The New World of Social Media: Business and Legal Risks

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1 March 2, 2010 The New World of Social Media: Business and Legal Risks Call-In Details: United States/Canada: All other countries: Participant Passcode:

2 Agenda 1. Introduction Rennie Muzii, Managing Director, 2. Use of Social Media, Company Policies, and Legal and Business Considerations Melissa Krasnow, Partner, Dorsey & Whitney LLP 3. Social Website Dangers for Unwary Employers Tamara Russell, Partner, Barran Liebman LLP 1

3 Use of Social Media, Company Policies, and Legal and Business Considerations By Melissa Krasnow Dorsey & Whitney LLP

4 Use of Social Media 46% of American adult Internet users use a social media site like Facebook, LinkedIn or MySpace (October 2009, PEW and American Life Project) 65% of American teen Internet users use social media (October 2009, PEW Internet and American Life Project) 70% of the audience of Facebook (the second most popular internet site after Google) is outside of the United States (January 2010, Economist) 3

5 Use of Social Media Users have been spending more time on social media sites than since February 2009 (January 2010, Economist) Minutes Spent on Social Media (December 2009) Facebook Twitter MySpace Source: Reuters 4

6 Use of Social Media Facebook has 110M unique visitors per month. Twitter has 18M. Number of Unique Visitors (December 2009) Facebook Twitter MySpace Nielsen 110M 18M 50M Comscore 112M 20M 57M Compete.com 132M 23M 49M 5

7 Facebook Business Issues Need 25 fans to get vanity URL (www.facebook.com/companyname) Pages cannot be transferred Can t have multiple users on same account Self-help customer service Company protected by Facebook s terms of service? Coca-Cola Facebook Terms of Use 6

8 Twitter Business Issues Twitter imposters Character limits for handle and profile name Delay in updating hard to find accounts Self-help customer service Will hashtags (social tagging) prompt keyword-like trademark infringement lawsuits? 7

9 Company Use of Social Media Marketing versus legal / compliance Social media policies increasing Tailored to a particular company How does your company use social media? Company social media usage is being tracked and used for benchmarking Social media monitoring Use of social media in litigation 8

10 Company Social Media Policies Often not publicly available Some common elements of social media policies: Identify yourself and make it clear when you are speaking on behalf of or about the company Employee versus individual capacity (e.g., are any employees executive officers?) liability Seek advice from the legal department or management when necessary (e.g., permission to comment if the content is workrelated) 9

11 Company Social Media Policies Information that can be disclosed Information should be accurate Personal liability for content Disclaimers are advisable, but not a shield from liability Do not disclose company confidential or financial information Is material, non-public information disclosed? Follow established company guidelines, policies and codes (e.g., code of conduct / ethics, etc.) 10

12 Sources of Corporate and Securities Law Requirements Company policies Review existing company policies Are there controls and procedures for monitoring? Company agreements Antifraud provisions of the Securities Exchange Act of 1934 Regulation FD (Fair Disclosure) SEC Release on Use of Company Web Sites Rule 14a-17 Stock exchange requirements 11

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17 Federal Trade Commission Developments FTC Guides Concerning the Use of Endorsements and Testimonials in Advertising Advertiser liability for false or unsubstantiated statements made through endorsements Advertiser liability for failure to fully disclose material connection between them and the endorser that might materially affect the weight or credibility of the endorsement (e.g., advertiser providing endorser with free products, employee of advertiser, etc.) Endorser liability for statements made in the course of their endorsements (e.g., bloggers) 16

18 Other Regulators on Social Media Financial Industry Regulatory Authority FINRA Regulatory Notice - Guidance on Blogs and Social Networking Web Sites U.S. Food and Drug Administration Public Hearing on Promotion of FDA-Regulated Medical Products Using the Internet and Social Media Tools 17

19 Overall Recommendations: Company Use of Social Media Register key trademarks as Twitter usernames and Facebook vanity URLs Monitor social media Consider all disciplines / areas affected by social media Review company procedures and revise or establish new policies as needed Make sure company policies are consistent and integrated Train marketing, customer service, human resources, investor relations, employees and others who handle company s social media Take into account business considerations 18

20 Digging for Dirt Without Making a Legal Mess Social Website Dangers for Unwary Employers By Tamara E. Russell Barran Liebman LLP

21 Social Website Dangers for Unwary Employers Is this who we want to hire (or fire)? Should we? Photo credit SOCIALisBETTER via flickr Found on employmentblawg.com 20

22 Social Website Dangers for Unwary Employers Legal risks of doing a background check on the internet 1. Potential violation of state or federal discrimination laws Why? Because you re asking questions that you wouldn t otherwise ask during an interview. Are you basing your decision to hire, or not hire, someone based on what you see (even inadvertently)? 21

23 Social Website Dangers for Unwary Employers What if you saw these photos of an applicant on the internet? Source:www.marijuana-seeds-cannabis.com/marijuana_seeds_cannabis_Medical.php 22

24 Social Website Dangers for Unwary Employers What if you saw these photos of an applicant on the internet? Source: 23

25 Social Website Dangers for Unwary Employers Legal risks of doing a background check on the internet (continued) 2. Fair Credit Reporting Act? 3. Violate terms of service of website? 4. Federal Computer Fraud and Abuse Act? 5. Federal Stored Communications Act? 6. Common law privacy claims? 24

26 Social Website Dangers for Unwary Employers If you MUST use the internet to research a candidate... Ask: Is the information I am going to learn a valid predictor of job performance? Consider modifying written authorizations for background checks to include reference to internet searches 25

27 Social Website Dangers for Unwary Employers If you MUST use the internet to research a candidate... Consider researching after a conditional job offer is made If you find something negative, give the applicant time to correct or explain 26

28 Social Website Dangers for Unwary Employers If you MUST use the internet to research a candidate... Update your policies: Specify who will do the internet background checks (and keep it that way) Carefully consider criteria about how and when to use the internet in evaluating applicants (and be consistent) Specify that no one is authorized to use the internet to research a co-worker, applicant, former worker, etc. Clarify and identify who is authorized to give referrals, if any Should you be wary of the LinkedIn recommendation? 27

29 Your employee posted a bad, bad thing on the internet... Now what? This company sucks! 28

30 Social Website Dangers for Unwary Employers Pietrylo v. Hillstone Restaurant Group (2009) Plaintiff created a group on MySpace called The Spec-Tator, where employees by invitation only could engage in shit talking about the restaurant and its managers Site contained ethnic slurs and derogatory comments about guests and managers and discussions about drug use and sexual acts A non-manager employee joined and showed content to a manager, who used nonmanager employee s account name and password to access the account and show it to other managers Plaintiff and another co-worker were fired 29

31 Social Website Dangers for Unwary Employers Pietrylo (continued) Plaintiff claimed the termination violated federal and state statutes that prohibit knowing and unauthorized access to stored electronic information; violations of privacy rights; and unlawful termination Tried to jury in June 2009 Verdict for plaintiff violation of federal Stored Communications Act Damages for plaintiff were nominal, but plaintiff s counsel applied for and will likely receive close to $125,000 in attorney fees 30

32 Social Website Dangers for Unwary Employers Discharging employees for internet postings the safe cases When the content of the posting violates the law When the content of the posting discloses trade secrets or other company confidential or proprietary information When the content was posted during work hours, and violates the company s policy on use of the internet 31

33 Social Website Dangers for Unwary Employers Discharging employees for internet postings the more difficult cases When the employee says disparaging but not unlawful things about: the company or its products or services co-workers, the work environment, etc. 32

34 Social Website Dangers for Unwary Employers Discharging employees for internet postings when not to discharge When the employee s comments are protected by law Federal and state anti-discrimination laws, including wage and hour laws NLRA: Section 7 protects employees right to form, join and assist labor organizations, engage in collective bargaining, and to engage in other concerted activities for mutual aid and protection Constitutional laws applicable to state/federal employees (1 st and 4 th Amendments) 33

35 Social Website Dangers for Unwary Employers Discharging employees for internet postings when not to discharge Other laws that may protect employee postings/blogging Electronic Communications Privacy Act of 1986 (18 USC 2510 et seq.) State laws regarding lifestyle statutes (not OR or WA but yes in California) 34

36 Social Website Dangers for Unwary Employers Reasons why an employer may want to monitor employee internet activity Possible liability for: torts committed by employee, including defamation of company employees and constituents; negligence, etc.; harassment or discrimination Possible intellectual property infringement Possible dissemination of trade secrets or confidential or proprietary information 35

37 Social Website Dangers for Unwary Employers Should I have a policy? Consider your company s culture, and history with technology Do you have policies in place already that address this issue? Anti-harassment Non-disparagement No divulging company secrets/proprietary information Computer use policy Does your company have an intranet or other company-sponsored forum where employees may post comments? 36

38 Social Website Dangers for Unwary Employers Contents of Policy No access to social/web networking sites or blogs using company-provided equipment (computers, cell phones, etc.) Consider blocking access to the well-known accounts Employees may not access social/web networking sites and may not blog during work hours 37

39 Social Website Dangers for Unwary Employers Scope of Policy (continued) Employees who access social/web networking sites or who blog during non-work hours, using non-work computers, may not disclose or discuss confidential or proprietary information (include definition) disclose or discuss information regarding the company s clients or business partners, or details of a particular client engagement use the company s trademarks, logo, and any copyrightprotected material of the county in the blog, posting, etc. promote competitors goods, services, products, etc. 38

40 Social Website Dangers for Unwary Employers Scope of Policy (continued) And employees... may not: Post any material or content that is discriminatory, harassing, etc. or Engage in any activity that reflects or may reflect negatively on the company, its affiliates, employees, or clients/customers 39

41 Social Website Dangers for Unwary Employers Scope of Policy (continued) Employees who access social/web networking sites or who blog during non-work hours, using non-work computers, must: Remain respectful of the company, its products/services and clients/customers, affiliates, vendors and suppliers, competitors (and competitors products and services). 40

42 Social Website Dangers for Unwary Employers Scope of Policy (continued) And employees... must: Make clear in any post or blog that the views and opinions they express about work-related matters: o Are their own, o Have not been reviewed or approved by their employer, and o Do not necessarily represent the views and opinions of their employer. 41

43 Social Website Dangers for Unwary Employers Scope of Policy (continued) Employees should expect that any information created, transmitted, downloaded, exchanged or discussed on social networking sites and/or blogs may be accessed by the company at any time without prior notice 42

44 Questions?... you can either ask the question or experience the answer Author unknown (source: Contact: Rennie Muzii (503) Tamara E. Russell (503) Melissa Krasnow (612)

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