The Corporate Transparency Act
Last Sunday, the US Department of the Treasury announced that it will not be enforcing the beneficial ownership information reporting requirements of the Corporate Transparency Act (CTA) as previously planned.
According to a press release, it will not enforce any penalties or fines against US citizens or domestic reporting companies or their beneficial owners.
Instead, it will be issuing a proposed rulemaking narrowing the scope of the rule to “foreign reporting companies” only.
Under the law, a foreign reporting company is an entity formed under the law of a foreign country that has registered to do business in the US by filing a document with a secretary of state or any similar office of a US state or territory or a Native American tribe.
Social Media Accounts
In most cases, the answer to “Who owns a social media account?” is obvious, but what if an employee uses an account both for personal use and to communicate on an employer’s behalf or with an employer’s customers? In that case, it’s not as obvious.
Many companies have been shocked when employees leave and claim they own the social media accounts they used at work. Because the primary value of a social media account is its followers, employees who take the accounts with them can now use those accounts (and the followers) to compete with their former employers.
Conversely, companies have been sued for using an employee’s account with a mix of business and personal followers to post company materials under that employee’s name without that employee’s consent.
One case involved a company that claimed ownership of Instagram, TikTok, and Pinterest accounts created by a former employee, arguing that she had created them in her capacity as an employee.
The employee, a fashion designer and social-media influencer, claimed that she had created those accounts in her personal capacity and that her use of those accounts to market the company’s products didn’t transfer ownership of the accounts to the company.
While the lower court sided with the company, the US Court of Appeals for the Second Circuit found that social media accounts are legally treated the same as any other form of property.
It went on to hold that if the employee created the accounts for her personal use, using her personal information, she owns the accounts, regardless of how she used them later.
In this case, there was no contract specifically addressing social media accounts. The Court did note that there is a difference between transferring rights to content posted on an account and transferring ownership of the account itself.
In other words, even if the employee transferred rights to content to the company, that doesn’t mean she transferred ownership of the accounts.
The appellate court then sent the case back to the lower court so that it could reevaluate the facts of the case under these legal principles. The parties ended up settling the dispute, with the influencer retaining the social media accounts.
In order to avoid the question of who owns an account, employers should have written policies stating that company-branded accounts are for business use only and that the accounts, passwords, and followers all belong to the employer. The policy should go on to provide that employees should not use their personal accounts on the employer’s behalf and that such purely personal accounts remain the employee’s property.
Even if their employer doesn’t have such a policy, employees should set up separate accounts for any work they do on behalf of their employers instead of using their personal accounts, to help prevent loss of their own accounts.
Individuals who own their own companies should also segregate their personal and business social media accounts, since the problem described above could arise when a business sale or any other business transfer occurs.
Please feel free to contact us if you need any assistance drafting such a policy or any other employee policies.
Photo by Nathan Dumlao on Unsplash
