Employer Liability for Employee Endorsements
An employee of a well-known computer products manufacturer goes home after a long day of work. He plugs his headphones into the latest MP3 player created by his employer. The MP3 player has amazing features such as a large memory for storing media, custom playback settings, and the ability to download the latest albums directly to the player. The employee is quite impressed by his employer's product, and he honestly believes that this is the best MP3 player on the market. Wanting to tell others about this latest product, he goes online and posts a message on a public bulletin board for discussions of MP3 player technology. The employee's message will be read by thousands of internet users looking to find the best MP3 player to purchase. Unbeknownst to the employer, under the recently issued Federal Trade Commission's Guides Concerning the Use of Endorsements and Testimonials in Advertising (the "Guidelines"), the employee may have just exposed his employer to an FTC enforcement action.1
The Impact of Social Media on the Workplace
Social media in the workplace have become a fact of everyday life with which employers must be prepared to deal. Currently, there are more than 400 million users on Facebook who spend over 500 billion minutes per month on the social media service.2 What is more, some analysts are predicting that by 2012 roughly one out of every six persons on the planet will be using social media applications such as MySpace, YouTube, and Flickr.3 Employers must be aware that social media present both great business opportunities and increased risks.
One such risk, created by the Guidelines, is that of employee endorsement of the employer's products or services on the internet. Most employers are well aware that they need to protect themselves from current or former employees disparaging them on social media networks such as Facebook and Twitter, but now employers must also be aware of the dangers of their employees praising their products or services on the World Wide Web.
The Guidelines define an endorsement as "any advertisement message ... that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser ... "4 The Guidelines require disclosure whenever there exists a material connection between the endorser and the seller of the advertised product.5 A material connection exists when the connection between the endorser and the seller of the product would not reasonably be expected by the audience.6 Thus, under the Guidelines an employee must disclose his employment when making statements about his employer's products or services on the internet.
Particularly worrisome for employers is the fact that the duty to disclose applies even when the employee makes his comments on a public site (such as a bulletin board) without the employer's knowledge. Furthermore, the FTC may take action against the employer even when the statement itself is not misleading and actually reflects the employee's honest opinion or belief about his employer's product or service. Regardless, under the Guidelines, the employee must clearly and conspicuously disclose his relationship with the employer to the readers of the message board.
What Employers Can Do to Protect Themselves
Employers can manage the risks posed by social media by creating and adhering to a social media policy. In its comments to the Guidelines, the FTC noted that it is not aware of any enforcement action brought against an employer for the actions of a single "rogue" employee who violated established internal policy concerning the questionable conduct.7 Consequently, the FTC has stated that it is not likely to pursue an enforcement action against an employer who has properly protected itself.
Employers must be aware of the risks posed by social media in the workplace and should adopt and follow a comprehensive social media policy. In fact, such a social media policy should address endorsement disclosure and general social media etiquette. The employer's social media policy should address additional issues including but not limited to the fact that employees may put their employer at risk by posting confidential or proprietary information, discriminatory comments, or comments disparaging the employer. Moreover, employers should discourage employees from commenting about the employer's competitors.
Footnotes
1 See, 16 C.F.R. § 255.5, Ex. 8 (2009).
2 Facebook Statistics, http://www.facebook.com/press/info.php?statistics (last visited June 2, 2010).
3 Strategy Analytics: Social Media Users to Exceed One Billion by 2012, http://www.businesswire.com/portal/site/google/index.jsp?ndmViewId=news_view&newsId=20071213005893&newsLang=en (last visited June 2, 2010).
4 16 C.F.R. § 255.0(b) (2009).
5 16 C.F.R. § 255.5 (2009).
6 Id.
7 Guides Concerning the Use of Endorsements and Testimonials in Advertising, 73 Fed. Reg. 72374 (proposed Nov. 28, 2008) (codified at 16 C.F.R. § 255.0, et seq (2009)).)
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.