Another Reason Employers Need a Social-Media Policy: New FTC Regulations

What are the legal reasons that an employer needs a social-media policy? That’s a question that I get a lot when discussing social media with clients and others. And, maybe more often, “Are there any reasons that I need a social-media policy?”  This is a complicated question, really. And there are lots of possible answers. But there’s at least one new legal reason for employers to stop procrastinating, get the idea out of committee, and get to work on such a policy.

Recently, the Federal Trade Commission (FTC), issued regulations that affect nearly every business–at least every business with a workforce that has access to a computer (either on or off working time). The FTC is the government agency charged with the responsibility of protecting consumers against false and deceptive advertisements, among other things.  The FTC’s newest regulations, called the Guides Concerning the Use of Endorsements and Testimonials in Advertising (PDF), sets fairly strict restrictions on employees’ use of social media to talk about a product or service offered by their employers.

Section 255.1(d) of the Guides provides that:

Advertisers are subject to liability for false or unsubstantiated statements made through endorsements, or for failing to disclose material connections between themselves and their endorsers. Endorsers also may be liable for statements made in the course of their endorsements.

The key language in this section is that an “endorser” must disclose any “material connection” between himself and the company that sells the product or service being endorsed. In other words, if I am married to a local restaurateur, I must disclose that connection any time I endorse the restaurant. An “endorsement” is any advertising message, including verbal statements, that consumers are likely to believe reflects the opinions, beliefs, or experiences of a party other than the sponsoring advertiser. See Section 255.0(b). So, if I say that my spouse’s restaurant, hands down, serves the best braised short ribs a girl could ever have, then I need to add a disclaimer such as, “Of course, I may be a bit biased, since I happen to be married to the chef.”

What is the impact on employers?

Under the new regulations, any time an employee endorses your product or service, he is required to disclose his employment relationship. This means that employees must disclose their material connection any time they promote or defend the organization, its products, or its services.

The world of social media provides for an unlimited number of circumstances for this situation to occur. A comment left on a blog, or a tweet on Twitter, or even a few words of praise posted on an employee’s Facebook profile could be construed as an endorsement if it “reflects [the employee’s] opinions, beliefs, or experiences” about a product or service offered by the employer.

What if the employee fails to disclose the employment relationship?

If an employee tweets about his employer’s pizza being the best around, he must do so in compliance with the regulations. Failure to do so and both the employee and the employer are on the hook. Both can be held liable if the comment or statement is false or unsubstantiated. So, if the pizza really is the best in town and you’ve got the studies to show it, then there’s no real risk of liability. But, if an employee leaves a comment on a blog about a particular brand of laundry detergent that works wonders on grass stains, and another person reads the comment, buys the detergent, and isn’t satisfied with its stain-fighting powers, there may be problems.

There is no private right of action under the FTC Act but the organization is exposed to investigation or suit by the FTC.

How to prevent potential liability

The critical take-away from the new FTC Guides is this: Employers must have a social-media policy that addresses the ways employees talk about their employers. The social-media policy should make very clear that employees are not permitted to talk about the company or its products or services unless they provide a clear disclaimer stating their affiliation with the organization.

One thing that the Guides fail to address is what constitutes a sufficient disclosure in the social-media context. The examples that are provided in the Guides are scenarios that occur in the context of television ads, when the speaker (endorser) has an opportunity to state his affiliation. This is not possible in 140 characters or less. Is it enough that the employee includes a disclaimer that states his connection to the company in his Twitter profile? Maybe. The Guides do not address this situation and don’t give any guidance about how the regulations would be applied in this context.

What if the employee’s profile lists a company e-mail address (i.e., Is that enough to put the average consumer on notice of a “material connection”? Probably not. The Guides do make clear that the disclaimer has to be reasonably apparent to the average person. Asking the reader to imply from an e-mail address that a “material connection” exists is probably hoping for too much.

Until the specifics are known, employers are best advised to take a very proactive approach in order to avoid potential liability. They should include in their social-media policies a provision that specifically addresses expectations for conduct when an employee discusses the company when online. Employers should then train employees on the policy and should not turn a blind eye to a report that the policy has been violated.

The potential exposure to employers for employees’ online conduct can seem overwhelming. But the reality is that Web 2.0 is here to stay. It’s best to get a policy in place now, rather than wait with eyes closed and hope that the issue simply disappears.

Other posts on social media and its impact on employers:


Social-Media Policy Ideas

Sample Social-Media Guidelines

Social Media Is Here to Stay: Time to Start that Workplace Policy

3 Reasons Why Employers Don’t Have a Social-Networking Policy

Social Media Policies: What about my “friends”?

Friends Without Borders: State Off-Duty Conduct Laws and Facebook-Friending Policies

The 3 Principles for Social Media:  How to Be a Good Online Citizen


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