Social media and potential legal issues can strike the fear of God into any corporate decision maker, especially the CEO of a public mining company who must abide by strict securities and environmental laws, not to mention brand management of the company’s good name.

It is clear that business sectors with tight rules and regulation such as finance, healthcare and mining are late to the social networking party because they are most often not sure how to implement it effectively and are afraid of provoking the regulators or facing a lawsuit by a disgruntled investor.

Although their concerns for hesitation are understandable, there can be, however, more potential risks in lost opportunities and a lack of reputation management online by not being “in the room and in the deal”, so to speak.

Canada ranks fourth for having the highest Internet users per capita in the world, and over half of these users are on social media. In fact, we Canucks spend almost twice the number of hours online (43.4 hours) over others in our global community each month. Sites such as Facebook (845 million users), Twitter (465 million users) and LinkedIn (150 million users) continue to grow exponentially in worldwide daily use.

Social networking also influences consumers’ buying decisions. When we read posts of others’ experiences with companies, either positive or negative, we tend to listen and weigh our decision to engage with the business accordingly. Consulting firm Booz & Co. thinks that social media is a great way to influence buyers and will eventually result in $30 billion in global social commerce revenue ($14 billion in the U.S. alone).

It’s important for companies, both public and private to recognize the opportunity that exists to capture their audiences’ attention online and manage their brand’s reputation. This can safely be achieved while reducing regulatory risk by following some basic rules and ensuring that all employees are well versed and know the policies for interacting in social networks.

As brand advocates and communicators, we regularly receive questions around data privacy, copyright, spam and compliance. For this reason, we asked an expert Internet lawyer, Jeffery Wittmann (Partner at Wiebe Douvelos Wittmann LLP, to provide guidance to companies that want to participate in channels online with greater confidence and ease.  When I met Jeffery, he was personable, knowledgeable and open to sharing his fascination with the law and how technology is changing our lives, and our businesses.

Q. Can you tell us about your background and your experience with online communications relevant to the law?

A. I’ve been practicing law for 20 years. 15 of which have been in advising companies that rely heavily upon the Internet, either as a marketing tool or through which to provide wares and/or services. As Canadians are among the highest Internet users in world, it serves companies to know their way around the benefits and potential pitfalls of using the Internet, including social media.

Q. How do you advise companies to navigate this rapidly evolving area?

A. Depends on the company and its business, however Canada’s privacy laws are the first point of contact for businesses collecting personal data. In drafting ‘Privacy Policies’ for their websites, we ensure that the companies’ customers know what use, if any, will be made of the information they may provide. This information includes any credit, personal or vital statistical information or such digital information as the “cookies” users leave behind when surfing companies’ websites.

If the company is publicly traded then counsel focuses on the rules prescribed by the Securities Act. For example, a public company should never post about any event that could be considered to be “material” information under the securities legislation before the material event takes place and is announced through proper disclosure channels.

Q. In relation to employee privacy, does the employer have a right to use social media channels to “check-up” on an employee? e.g. To see if he/she is actually sick or posting information on Facebook that proves otherwise?

A. Several provincial and federal laws govern privacy. In BC, companies should be aware of the provisions of the provincial Privacy Act and the Personal Information Protection Act and the federal Personal Information and Electronic Documents Act.

There have been cases whether employers have used information found online to investigate persons seeking employment. There have also been cases whether employers used social media to check on employees. It’s really a question of balancing competing rights or privileges. The Federal Privacy Commissioner has sought to strike a middle-ground between an employer’s right to manage its business through monitoring and an employee’s right to privacy. The Commissioner has recommended that companies should monitor the online acts of their employee only as a last resort. The monitoring must be effective in its stated purpose, proportionate in benefit to the privacy sacrificed, and no more intrusive than any other form of action.

If an employee has set his or her privacy settings on the relevant social media site so that his or her status and profile are visible, then such information may be treated as being public and the employee should not be surprised if the employer makes use of such information. In addition, employees need to be careful in posting about their employer on social media sites. Companies have a right to protect their copyright s and trademarks and to ensure that they are not the subject of defamation.

Many companies that we (Activ8) work with are publicly listed and have fear around posting a statement online that could get them into hot water with the securities regulators or even sued by an investor, both understandable concerns.

When speaking on the topic, I take them through the TSX Disclosure Rules and Electronic Guidelines, some of which includes:

  • Disclaimers are to be placed on all social media pages belonging to the company
  • No misleading information and the company should be completely transparent
  • Links should be posted to SEDAR filings with any reference to the filing discussed online
  • Third party endorsements such as analyst reports or media coverage should be linked to the author and state a company disclaimer
  • Social media training for employees online is highly suggested
  • Corporate governance and employee policy should be in place

Q. Is there anything else, we should add to this list?

A. Taking your last point, I’m often called upon to draft corporate governance policies for my clients. These policies could include a code of conduct for online communication (for example, proscribing the use of foul or potentially defamatory language); whether or not postings to the site are monitored by the client; and, as mentioned earlier, what use the company will make of information provided by users of its website.

Q. If a comment is posted on a company’s Facebook page by an Investor Relations Representative and an investor or financial professional regards it as misleading, how can the company best manage this public communication from a legal perspective?

 

A. This is where disclaimers come in. The posting needs to clearly state that the information may be based on certain assumptions that may change and that such changes may be material. As a result, the user needs to know that there is a risk in relying upon the given posting. If disclaiming language was not used, the company should not seek to redress the error on its own. It should always seek legal advice before trying to address the investor’s concern.

Q. What are the Canadian rules and guidelines around electronic public dissemination?

A. Companies and particularly public companies need to abide by proper disclosure regulations. Several months before Twitter was even created, Bill 198 was passed in Canada giving investors a statutory right to act against public companies for material misrepresentations made in public disclosure and for failure to disclose material changes in a timely manner. Companies have to ensure that information imparted in this matter is not out of context or is carefully thought out in advance of being posted.

In addition, several provinces have enacted legislation the result off which is to treat electronic documents or contracts in the same manner as those made on paper. For example, in BC, the Electronic Transactions Act provides that electronic contracts are just as binding as contracts on paper provided the electronic contract is accessible by the recipient; capable of retention by the recipient and capable of being stored for subsequent reference.

Q. What of Spam in social media channels?

A. In December 2010, the Federal Government passed legislation with the rather unwieldy title: “An Act to promote the efficiency and adaptability of the Canadian economy by regulating certain activities that discourage reliance on electronic means of carrying out commercial activities, and to amend the Canadian Radio-television and Telecommunications Commission (CRTC) Act, the Competition Act, the Personal Information Protection and Electronic Documents Act and the Telecommunications Act”. Otherwise known as Canada’s Anti-Spam legislation, some provisions have yet to come into force; however, companies are well-advised to start preparing now in order to comply with the Act.