When a Business Must Inform Customers about Competitors [e98]

September 24, 2014

Nasir and Matt talk about the recent court decision that requires insurers to inform consumers of the name of a competitor. They then answer the question, “One of our employees is a backup driver for our food delivery business and we get a discount from our insurance company if our drivers take a defensive driving course; that employee ended up taking the course but did not get approval from HR, but from her supervisor. HR says we don’t have to pay her for the day and tell her we’re docking her a vacation day, I wasn’t as sure. What do you think?”

Full Podcast Transcript

NASIR: All right. Welcome to our podcast where we cover business in the news and add our legal twist and also answer some of your business legal questions that you, the listener, can send in to ask@legallysoundsmartbusiness.com and, of course, follow us at askbizlaw.

MATT: And you are?

NASIR: Oh, yeah. And my name is Nasir Pasha.

MATT: I’m Matt Staub. I guess that was my opportunity to say my name first and I didn’t do it.

NASIR: You totally blew it! That was your opportunity.

MATT: That’s fine.

NASIR: In fact, that was a test and you failed, miserably.

MATT: We like to do alphabetically order so I wouldn’t want to get out of place.

NASIR: Oh, is that why we did it that way? Obviously, by last name.

MATT: Yeah, I guess that’s true. Well, that’s what I was thinking. Who goes alphabetical by first name?

NASIR: People that forget others’ last names, I suppose, I don’t know.

MATT: Okay. We’re going to go a little bit outside our states here in Connecticut but we can talk about this as a whole because it’s pretty interesting. So, I guess this was in the federal court of appeals but it was in the second circuit. There is a new Connecticut statute that’s restricting insurers in claim administrators for mentioning the name of or scheduling an appointment with an affiliated glass company unless they also give the name of a competing glass company in the area. So, basically, they have to inform the consumer of I guess the name of the competitor before scheduling this appointment and I am sure there is more details that go into this but there’s protections in place. I would think it’s to help the consumer but, yeah, this is pretty interesting. I have never really even come across something like this or thought about it before.

NASIR: Yeah, if you have ever been into an accident or your windshield breaks or whatever, sometimes you will get referrals, especially depending upon whether they are going to write you a check or they have to go through an authorized dealer or whatever, they will tell you or give you a referral to who you can take your car to, right? To get your glass repaired or whatever. And so, what this Connecticut law is saying, “Okay. Look, if you are going to make a referral like that, if there is an affiliation between you and this other company, then you also have to mention a competitor.” And it sounds nice and I think the public court here thought the same, “Okay, it sounds nice, but does this really protect the consumer or does it protect the competitor?” And, if you look a little bit deeper where the statute came from, it definitely didn’t come from consumer protections advocates; it came from these other competitors, specifically in this glassware industry, apparently.

MATT: Yeah, I guess I should have mentioned it in the beginning that, when I said glass, that was the reason I said that. It’s kind of confusing but I am thinking back to the last time I had my windshield replaced and I think – this was not in Connecticut but – they gave me three different options and I can’t remember if they just gave it to me because they wanted to give three options or, you know, maybe that was just the way they do business.

NASIR: Yeah. This is in California, right? I don’t know; I’d be surprised. I have never heard of any such law that does that but I wonder if they did that out of requirement or not.

MATT: Because it was, well, it was supposed to be covered by the insurance but I actually ended having to pay but maybe it was reduced.

NASIR: Was it because of an intentional conduct? Did you like just throw a rock at your windshield or what?

MATT: No, it wasn’t intentional, but maybe it was three people that the insurance company was affiliated with.

NASIR: That’s true.

MATT: That’s what they said at least.

NASIR: Good point. Yeah, I compare this to one of the most highly regulated industries in the country is in the healthcare industry and a good example is when a doctor refers out a patient to an out-of-network facility that they may have ownership interest in. For example, there are requirements of disclosures to the patient that, “Hey, I am referring you to this place but, just so you know, I have an ownership interest in this so, in theory, there could be a conflict but I think this is the best for you,” and that is required by law, and there are plenty of other disclosures like that and probations and so forth that is kind of beyond the scope of this discussion. But, the point is that, in order to protect the consumer, the disclosure is made. I think, if they really wanted to protect the consumer and not just focusing on the competitors, as an insurer they would say, “Okay. Well, I am making this recommendation but, just so you know, we do have an affiliation. You do have other options but this is what we would recommend.” What is wrong with that?

MATT: And I think that is fine and I am trying to think too who this really… It seems that it would be something beneficial for the consumer but I don’t know. It is an interesting thing. It’s not as simple as I first thought when I kind of looked at the general idea behind it.

NASIR: Yeah, though I would like to defend to any kind of insurance company. This is my personal perspective in their business practices but I think they have the right here. The court of appeals of the second circuit, they mentioned about free speech and commercial speech and we kind of discussed that a little bit, it might a little bit boring but there is free speech in this country, obviously. But then, commercial speech is a protected activity unless there is some kind of government interest to protect that, and one of the things that they have done with commercial speech is they restricted it to like you can’t say things that are fraudulent, you can’t say things that are unfair in business practices and so forth. And so, this is where they are coming in with that perspective with the law in that respect if they actually shut down the law in violation of free speech.

MATT: I’ll be interested to see if this trend kind of – well, I guess not trend – this law…

NASIR: This wide-sweeping trend that’s taking over our country starting from Connecticut.

MATT: I’ll be interested to see if it spreads, I guess I should say.

NASIR: If you think about it, to a certain extent, look at the tobacco industry. I can’t remember if they passed it or they were going to pass that law which required those very graphic images on the outside of the actual cigarette boxes. If I recall correctly, they also struck that down as well.

MATT: I’ll take your word for it.

NASIR: Okay.

MATT: Well, I think we have a very interesting question of the day.

NASIR: Yeah, this is a difficult one too, I think.

MATT: A long one. All right, here we go.
“One of our employees is a back-up driver for our food delivery business and we get a discount from our insurance company if our drivers take a defensive driving course. That employee ended up taking the course but did not get approval from HR but from her supervisor. HR says we don’t have to pay her for the day until we are docking her a vacation day. I wasn’t sure. What do you think? Thanks guys in Texas.” It went a little bit downhill towards the end in terms of grammar and spelling but…

NASIR: Am I being coherent or not? Well, yeah, instead of basically paying her, they’re going to just dock a vacation pay which, wow, that kind of sucks for that person.

MATT: Yeah. I mean, right off the bat, whether it’s legal or not, it’s not something you probably want to do as a company or as an employer but you’re the Texas person so you tell me the Texas law.

NASIR: Yeah. Well, I want to talk about his HR thing for a moment. We deal with the human resource personnel often and there is nothing wrong with them necessarily but, for some reason, they really get caught up into their job a little too much, you know? And, oftentimes, they’re one of two things – either they’re so wired up to look out for the interest of the company that they’re very, very strict or (two) they’re so concerned about labor law violation that they become overboard too. For some reason, we have just dealt with lot of extremes in that respect. But, in my perspective, it’s much better to lean towards being conservative if you are an HR personnel than the other way around. In this case, it seems like the HR is just making some kind of a mistake because, first of all, federal law applies here in Texas. There is not a lot of discussion about training time and so forth specifically in Texas that I am aware of. But, just like California and just like the federal law, if it’s required training or if it’s training done for purposes of work and things like that, then it’s definitely work time. And here there’s a little bit of issue with the supervisor also approving it. But, even if the supervisor didn’t approve it and it was something that was encouraged in part of work and everyone knew that they were taking – at least the supervisor was aware that she was taking off work in order to perform this training that she would never have gotten if it was not for her job – then she should be paid for it and, docking vacation pay, that is an interesting issue. I had to think about it a little bit because, just like other states, Texas does not have a mandatory vacation law or anything like that but you do have to follow your policy and the question is: “What if they drafted their policy in such a way that you get certain number of days per year and some of those days may be used for sick time, for vacation time, and also for training time?” I have seen that before. I’m not sure that’s the case in this instance but I wonder that may be a way for this employer to get away with it. But, at the end of the day, what do you think that the employer should do though?

MATT: Right. At the end of the day, he probably just needs to pay them for that time. I doubt this individual signed up for the course on her own and just did it and didn’t run it by the company and all and left work and whatever. So, legally, we need to see exactly what’s in their handbook. But, from a common sense perspective, they need to make the right call on this one. It’s not just worth the bad – well, I don’t know if there’d be like bad PR behind it but just pay her for the time.

NASIR: I think, within the office, they met this employee, they’re going to complain and, if they don’t complain to you, they are going to complain to their coworkers, right? And, if they don’t complain to their coworkers, they are going to complain to their family members at home for which they are just going to become an unhappy employee and that sucks. Is that worth that? I mean, you are paying the person anyway, basically. You are paying a vacation day. It’s just one extra day. I don’t see that’s a big deal.

MATT: Well, I mean, I guess it depends too. Does she normally spend her vacation days taking defensive driving classes? Because then they might have a better argument if this is her normal type of vacation.

NASIR: Yeah, very good point.

MATT: It wasn’t really but…

NASIR: That was probably the best point you’ve made this week.

MATT: Yeah, thanks.

NASIR: Let’s write that down.

MATT: Thanks.

NASIR: All right. Thanks for joining us, everyone.

MATT: Yeah, keep it sounds and keep it smart.

Non Compete Law Page


The Podcast Where Nasir Pasha and Matt Staub cover business in the news with their legal twist and answer business legal questions that you the listener can send it to info@legallysoundsmartbusiness.com.

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Legally Sound Smart Business

A business podcast with a legal twist

Legally Sound Smart Business is a podcast by Pasha Law PC covering different topics in business advice and news with a legal twist with attorneys Nasir Pasha and Matt Staub.
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