September 23, 2010
(Editor’s note: This is the first in a series of posts on the legal implications of social media use by businesses. Check back weekly for tips on how companies can protect themselves and periodic roundups of other relevant articles.)
If your company uses social media for marketing, brand awareness, or customer service, you need to stay on top of the legal implications. The most common social media risks for businesses fall into these broad categories:
- Employee-generated content on behalf of the company
- User-generated content on company social media venues (Facebook, Twitter, etc.)
- Third-party use of company social media content
- Employee relations issues (e.g. employee screening practices, media use during working hours, wage/hour issues, whistle-blowing)
- Electronic discovery and company responsibilities around record retention
Let’s begin with the first scenario – situations where employees are engaging in social media on behalf of the company. For these employees, the major risks to the company center around four key areas of law.
Employee posts with content that infringes on the copyright or trademark rights of a third party can leave the company open to liability for the infringement. Companies also need to guard against the disclosure of proprietary information via social media outlets, including trade secrets, product release plans, marketing strategies, and financial information. For publicly traded companies, the latter may also involve SEC rule violations, depending on the nature of the disclosure.
Labor & Employment Law
Wage and hour issues may arise when employees engaging in social media for the company are doing so outside of regular work hours or outside of the office. Generally, such practices will be fine if the employee is salaried, or “exempt” under the Fair Labor Standards Act, but overtime payment may become an issue if the employee is being paid on an hourly basis.
Here’s where the FTC comes in with guidelines for online advertising that cover personal data collection, targeting, endorsements, and direct communications with consumers.
- The CAN-SPAM act may be implicated as well, if courts begin to apply it to electronic communications beyond email.
- Endorsements and testimonials in advertising are governed by FTC guidelines, and the rules apply to social media endorsements as well – which means that companies that incentivize endorsements should be prepared to disclose the arrangements.
Employee posts that comment on a competitor’s business practices or products, especially in a negative light, can create risk of liability for defamation or trade libel on the theory of vicarious liability.
Next week, I’ll outline the legal issues around user-generated content and third-party use.
Are there any additional issues that have arisen in your practice or business around employee-generated social media content? Please feel free to comment below or on our Facebook page, and we’ll try to address your comments personally.