Legal Briefing

Employer v employee… and the rest of the world via the media

The In-House Lawyer Logo

Technology, Media and Telecoms | 01 November 2010

The recent trend in the media for reporting on greed and corporate failure has led to a hive of activity in media circles for unearthing the next business scandal. With the rise in social media and the growing number of instances in which the media are courting ‘insiders’ with a story to sell or an axe to grind, effective risk management is more important than ever. The in-house lawyer should be particularly aware of the need for reputational management when dealing with disgruntled employees. Smear campaigns and negative media coverage initiated by these individuals can do untold damage to a company’s reputation, business relationships and its financial value. There follows some of the most common areas of risk.

Whistleblowers v malicious insiders

In a fair society it is essential that any employee with a genuine concern relating to their workplace is encouraged to come forward and report problems, such as malpractice or illegality, even if that involves the employee using confidential information to make the disclosure.

By way of the Public Interest Disclosure Act (PIDA) 1998, the law recognises that employees who are positioned ‘at the coalface’ may be best placed to spot any problems within their own company and provides legal protection for those that make disclosures deemed to be genuinely in the public interest. Employees who make disclosures under PIDA 1998 are commonly referred to as ‘whistleblowers’.

However, there is a significant distinction between the genuine whistleblower and the malicious insider or rogue employee. In the current economic climate both types of individual will be courted by the media. The difference is that the genuine whistleblower will often be uninterested in selling their story to the media. They will make their disclosure to an authorised person(s) in accordance with PIDA 1998 provisions. By contrast, the malicious insider can be enticed by the publicity or financial incentives offered by journalists and editors hungry for a scoop.

Historically, the media has been keen to obtain embarrassing information concerning the alleged misuse of taxpayers’ or shareholders’ money, and is under more pressure than ever to break this type of story since the credit crisis first threw certain organisations into the spotlight and pushed financial news onto the front page. ‘Insider’ stories are very much in vogue. This, in turn, gives a disenfranchised or malicious employee a bigger incentive to use the confidential information they possess for their own gain. In some cases, this may involve exaggerating the information or fabricating it altogether.

A study of American workers found that six out of every ten employees stole company data when they left their job the previous year.1 There is a danger that malicious insiders use the confidential information to get a new job, start their own business or for the purposes of revenge. The survey found that ‘they are making these judgments out of fear and anxiety… people are losing their jobs and want to hedge their bets’.

These findings highlight the fact that in the current economic climate there is likely to be a growing number of disgruntled employees who are feeling insecure in their current role or who may have been made redundant and are tempted to take confidential information, believing that it will put them in a better bargaining position.

Even though the malicious insider will lose their protection under PIDA 1998, once the information is published by the media it is – usually irrevocably – in the public domain. Journalists and the business community are increasingly using Google and other internet search engines to find fodder for basic news stories. Negative stories are no longer tomorrow’s chip wrapper and the confidentiality of this type of information is like an ice cube on a carpet: once it is lost, it is gone forever.

However, there are several steps a cautious employer may take to avoid this sort of situation, for example:

  • considering IT audits for employees when they exit the company to ensure that they have not removed confidential information;
  • considering drafting confidentiality undertakings for employees to sign upon exit;
  • ensuring that confidentiality clauses in the company’s employment contracts are effective; and
  • taking preventative action against an employee and/or the media to pre-empt the disclosure of confidential information.

In these cases, prevention is always more expedient than cure.

rise of social media

While ‘new media’ like social networking sites may be utilised effectively to improve a business, they also contain huge potential for reputational damage. The Trade Union Congress famously referred to Facebook as ‘3.5 million HR accidents waiting to happen’.

An employer needs to be careful that expressions of opinion by employees about the business do not reflect negatively on it and thereby harm its reputation. It is not uncommon for disgruntled former employees to set up a Facebook group or a website dedicated entirely to criticising an employer or former employer.

A very memorable example of this kind of reputational damage is from April 2009 when two teenagers who were working at a Domino’s pizza restaurant decided that they would make a video of themselves dressed in full Domino’s uniform contaminating food that was to be sold to customers. They then uploaded the video onto YouTube. Domino’s managed to act relatively quickly and ensured the video was removed in less than two days, but by then the damage had already been done. The video had received close to one million hits, and several viewers of the original video had downloaded it from YouTube and subsequently posted it back up, making the clip almost impossible to eradicate.

A recent survey by YouGov revealed that 11% of those under 35 had posted a derogatory comment about their employer on Facebook, and that 4% of those aged 45 and over had done the same. This makes it clear that the potential for reputational harm resulting from employees’ comments on social networking sites is not restricted to companies with a young and tech-savvy workforce, and that the risks will only increase as subsequent generations come of age in a world obsessed by online presence.

However, while the technology may have changed radically, the legal principles of employment law remain the same. An employer should have clear policies in place detailing what is and is not acceptable behaviour with regards to the company’s public image. A staff member who brings the company into disrepute or damages its reputation via a networking site can be disciplined in the same way as if it had happened by any alternative means.

Creating a social media policy is therefore a sensible (and increasingly crucial) step for an employer to take, that would make it easier to discipline an employee who breaches the usage restrictions. A Manpower survey in January 2010 indicated that only 20% of companies worldwide have a social media policy. Putting such a policy in place is a sensible step because it puts employees on notice as to how they are expected to conduct themselves in their uses of social media, even when this usage takes place outside the office.

For larger employers, it may be appropriate for one employee to act as a ‘social media representative’, from whom employees would be expected to obtain consent before publishing any content concerning the company on social media websites. This will allow employers to gain some control over the social media content and become aware of content that is relevant to its business. A less stringent (and less expensive) alternative is for an employer simply to trust its employees to use social media responsibly, perhaps within a set of guidelines laid down in a social media policy guiding them as to what constitutes appropriate use. Some employees may appreciate the guidance.

Reputation management and employment tribunals

In the unfortunate event that an employer finds itself faced with an employment claim heading for an employment tribunal, fresh reputational risks will arise. For example, when ITV news presenter, Lisa Aziz, was accused of financial impropriety regarding her expenses and was suspended, she made several very damaging public comments about her employers and co-workers, alleging that co-presenter Steve Scott ‘regularly mimicked’ Sir Trevor McDonald’s Afro-Caribbean accent during rehearsals. She submitted a claim for age, sex, race and religious discrimination against ITV to the Bristol Employment Tribunal, asking for £5m in damages, but subsequently withdrew all allegations and apologised.

Employment claims do not always end this prematurely or favourably for the employer. Almost all tribunals are held in public, and the media are free to attend and report on the proceedings. The threat of sensationalised coverage of tribunal hearings leaves many employers with little choice but to settle a claim, and thus escape the bulk of the damage to its reputation and that of its executives, despite often having a solid case for the defence.

The fact that the press typically provides very limited coverage to the final tribunal decision exacerbates the problem. Employees know this, thus use the threat of employment tribunal proceedings as a bargaining tool.

This is especially true of high-profile cases involving several days of evidence when, in some circumstances, many weeks may have passed before the written judgment is finally handed down. By this point, however outrageously false the allegations are eventually proven to be, what tends to linger in people’s minds is a sense of ‘no smoke without fire’ and thus the empty claims of a malicious employee may quickly gain substance in the public eye.

For some employers, the prospect of seeing their accuser publicly humiliated in the press leads them to take drastic measures to ensure that press coverage is favourable, such as providing the waiting court reporters with a copy of arguments or witness statements.

However, encouraging a very public character assassination of the claimant employee can backfire spectacularly, as the employer is likely be left to pick up the tab for loss of career earnings if the employee’s accusations are upheld. When it comes to determining levels of compensation, the employee’s ability to secure future employment is a key factor. The tribunal cannot ignore the severely diminished employment prospects resulting from adverse press coverage of the proceedings.

When it comes to handling the sometimes delicate relationship between employers and employees, forewarned is certainly forearmed. Employers who are aware of all the potential risks and do their utmost to prevent them, as well as acting quickly and decisively when they do arise, will be able to avoid the vast majority of these types of reputational issues.