Employee Endorsements Can Now Lead To Employer Liability
January 27, 2010
Under guidelines recently issued by the Federal Trade Commission (“FTC”)—Guides Concerning the Use of Endorsements and Testimonials in Advertising, 16 CFR Part 255—an employer may now face liability for employee endorsements of its products and services, if the employment relationship is not disclosed. The guidelines, which took effect on December 1, 2009, require that employees who endorse their employer’s products or services, must “clearly disclose” the employment relationship within the endorsement.
Although the new guidelines are primarily concerned with celebrity endorsements, they also apply to more routine comments ordinary employees may make on social media outlets such as personal blogs, Facebook and Twitter. The FTC has stated, for example, that where an on-line blogger discusses a product manufactured by her employer, she “should clearly disclose her relationship to the manufacturer to members and readers of the message board” because knowledge of that relationship “likely would affect the weight of credibility of her endorsement” in the eyes of the public. If the employment relationship is not disclosed, both the employer and employee may face liability under Section 5 of the Federal Trade Commission Act (15 USC § 45 et seq.), which prohibits unfair or deceptive acts or practices in the marketplace. This is so even if the employee’s endorsement was not authorized or sponsored by the employer, and even where the actual endorsing statement is not misleading.
While the FTC has indicated that it is not necessarily going to take enforcement action against an employer for the statements of a single “rogue” employee, employers should nonetheless take proactive steps to help protect against potential liability by ensuring that their technology usage policies cover all electronic communications, employee blogging and use of social networking sites (e.g., Facebook, Twitter, MySpace, LinkedIn). The policy should also clearly inform employees whether they are permitted to discuss the employer’s products and/or services online. There are advantages and disadvantages to authorizing such discussions. Permitting employees to do so may well serve the interests of the employer by providing increased exposure through positive word-of-mouth. However, it could also yield negative statements about the employer or its products which are seemingly authorized by the policy. Where an employer elects to allow employees to discuss its products/services, the policy should state that employees who engage in such discussions are required to clearly and conspicuously disclose their relationship with the employer. The policy should also require employees to include a disclaimer within any online discussion of the employer’s products/services, such as, “any opinion stated is that of the employee, and is not authorized by the employer.”
