Watkins Ludlam Winter & Stennis, P.A.

            Facebook, LinkedIn, MySpace --  there are literally hundreds of “social networking” sites that provide easy access for individuals to network with friends, colleagues and the like.  Many employers actively encourage employees to use these sites to increase their visibility – particularly if an individual’s relationships are key to the individual’s success in his/her job. 

            Employers should be beware, however.  Under recently issued Federal Trade Commission (FTC) guidelines, an employer may be held liable for an employee’s false or misleading advertising stemming from an employee’s online postings about the employer’s products or services. 

            How can this be?  Section 5 of the FTC Act prohibits businesses from engaging in unfair or deceptive acts or practices affecting commerce.  The FTC interprets this prohibition as covering false or misleading advertising practices. With respect to unlawful advertising practices, the FTC recently issued revised guidelines on endorsements of products and services, and these guidelines cover advertising achieved through “new media” such as blogs and social-networking sites. These guidelines went into effect on December 1, 2009.

            Employers must take note of the new guidelines which that “endorsement” as an advertising message that consumers are likely to believe represents the opinions or experiences of a party other than the sponsoring advertiser. Under the guidelines, a business that pays the party making the endorsement or that has an ongoing relationship with that party can be held liable for false or misleading statements made by the endorser about the business’s goods or services or for the endorser’s failure to disclose the relationship between the endorser and the business, even if the business has no control over the content of the endorser’s statements.

            The new guidelines raise significant liability concerns for an employer when its employees promote the employer’s products or services on their personal blogs or social-networking pages. If the employer is found to be “sponsoring” those employee endorsements, it can be held liable under the FTC Act for any false or misleading statements in the employee’s message.  A simple failure to disclose the employment relationship in the endorsement can render what might be considered true to be misleading. 

In determining whether a business is sponsoring an individual’s internet-communicated endorsement, the FTC says that it will consider a number of factors including:

·        whether the individual receives compensation from the business,

·        the length of the relationship between the individual and the business, and

·        whether the business has provided the endorsed products or services to the individual free of charge.

So what does this mean?  Let’s take the typical employer/employee relationship where, for example, as one of the benefits for working for the employer, the employee receives the employer’s products or services free of charge or at reduced prices.  Your employee likes your products, right?  So you employee goes on line and endorses your product saying nothing more than “Hey, this company’s product is fantastic.  It worked for me and can work for you!!”  In this case, the employer did not ask the employee to post the endorsement and really didn’t know what the employee was doing after hours (don’t employers have enough to do than monitor their employees’ online usage after hours?).  In this scenario, the FTC states that it will find that the employer is the sponsor of this employee’s endorsement if it has either directed or encouraged the employee to post the endorsement.  Are you “directing or encouraging” when you suggest that the employee might want to use social networking to increase his/her exposure? 

In comments published with the revised guidelines on endorsements, the FTC stated that it would consider the existence of an employer’s policies and procedures governing employee postings on blogs and social-networking sites in determining whether the employer should be held liable for misleading employee endorsements on such sites. The FTC indicated that it would generally not pursue an enforcement action against an employer based on the actions of a single employee who violated a company policy that “adequately” covered the employee’s inappropriate endorsement.

            What should employers do now?  Even if you have not actively solicited employee endorsements of your products or services, the new FTC guidelines suggest that the mere existence of an employment relationship may support a presumption that the employer sponsored misleading endorsements on an employee’s personal blog or social-networking page. To minimize the risk of liability for false or misleading advertising in this situation, employers should adopt polices addressing statements about the employer’s products or services on employees’ websites. Such a policy should inform employees about what constitutes an employee endorsement, what disclosures must be made in connection with employee endorsements, and what statements would be inappropriate. The policy should also require employees to submit proposed endorsements of the employer’s products or services to the employer’s marketing or legal staff for approval before being posted on the internet. Although employee endorsements on personal web pages can be a valuable marketing tool, exerting an appropriate level of control over such endorsements can mean the difference between a successful advertising strategy and a costly lawsuit under the FTC Act.