang” is a good example of a suggestive mark because it although doesn’t immediately refer to a car, it does connect the car with speed and horsepower.

    Arbitrary
    Arbitrary marks are also inherently distinctive and consist of ordinary words that do not relate to the goods or services in a descriptive or suggestive manner. A common example used to illustrate this category is “Apple Computers.” Another is “Virgin Mobile” for telecommunication services.

    Fanciful
    Not only are fanciful marks inherently distinctive, but they are also the strongest trademarks in terms of protection. Fanciful marks consist or coined or made-up words. Some examples are “Kodak”, “Mattel”, and “Starbucks”.

    Practical Considerations
    From a marketing standpoint, there is an incentive to adopt marks that are closer to generic and descriptive terms. Such marks signal to consumers a more obvious association between a business and its goods or services. However an established, more inherently distinctive mark diminishes the off chance that consumers will confuse your business with competitors (i.e. Apple Computers or Kinko’s).

    Fanciful and arbitrary marks are the strongest in terms of legal protection and distinctiveness. Yet the drawback here is if the market comes to associate the trademark with the generic term for your business’s goods or services (i.e. Xerox for copying, Kleenex for tissues, Rollerblades for inline skates). To keep your mark from becoming weak or generic, promote awareness in the marketplace about the difference between your mark and the generic term. Here are some things you can do to maintain this distinction: avoid using the trademark as the name of the goods or services in internal and trade-related communication; draw attention to both terms properly in advertising to consumers; and develop and promote a generic term if one does not already exist for your goods or services.

    A suggestive mark is a good option if you wanted the obviousness of a descriptive mark. While suggestive marks are not as strong as fanciful or arbitrary ones, they remain protectable. A suggestive mark is a good option if you wanted it to signal a more immediate association between your mark and the goods or services provided. Also, there’s less of a chance it can take the place of a generic term. Just be sure to test that the mark does not primarily describe or call to mind your goods or services first, but still requires some level of imagination.

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    Restricted Stock and IRS Section 83(b) Election

    Making a § 83(b) election for restricted stock can be a complex decision due to the inherent risks involved. It is best to get the advice of legal and tax counsel before making this decision. The election deals with property subject to a substantial risk of forfeiture. The reason its so popular for founders of a startup, is accepting shares of restricted stock can signal to investors that the founders believe in the company’s future success and are willing to put in some time for that to happen.

    While it is not necessary to file a § 83(b) election, doing so means that the restricted stock will be taxed at the time it is granted and not as it vests over time. Doing nothing means that the shares will be taxed as income as they vest.

    What is Restricted Stock?

    What is the difference between restricted stock and authorized stock? Authorized stock is the total amount of shares authorized at the formation of a company, but not all shares need to be issued. Restricted stock is a type of unissued stock that companies may award for employee or other equity compensation purposes.

    Shares of restricted stock do not vest immediately. Restricted stock is issued with a condition imposed on when the shares vest. Generally accompanied by a standard vesting schedule. That is to say, the ownership rights in the shares do not fully transfer until some future occurrence or fulfillment of the condition.

    The vesting of the shares can be tied to performance or to a length of time. For instance, in a startup the purpose behind restricted stock can be to incentivize founders to continue with the company and help build it for a length of time after which their shares will vest. For executive compensation models, vesting of shares could be contingent upon meeting company goals and growth benchmarks.

    Understanding Section 83(b)

    Section 83 of the Internal Revenue Code concerns property transferred in connection with performance of services. Through § 83(b), property granted with an imposed condition or restriction can be taxed before it vests.

    For restricted stock then, an employee (or founder) can choose to be taxed on the excess of its fair market value at the time it was granted. Under § 83(b) it must be included as gross income for the taxable year in which the shares of restricted stock were granted.

    The benefit here is that the tax would be lower since the shares would initially have a lower valuation as opposed to later if the shares appreciate in value as the company grows. Also, once the stock does vest it will not be taxed again as income once the § 83(b) election has already been made.

    However, the downside to § 83(b) is having already paid taxes on shares that are unvested. If the condition has not been met by the time a person’s services are terminated with the company, then the unvested shares must be forfeited. While the company will buy back the stock for the original purchase amount, the person cannot seek a refund on the amount they were taxed on the unvested shares nor can it be deducted as a loss. Another drawback here is the off chance that the vested stock’s value happens to be lower than its valuation at the time of the § 83(b) filing, thus being taxed more on less income.

    Lastly, keep in mind that the deadline for making a § 83(b) election is pretty strict and it must be timely filed within 30-days of when the stock is granted. No exceptions!

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    Community Presentations

    Upcoming Presentations

    Past Presentations

    "Going Solo"
    University of Kansas School of Law
    October 4, 2011
    (Interactive workshop on the mechanics of launching a solo law practice)
    
    "Social Media and the Cloud: The Rise of New IP Concerns"
    Seattle Technical Forum
    September 14, 2011 Bellevue City Hall
    
    "Cloud Computing Essentials"
    WSBA-CLE, WSBA Offices
    August 25, 2011
    
    "Business Development for your Law Practice"
    Panel Discussion hosted by the South Asian Bar Association
    June 9th, 2011; Perkins Coie PLLC
    
    "Social Media and the Law: What Businesses Need to Know about Social Media Marketing"
    May 5, 2010; June 3, 2010; February 22, 2011 hosted on Biznik
    
     



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