Pubications > Submarines online – legal risks of social networking for organisations

2009 saw a gradual evolution of the law in relation to social networking in all jurisdictions.  It's possible in certain circumstances, for website owners to have a duty of care to their users, individuals can now be served via their Facebook profile if they can't be located, and in the US, there is a continued debate over online privacy.  In Australia, individuals profile page can be used in evidence there has also been comment about organisations wanting to own their employees "Tweets".  The point of this is that the legal risks for organisations participating in social networking are evolving at the same pace as the technology.

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Twitter, Myspace, Youtube and Facebook have all become household names and whether you like it or not, the employees in your organisation are participating as you read this article.  2009 saw explosive growth in the use of social media by organisations as they grappled to come to grips with new and cost effective ways of engaging their customers and dealing with the boom and bust era of the post global financial crisis era – but have organisations fully considered the legal risks in social networking?

 

Legal risks in social networking for organisations

 

The following nomenclature is used for convenience:

	Loss of confidential information;
	Trademark infringement and loss of brand reputation;
	Copyright infringement;
	Discrimination;
	Misleading and deceptive conduct;
	Passing off;
	Organisational reputation risk;
	Breach of continuous disclosure obligations for public companies;
	Defamation;
	Privacy;
	Vicarious liability;
	Negligent misstatement;
	Occupation and industry specific risks as they are embodied in organisation specific legislation.

 

This classification system whilst reasonably comprehensive attempts to classify new millennium risks that cannot be compartmentalised, as many cross categories as well as jurisdictions.

 

Loss of confidential information

Business networking sites such as LinkedIn and Linkme enable people to build connections to other people that they do business with or are associated with in some way. It's possible for employees to upload their email address book into LinkedIn that contains the employers confidential information in the form of its customer database and invite customers to "connect".

The employee is then able to leave the organisation, change their status in their LinkedIn profile and notify all their connections (many of whom represent the confidential information of the organisation) of their new employer. Result, loss of confidential client information and potentially loss of revenue.

 

Trademark infringement

Most social networking sites have the ability to create fan pages, personalised url's and groups for users. For example www.facebook/yourcompany.  Have you protected yourself from someone taking your trademarked name with these urls? What would you do if someone had hijacked your brand name on a social networking site and started using it in a negative fashion?

 

Misleading and deceptive conduct

The line between meer puff and binding promises is yet to be tested formally online. Do you know what your employees are saying (and promising people) online?

 

Breach of continuous disclosure for listed public companies

If you staff are recommending people in LinkedIn, or Tweeting, then it's possible for them to commit various minor breaches of an organisations continuous disclosure obligations through inadvertent disclosure. 

 

Endorsements in LinkedIn

Care should be taken by employees recommending people in LinkedIn who they work with.  I saw a contact of mine that worked for a listed public company recommen a connection of theirs as a "business partner" who happened to work for another listed public company.  The description of the person as a "business partner" and the nature of their role led me to the conclusion that the parties had entered into some sort of alliance, when in fact a search of the ASX's announcements platform for both companies showed no such alliance.  Had this information been released to the market?  Should it have been?

Tweeting your location and activities

By Tweeting your location and what you are doing in any of the social networking sites, there is the risk that an informed user can make various inferences.  For example if you are leading international beverage maker and an employee who works in the mergers and acquisitions department Tweets that they are bored as they are spending two weeks in Bundaberg on a work assignment, then its reasonably clear what they may be considering.

 

Discrimination

Do your managers accept all friend requests from subordinates or do they pick and choose?  The implications for a discrimination claim should be obvious.  In the US its been shown that Lawyers cannot be friends of Judges, but they can be members of their fan pages.

 

Employer liability for employee acts of defamation

As a general principle an employer is vicariously liable for the acts or omissions of their employees. For employees that are engaged by their employer to perform social networking tasks, it would be possible for the employer to be held liable for the defamatory acts of their employee.
The new and different permutations of minor (and some not so minor) breaches of traditional laws online will continue to evolve.  The ones described above are samples of the legal issues that organisations should protect themselves against.

 

Reputation risk – the nuclear submarine

 

Perhaps the most important risk in the hierarchy of risks associated social media is the intangible loss of reputation that can be felt when things go wrong online – the viral video.

 

The Dominos disaster

Most followers of social media (indeed most people) would be aware of what has become a text book example of how not to handle a viral public relations problem.

A Domino's franchise in North Carolina was where two employees filmed and later posted a prank video to YouTube showing unhygienic food preparation practices.  Within a few days due to the power of social media, there were more than a million views on YouTube, a viral spread of the subject on Twitter and five references on page one of a Google search for Domino's.

The problem compounded when Domino's took 48 hours to respond, and it took time to get the video down from YouTube, well after many had downloaded it and added to its proliferation.
The delay in responding formally, let the online conversation build and the story continued to proliferate throughout social media channels, with the added speculation about whether the video was authentic and which Domino's store it was filmed in.

Domino's did not issue a formal press release but instead opened a Twitter account to respond to questions, later posting an apology on YouTube in a vain attempt to quell the fire.

 

NBC coverage of the Domino's viral video

 

 

 

Addressing reputation risk in Social Media

 

There are several things that organisations can to do protect themselves against the conduct of their employees (and contractors) who participate in social networking sites.  These include:

	revising contracts of employees who participate in social networking sites as part of their job
	considering other contracts that should include social media clauses;
	introducing a social networking policy to provide guidance to employees both during and after hours;
	conducting training in social media legal issues to increase awareness;
	having a real time social media reputation monitoring service; and
	having an overall social media strategy.

 

Doing these things assists to minimise the risk and address the risk posed by a Domino's nuclear submarine attack.

 

If your organisation requires assistance to protect itself against the lurking submarines on social networking websites, whilst getting the benefits, please contact us.

 

 

 

Malcolm Burrows B.Bus.,MBA.,LL.B.,GDLP.,MQLS

Associate

"The information contained in this article is general in nature and cannot be regarded as anything more than general comment. Readers of this article should not act on the basis of this comment without consulting one of Rostron Carlyle's legal practitioners who will consider their particular circumstances".

 

Related Legal Practices

 

Rostron Carlyle also has the following related speciality Practices that can assist organisations :

 

Technology and Software Development Law

Corporate Law Practice

Intellectual Property Practice

Defamation and Media Law Practice

 

 

 

Expertise in Social Media Law

 

Rostron Carlyle's Social Media Practice is one of the first of its kind in Australia. It has been building its expertise over most of 2009 and is now one of the few Practices with specialist expertise in this area.

 

If your organisation needs assistance to protect itself against the lurking perils of Social Networking, whilst getting the benefits, please contact us or follow us on Twitter @ITCorplaw.

 

You'll find that Rostron Carlyle is likely to have assisted someone to do exactly what it is that you are trying to do, but you’ll find that a Rostron Carlyle Lawyer can distill a complex legal issue into a set of actionable options for you to consider.

 

A Rostron Carlyle lawyer will be a person that you can relate to.  We'’ll talk your language. Most

importantly, a relationship with a Rostron Carlyle lawyer will be "a relationship you can rely on".