Tag Archives: Company Legal & Law Matters

California Supreme Court upholds classification of gig workers as independent contractors

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Ride-share companies scored a victory in the California Supreme Court, allowing them to continue classifying gig workers as independent contractors rather than employees. Uber, Lyft, DoorDash and other gig-economy companies invested around $200 million in the passage of Proposition 22, which voters approved in 2020. The state’s highest court rejected a legal challenge from a drivers’ group and a labor union, ending their quest to bring full employee benefits to the state’s gig workers.

The California Supreme Court ruling affirms the state’s definition of drivers and other gig workers as independent contractors. Proposition 22, which received the support of 59 percent of voters in 2020, gives gig workers limited benefits like a baseline income and health insurance for those working at least 15 hours a week. However, it also allows the companies to avoid providing the broad swath of benefits full employees receive.

The Service Employees International Union and a drivers’ group sued to challenge the law after it went into effect in early 2021. Their lawsuit got an early boost from lower courts: An Alameda County Superior Court Justice ruled that year that Proposition 22 was “unconstitutional and unenforceable,” as the LA Times reported. The lower-court judge determined that the law diminished the state Legislature’s power to regulate injury compensation for workers.

However, in 2023, a state appeals court ruled the opposite, that Proposition 22 didn’t impede on the Legislature’s authority. Thursday’s decision upholds that ruling, ending the long saga and leaving the state’s gig workers with fewer benefits than they’d otherwise have. Proposition 22 remained in effect during the legal challenges, so nothing will change in how they’re treated.

Uber, Lyft, DoorDash and other gig-economy companies fought tooth and nail to pass and uphold the law. Four years ago, they invested upwards of $200 million in campaigning for it. They even threatened to pull their businesses from the state if they were forced to classify drivers as employees.

The LA Times reports the decision could influence other states’ laws. Uber has lobbied for similar legislation in other parts of the US. A law in Washington state closely parallels it, and the companies recently settled with the Massachusetts attorney general to provide similar (minimal) benefits to gig workers in that state.

Uber framed the ruling as a victory for upholding the will of the people (well, apart from the gig workers who wanted more benefits and protections). The company described the Supreme Court’s decision as “affirming the will of the nearly 10 million Californians who voted to deliver historic benefits and protections to drivers, while protecting their independence.”

This article originally appeared on Engadget at https://www.engadget.com/california-supreme-court-upholds-classification-of-gig-workers-as-independent-contractors-210735586.html?src=rss

TikTok will still be a ‘gatekeeper’ under the Digital Markets Act, EU rules

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As far as the EU is concerned, TikTok requires strong, ongoing regulations. The EU's General Court dismissed an action brought by TikTok's parent company, ByteDance, which argued that the platform shouldn't be considered a "gatekeeper" under the Digital Markets Act (DMA). The designation came in September 2023, and ByteDance filed to undo it just two months later. 

ByteDance had painted TikTok has an up and comer EU market, citing pushback through the development of Reels and Shorts — the General Court disagrees: "Although in 2018 TikTok was indeed a challenger seeking to contest the position of established operators such as Meta and Alphabet, it had rapidly consolidated its position, and even strengthened that position over the following years, despite the launch of competing services such as Reels and Shorts, to the point of reaching, in a short time, half the size, in terms of number of users within the European Union, of Facebook and of Instagram."

ByteDance had argued that TikTok was not dominant in the EU market, citing Instagram's Reels and YouTube's Shorts as meaningful competition. The General Court disagreed, writing that "although in 2018 TikTok was indeed a challenger seeking to contest the position of established operators such as Meta and Alphabet, it had rapidly consolidated its position ... to the point of reaching, in a short time, half the size ... of Facebook and of Instagram."

The General Court added that TikTok meets the qualifications set out to be a gatekeeper: a €75 million ($82 million) global market value, over 45 million monthly active end users and over 10,000 yearly active business users across the EU over the last three years. 

The DMA went into effect in March and prohibits gatekeepers — including Alphabet, Meta, Amazon and more — from favoring their own platforms or forcing users to stay inside their company's ecosystem. ByteDance has just over two months to launch an appeal with the Court of Justice, the EU's highest court. 

This article originally appeared on Engadget at https://www.engadget.com/tiktok-will-still-be-a-gatekeeper-under-the-digital-markets-act-eu-rules-131534890.html?src=rss

Verizon faces lawsuit after record labels say it profits from piracy

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A group of record labels that include Universal, Capitol, Warner and Sony has filed a lawsuit against Verizon, accusing it of "contributory and vicarious copyright infringement." Verizon "knowingly provides its high-speed service to a massive community of online pirates," the companies said in their complaint. Apparently, the plaintiffs have sent the internet provider "hundreds of thousands" of copyright infringement notices over the past few years, identifying subscribers who've been using Verizon's network to share copyrighted music via peer-to-peer (P2P) file-sharing networks. 

Verizon, they said, acknowledged that it received their notices. The company allegedly chose to ignore them and continued to provide internet services to "thousands of known repeat infringers so it could continue to collect millions of dollars from them." Since it didn't terminate the accounts of the alleged copyright infringers, Verizon "obtained a direct financial benefit" from their "continuing infringing activity," the plaintiffs argued. The labels are asking for damages worth up to $150,000 for each work infringed. Based on the list posted by Ars Technica, 17,335 titles are involved in the case, which means Verizon could be fined for as much as $2.6 billion. 

Back in 2018, music labels also sued Cox Communications for allegedly refusing to fully terminate the accounts of users who were pirating music. A US District Court jury originally sided with the labels and ordered Cox to pay $1 billion in damages. But earlier this year, an appeals court overturned the verdict and found that the provider didn't profit directly from its users' activities. A group of record labels also sued Charter Communications in 2021 over over song piracy and similarly accused the company of turning a "blind eye" to music piracy.

This article originally appeared on Engadget at https://www.engadget.com/verizon-faces-lawsuit-after-record-labels-say-it-profits-from-piracy-133047303.html?src=rss

OpenAI whistleblowers call for SEC probe into NDAs that kept employees from speaking out on safety risks

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OpenAI’s NDAs are once again under scrutiny after whistleblowers penned a letter to the SEC alleging that employees were made to sign “illegally restrictive” agreements preventing them from speaking out on the potential harms of the company’s technology. The letter, which was obtained and published online by The Washington Post, accuses OpenAI of violating SEC rules meant to protect employees’ rights to report their concerns to federal authorities and prevent retaliation. It follows an official complaint that was filed with the SEC in June.

In the letter, the whistleblowers ask the SEC to “take swift and aggressive steps” to enforce the rules they say OpenAI has violated. The alleged violations include making employees sign agreements “that failed to exempt disclosures of securities violations to the SEC” and requiring employees obtain consent from the company before disclosing confidential information to the authorities. The letter also says OpenAI’s agreements required employees to “waive compensation that was intended by Congress to incentivize reporting and provide financial relief to whistleblowers.”

In a statement to the Post, OpenAI spokesperson Hannah Wong said, “Our whistleblower policy protects employees’ rights to make protected disclosures,” and added that the company has made “important changes” to its off-boarding papers to do away with nondisparagement terms. OpenAI previously said it was fixing these agreements after it was accused this spring of threatening to claw back exiting employees’ vested equity if they didn’t sign NDAs on their way out.

According to The Washington Post, the SEC has responded to the complaint, but no details have yet been released regarding any action it is or isn’t going to take. But the whistleblowers say enforcement is of utmost importance “even if OpenAI is making reforms in light of the public disclosures of their illegal contracts.” The letter says it is necessary “not as an attack on OpenAI or to hinder the advancement of AI technology, but to send the message to others in the AI space, and to the tech industry at large, that violations on the right of employees or investors to report wrongdoing will not be tolerated.”

This article originally appeared on Engadget at https://www.engadget.com/openai-whistleblowers-call-for-sec-probe-into-ndas-that-kept-employees-from-speaking-out-on-safety-risks-171604829.html?src=rss

Apple will allow developers access to its NFC technology, avoiding an EU fine

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After four years of back and forth, the European Union and Apple have finally come to an agreement on the latter's tap-and-go technology. The European Commission announced Apple made "legally binding" commitments to provide developers with their Near-Field Communication (NFC) technology, which is used for tap-and-go technology, and access iOS features like Face ID authentication and double-click to launch. The agreement saves Apple from facing an antitrust fine equal to up to 10 percent of its worldwide annual turnover — about $40 billion. 

Apple has also agreed to stipulations such as allowing users to make third-party wallets their default app. "It opens up competition in this crucial sector, by preventing Apple from excluding other mobile wallets from the iPhone's ecosystem," Margrethe Vestage, the EU's executive vice president in charge of competition policy, stated in the release. "From now on, competitors will be able to effectively compete with Apple Pay for mobile payments with the iPhone in shops. So consumers will have a wider range of safe and innovative mobile wallets to choose from." The commitments are binding for ten years, with an independent monitor ensuring Apple follows them across the European Economic Area (EEA). 

The European Commission opened its investigation into Apple in 2020, alleging that Apple was restricting rival mobile wallet developers from accessing necessary technology. Two years later, the regulatory body issued a preliminary view that Apple "abused its dominant position." 

Then, in early 2024, Apple finally offered to open up its NFC technology and report to an independent reviewer. The European Commission shared the terms publicly, encouraging Apple's rivals and other interested parties to give their opinion. The final agreement between the European Commission and Apple results from those consultations.  

The tech giant could still be on the hook for tens of billions of dollars in a different case after the European Commission issued its preliminary view that Apple violated the Digital Markets Act (DMA). The new law went into effect in March, and the European Commission soon opened an investigation into whether Apple prevented developers from telling users that they could pay less for services elsewhere. Apple currently takes a 30 percent commission on any purchases made through the App Store. The European Commission has until March 2025 to make a final ruling in the case. 

This article originally appeared on Engadget at https://www.engadget.com/apple-will-allow-developers-access-to-its-nfc-technology-avoiding-an-eu-fine-123026127.html?src=rss

Elon Musk escapes paying $500 million to former Twitter employees

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The social media platform formerly known as Twitter has been at the center of multiple legal battles from the very beginning of Elon Musk's takeover. One such suit relates to the more than 6,000 employees laid off by Musk following his acquisition of the company – and his alleged failure to pay them their full severance. Yesterday, Musk notched a win over his former employees.

The case in question is a class-action lawsuit filed by former Twitter employee Courtney McMillian. The complaint argued that under the federal Employee Retirement Income Security Act (ERISA), the Twitter Severance Plan owed laid off workers three months of pay. They received less than that, and sought $500 million in unpaid severance. However, on Tuesday, US District Judge Trina Thompson in the Northern District of California granted Musk's motion to dismiss the class-action complaint.

Judge Thompson found that the Twitter severance plan did not qualify under ERISA because they received notice of a separate payout scheme prior to the layoffs. Instead, she dismissed the case, ruling that the severance program adopted after Musk's takeover was the one that applied to these former employees, rather than the 2019 one the plaintiffs were expecting.

This ruling is a setback for the thousands of dismissed Twitter staffers, but there are future chances for them to win larger payments. Thompson's order noted that the plaintiffs could amend their complaint for non-ERISA claims. If they do, Thompson said "this Court will consider issuing an Order finding this case related to one of the cases currently pending" against X Corp/Twitter. There are still lawsuits underway on behalf of some past top brass at Twitter, one which is seeking $128 million in unpaid severance and another attempting to recoup about $1 million in unpaid legal fees.

This article originally appeared on Engadget at https://www.engadget.com/elon-musk-escapes-paying-500-million-to-former-twitter-employees-203813996.html?src=rss

Microsoft and Apple give up their OpenAI board seats

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Microsoft has withdrawn from OpenAI's board of directors a couple of weeks after the European Commission revealed that it's taking another look at the terms of their partnership, according to the Financial Times. The company has reportedly sent OpenAI a letter, announcing that it was giving up its seat "effective immediately." Microsoft took on an observer, non-voting role within OpenAI's board following an internal upheaval that led to the firing (and eventual reinstatement) of the latter's CEO, Sam Altman. 

According to previous reports, Apple was also supposed to get an observer seat at the board following its announcement that it will integrate ChatGPT into its devices. The Times says that will no longer be the case. Instead, OpenAI will take on a new approach and hold regular meetings with key partners, including the two Big Tech companies. In the letter, Microsoft reportedly told OpenAI that it's confident in the direction the company is taking, so its seat on the board is no longer necessary. 

The company also wrote that its seat "provided insights into the board's activities without compromising its independence," but the European Commission wants to take a closer look at their relationship before deciding if it agrees. "We’re grateful to Microsoft for voicing confidence in the board and the direction of the company, and we look forward to continuing our successful partnership," an OpenAI spokesperson told The Times.

Microsoft initially invested $1 billion into OpenAI in 2019. Since then, the company has poured more money into the AI company until it has reached $13 billion in investments. The European Commission started investigating their partnership to figure out if it breaks the bloc's merger rules last year, but it ultimately concluded that Microsoft didn't gain control of OpenAI. It didn't drop the probe altogether, however — Margrethe Vestager, the commission's executive vice-president for competition policy, revealed in June that European authorities asked Microsoft for additional information regarding their agreement "to understand whether certain exclusivity clauses could have a negative effect on competitors."

The commission is looking into the Microsoft-OpenAI agreement as part of a bigger antitrust investigation. It also sent information requests to other big players in the industry that are also working on artificial intelligence technologies, including Meta, Google and TikTok. The commission intends to ensure fairness in consumer choices and to examine acqui-hires to "make sure these practices don’t slip through [its] merger control rules if they basically lead to a concentration."

This article originally appeared on Engadget at https://www.engadget.com/microsoft-and-apple-give-up-their-openai-board-seats-120022867.html?src=rss

Texas court blocks the FTC’s ban on noncompete agreements

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The Federal Trade Commission's (FTC) ban on noncompete agreements was supposed to take effect on September 4, but a Texan court has postponed its implementation by siding with the plaintiffs in a lawsuit that seeks to block the rule. Back in April, the FTC banned noncompetes, which have been widely used in the tech industry for years, to drive innovation and protect workers' rights and wages. A lot of companies are unsurprisingly unhappy with the agency's rule — as NPR notes, Dallas tax services firm Ryan LLC sued the FTC hours after its announcement. The US Chamber of Commerce and other groups of American businesses eventually joined the lawsuit. 

"Noncompete clauses keep wages low, suppress new ideas, and rob the American economy of dynamism," FTC Chair Lina M. Khan said when the rule was announced. They prevent employees from moving to another company or from building businesses of their own in the same industry, so they may be stuck working in a job with lower pay or in an environment they don't like. But the Chamber of Commerce’s chief counsel Daryl Joseffer called the ban an attempt by the government to micromanage business decisions in a statement sent to Bloomberg. 

"The FTC’s blanket ban on noncompetes is an unlawful power grab that defies the agency’s constitutional and statutory authority and sets a dangerous precedent where the government knows better than the markets," Joseffer said. The FTC disagrees and told NPR that its "authority is supported by both statute and precedent."

US District Judge Ada Brown, an appointee of former President Donald Trump, wrote in her decision that "the text, structure, and history of the FTC Act reveal that the FTC lacks substantive rulemaking authority with respect to unfair methods of competition." Brown also said that the plaintiffs are "likely to succeed" in getting the rule struck down and that it's in the public's best interest to grant the plaintiff's motion for preliminary injunction. The judge added that the court will make a decision "on the ultimate merits of this action on or before August 30."

This article originally appeared on Engadget at https://www.engadget.com/texas-court-blocks-the-ftcs-ban-on-noncompete-agreements-150020601.html?src=rss

Supreme Court remands social media moderation cases over First Amendment issues

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Two state laws that could upend the way social media companies handle content moderation are still in limbo after a Supreme Court ruling sent the challenges back to lower courts, vacating previous rulings. In a 9 - 0 decision in Moody v. NetChoice and NetChoice v. Paxton, the Supreme Court said that earlier rulings in lower courts had not properly evaluated the laws’ impact on the First Amendment.

The cases stem from two state laws, from Texas and Florida, which tried to impose restrictions on social media companies’ ability to moderate content. The Texas law, passed in 2021, allows users to sue large social media companies over alleged “censorship” of their political views. The Supreme Court suspended the law in 2022 following a legal challenge. Meanwhile, the Florida measure, also passed in 2021, attempted to impose fines on social media companies for banning politicians. That law has also been on hold pending legal challenges.

Both laws were challenged by NetChoice, an industry group that represents Meta, Google, X and other large tech companies. NetChoice argued that the laws were unconstitutional and would essentially prevent large platforms from performing any kind of content moderation. The Biden Administration also opposed both laws. In a statement, NetChoice called the decision “a victory for First Amendment rights online.”

In a decision authored by Justice Elena Kagan, the court said that lower court rulings in both cases “concentrated” on the issue of “whether a state law can regulate the content-moderation practices used in Facebook’s News Feed (or near equivalents).” But, she writes, “they did not address the full range of activities the laws cover, and measure the constitutional against the unconstitutional applications.”

Essentially, the usually-divided court agreed that the First Amendment implications of the laws could have broad impacts on parts of these sites unaffected by algorithmic sorting or content moderation (like direct messages, for instance) as well as on speech in general. Analysis of those externalities, Kagan wrote, simply never occurred in the lower court proceedings. The decision to remand means that analysis should take place, and the case may come back before SCOTUS in the future.

“In sum, there is much work to do below on both these cases … But that work must be done consistent with the First Amendment, which does not go on leave when social media are involved,” Kagan wrote. 

This article originally appeared on Engadget at https://www.engadget.com/supreme-court-remands-social-media-moderation-cases-over-first-amendment-issues-154001257.html?src=rss

Detroit police can no longer use facial recognition results as the sole basis for arrests

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The Detroit Police Department has to adopt new rules curbing its reliance on facial recognition technology after the city reached a settlement this week with Robert Williams, a Black man who was wrongfully arrested in 2020 due to a false face match. It’s not an all-out ban on the technology, though, and the court’s jurisdiction to enforce the agreement only extends four years. Under the new restrictions, which the ACLU is calling the strongest such policies for law enforcement in the country, police cannot make arrests based solely on facial recognition results or conduct a lineup based only on facial recognition leads.

Williams was arrested after facial recognition technology flagged his expired driver’s license photo as a possible match for the identity of an alleged shoplifter, which police then used to construct a photo lineup. He was arrested at his home, in front of his family, which he says “completely upended my life.” Detroit PD is known to have made at least two other wrongful arrests based on the results of facial recognition technology (FRT), and in both cases, the victims were Black, the ACLU noted in its announcement of the settlement. Studies have shown that facial recognition is more likely to misidentify people of color.

The new rules stipulate that “[a]n FRT lead, combined with a lineup identification, may never be a sufficient basis for seeking an arrest warrant,” according to a summary of the agreement. There must also be “further independent and reliable evidence linking a suspect to a crime.” Police in Detroit will have to undergo training on the technology that addresses the racial bias in its accuracy rates, and all cases going back to 2017 in which facial recognition was used to obtain an arrest warrant will be audited.

In an op-ed for TIME published today, Williams wrote that the agreement means, essentially, that “DPD can no longer substitute facial recognition for basic investigative police work.”

This article originally appeared on Engadget at https://www.engadget.com/detroit-police-can-no-longer-use-facial-recognition-results-as-the-sole-basis-for-arrests-204454537.html?src=rss