Policies and Contracts:

Considerations for Businesses

Presented by Ryan K. Hew, Attorney at Law, LLLC

Last updated July 8, 2013

Disclaimer• The information provided in this presentation is

provided as non-specific general legal information, and should not be construed as legal advice for any particular situation. The information provided here should not be relied on for any action or omission by the user.

• If you are in need of legal assistance, such as drafting policy or a written agreement or are in conflict/dispute with an opposing party you should seek an attorney in your relevant jurisdiction.

• Further, I do not guarantee or warrant the use of the resources listed, as they are only meant to demonstrate as examples. You should seek legal assistance for a legal review and opinion for your own use.

What’s the Point?• The goal of this presentation is to get the

audience to understand that policy and contracts are two different concepts. While there may be overlap, one is not necessarily the other.

• The intended audience are for organizations, and their people, whether profit or non-profit, to consider certain aspects when drafting policy or agreements.

• Of course with my background I will draw heavily from social media, corporate law, and HR.

Content Covered• HOWEVER, this presentation does NOT cover public

policy (i.e. policies promulgated by the government).• I will only focus on in this short presentation:

o What’s the Point (of this Presentation)o Content Covered (by the Presentation)o Your Daily Interaction (with policies & contracts)o Definitiono Distinctiono Examples of Policieso Overlapo Case Lawo Clickwrap Agreements vs. Online Policieso Handling Policy and Contracto Resources

Your Daily Interaction• People interact with both, policies and contractual

obligations on a daily basis, having a social media account, the workplace, and even visiting an amusement park.

• Some situations for your organization may call for implementing a policy whether new or changing an old one, but other times you might have need of a binding agreement.

• Finally, there are times where one may lead to the other:o Having a policy where all sponsors for a nonprofit must sign a licensing

agreement.o Having an employment contract where an employee agrees to abide by all the

policies and procedures for IT security.

Definition

Contract Policy

• CONTRACT is a binding obligation; it is enforceable by law, meaning if one party breaches the other owes it damages

• POLICY is a guideline for the way a business operates; it is a course of action for a process or procedure

Distinction• Not all policies are contracts.• Not all contracts are policies.• Violating a contract may give rise to a lawsuit.

o For example, if you don’t pay an independent contractor for the work that they did for you that you agreed to, the IC will sue for what is owed.

• BUT violating policy does not always lead to a suit.o For example, if you run a dog daycare center and your policy is to walk

the dogs three times a day, but you miss a walk one day, the customer cannot say “I’m going to sue you.” On the flipside, if your policy is the dog owner must provide a leash, and one day they forget, you aren’t going to sue them.

Examples of Policies• The employee handbook – example, a dress code

not to have visible tattoos or piercings• Retail Stores – Return Policy on Merchandise• Airlines – policy on using flight benefits• Bars and Restaurants – policy on employees of

not eating and drinking in front of patrons• Corporate Social Media Policies – some are strict

and wordy, others are short and “common sense” oriented. Consider these bullet point examples:o Protecting Private and Confidential Informationo Respect for Fair Use Lawso Open Dialogue and Communication

Overlap• Insurance policies are definitely intended to be

binding agreements. But what about other instances? When is there overlap?

• Sometimes a written agreement will have among the Attachments, Schedules, etc. . . some type of policy which would indicate it is to be part of the enforceable agreement.

• On the following slides I am going to talk about some cases that highlight some of the issues between policy and contract law.

Case Law #1 (Employment)

• In Braun v. Wal-Mart Stores , No. 3373 EDA 2007 (June, 10, 2011) the Pennsylvania Superior Court upheld a jury verdict of $187.6 million against Walmart for denying employee’s meal and rest break as promised in their employee handbooks. The court ruled that the policies in the handbooks were “unilateral contracts”. (under PA law)

• What the case also discussed:o Handbooks are enforceable against the employero Generally, disclaimers against contract formation will preclude a breach

of contract claim, BUTo A provision in a handbook can constitute an offer of employment which

the employee accepts by continuing performance of duties (“unilateral contract” concept)

Case Law #2 (Social Media)

• In Maremont v. Susan Fredman Design Group LTD, Ms. Maremont was a well-known designer with a large social media following. While she was recovering from an accident her employer started using her social media accounts. She sued them under the Trademark Act and Ill. Rights of Publicity Act.

• The case of PhoneDog LLC v. Noah Kravitz was settled, but the facts are important. In this case, Mr. Kravitz was an employee of the LLC and the company created a Twitter account for him to use (which contained his name). He gained approx. 17,000 followers, and after that left the company taking the Twitter account. The company sued him for misappropriation of trade secrets (specifically the account login information).

Case Law #2 cont.• The 2 prior cases outlined show that companies

that engage in social media marketing through employees and independent contractors should set-up policies or agreements that handle ownership of accounts and usage.

• Finally, you should be aware that several states have enacted laws or have considered legislation to prohibit employers from accessing an employee’s personal social media account.

Further information may be found at my site: www.hawaiiesquire.com

Clickwrap Agreements

vs. Online Policies• Nowadays we just click “I Accept” and the online store takes

our credit card number and sends us stuff – CONTRACT!• However, many service providers use browsewrap or

clickwrap agreements to provide online services.• An issue when there is an ongoing relationship (software as a

service (SaaS)) and use of unilateral amendment, where the service provider can change the agreement at will. Why?

• Because generally a contract cannot be revised after execution of the parties unless agreed upon.

• Bottomline: for the service provider a well-drafted unilateral amendment clause is needed and for the recipient, generally if you can negotiate you would want to avoid these clauses. (consider this in B2B relationships)

Clickwrap Agreements

vs. Online Policies Cont.

• Contrast the prior slide to online policy documents, which includes: Acceptable Use, DMCA/Copyright Notice, and Privacy – these all guide how users on what your website’s policies are on each topic.

Type of Online Policies:• Acceptable Use – indicates what behavior is ok for a site• DMCA/Copyright – how do you handle copyright

infringement complaints?o Site providers have a DMCA policy as they are given “safe harbor” from

copyright liability by providing it.• Privacy – what do you do with a user’s personal

information collected through the site?

Clickwrap Agreements

vs. Online Policies Cont.

• Generally, providers may change their online policies, as I have discussed throughout prior slides.

• However, issues arise when an agreement incorporates policy because one is meant to be enforceable, whereas the other is meant to flexible.

• Sometimes it is best to kept them separate, and further avoid turning policy terms into contract terms. With the online policy documents they should stick to the topics they cover, and nothing else.

Handling Policies and Contracts

• Use BOTH written agreements and policies as tools to approach a variety of matters.

• What’s your business model? o What are areas where your processes might require flexibility? o What areas might need an enforceable agreement to induce certain

behavior?• Neither policies or agreements are set in stone.

They should be reviewed periodically for updating/change or amendment, respectively.

Consider the following:

• Write in plain-English for policies that are too be widely distributed. No point in creating confusing policy that no one understands.

• Employee Handbooks – start with Company Mission Statement, also include Disclaimers, Receipt and Acknowledgment page (to be signed and dated be employees).

• Policies – will you live by the policies you create?• Agreements – you going to enforce the binding

obligation? Will the other side on you, if you fail your obligation?

Resources• Consider working with professionals, such as attorneys,

HR consultants, insurance, etc . . . as a fresh set of eyes to your policies and agreements.

• Many trade associations provide “best practices” that may serve as the basis of your policies.

• ONE SHOULD REFRAIN USING POLICIES OR AGREEMENTS FROM THE FOLLOWING SITES WITHOUT REVIEW, YOU USE THEM AT YOUR OWN DISCRETION:

• A comprehensive listing of social media policies: http://socialmediagovernance.com/policies.php

• Some sites provide basic legal documents as a starting point, such as: http://www.docracy.com/

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