Social Networking & Professional Liability May 13, 2010 Speakers: Gary Basham, Basham Parker Rebecca Pearson, AmWINS Insurance Brokerage of California Michelle Kley, Beazley Moderator: Randall J. Krause

Rebecca S. Pearson, Esq. Assistant VP in the Financial Risk Solutions Group of AmWINS Insurance Brokerage, San Francisco. Focus is E&O, D&O, EPL and other professional and management liability insurance placements. Expertise in cyber liability, technology, privacy, architects and engineers, lawyers professional, real estate professionals and miscellaneous consultants. Before engaging in insurance brokerage in 2006, Becky practiced law in San Francisco. Practice included insurance coverage litigation representing policyholders in coverage disputes. Stanford University (B.A. Communications) University of San Francisco School of Law (J.D. 2000)

Michelle Kley, Esq. Legal counsel to Beazley’s Technology, Media and Business Solutions team Focus is technology E&O, network security, privacy and media coverage. Prior to joining Beazley in 2009, she was an associate at Wilson Sonsini Goodrich & Rosati specializing in mergers and acquisitions. UC Berkeley School of Law (Boalt Hall) (J.D. 2003) Sonoma State University (B.A. psychology)

Gary R. Basham, Esq. Founding partner, Basham Parker LLP, with exclusive employment law practice. Focus is defending employers against claims for breach of contract, discrimination, retaliation, harassment, wrongful termination, unfair business practices, violation of wage and hour laws. Expertise in Age Discrimination and Employment Act, ADA, Title VII, Equal Pay Act, FMLA & CFRA, California’s FEHA, California Workplace Violence Safety Act, and workplace privacy laws. Member of the Labor and Employment Section of the State Bar of California, Sacramento County Bar Association, Sacramento Human Resource Management Association, Central Valley Human Resource Management Association. Mediator for the United States District Court for the Eastern District of California’s Voluntary Dispute Resolution Program. In addition to his law practice, Mr. Basham also is actively engaged in various community service activities. From December 2003 through May 2009, Mr. Basham was the Vice President of the Board of Directors for the Sacramento Union Gospel Mission, an organization dedicated to helping the homeless. Mr. Basham continues to volunteer his time to the Union Gospel Mission, as well as other organizations which feed the hungry and house the homeless. University of Michigan Law School, cum laude (J.D. 1987) Michigan State University, with honors (B.A. 1984).

Social Media Defined Social media is conversation and interaction online using highly accessible and scalable publishing techniques. Social media transforms people from content consumers to content producers.

Social Media Users Social media now appealing to big and small businesses. Companies are utilizing social media to reach customers and to build or maintain reputation.

Social Media – A Business Tool Examples: Facebook, Twitter, LinkIn, Ning, YouTube Social media have become the new "tool" for effective business marketing and sales.

Small Social Media Ziggs—a professional connection portal. Ecademy—networking for business, offline networking events and global networking groups. Fast Pitch—Social Network for Business Networking Professionals to market their business, press, blogs, events and networks. Yelp—a local business review and talk networking site, including user reviews and recommendations.

Social Media Statistics Social networking now accounts for 11 percent of all time spent online in the US In December 2009, 248 million unique monthly users on the top eight social networking sites in the US, an increase of 41% from January 2009 One in four (25%) US Internet page views occurred at one of the top social networking sites in December 2009, up 83% from 13.8% in December 2008

Social Media Statistics In December 2009, Twitter handled over 1 Billion tweets per month. Next month (January 2010), handled over 1.2 billion Average 40 million tweets per day Mobile User Stats as of March 4, 2010: Twitter had 347% jump since 2009 in access via mobile browser. Over 30% of smartphone users access social networks using a mobile browser, up from 22% a year ago. Facebook uses w/mobile browser up 112%.  In one month (January 2010): Facebook had 25.1 million users; MySpace had 11.4 million; Twitter had 4.7million

Facebook Statistics (as of May 12, 2010)

Last Week ePlace Solutions employees discovered major data breach Social networking site involved: Friendster.com

Here’s an example from my email account! KNBC Published: May 5, 2010 Over the past few months thousands of Facebook users report receiving messages or friend requests from people they don’t know. Researchers at VeriSign, an internet security company say they’ve tracked a growing trend of bogus or stolen Facebook accounts that are now up for sale in high volume on the black market. VeriSign says 1.5 million Facebook accounts appear to be for sale. Criminals apparently steal login data for accounts, typically with phishing techniques that trick users into disclosing their password. They use the accounts to send out spam or malicious programs or steal a person’s identity. Here’s an example from my email account!

Social engineering attacks on the rise!

Social Networking--EPL Liability Gary Basham, Basham Parker

Facebook Firing

SCREENING AND BACKGROUND CHECKS CareerBuilder.com reports that a survey of 3100 employers revealed that 22% of hiring managers said they use the Internet and social networking sites to research job candidates An additional 9% said they don't currently use the Internet and social networking sites to screen potential employees, but plan to start

SCREENING AND BACKGROUND CHECKS Twenty-four percent of hiring managers who researched job candidates via the Internet and social networking sites said they found content that helped to solidify their decision to hire the candidate; top factors that influenced their hiring decision included: 48% of candidates background supported their qualifications for the job 43% of candidates had great communication skills 40% of candidates was a good fit for the company's culture 36% of candidates site conveyed a professional image 31% of candidates had great references posted about them by others 30% of candidates showed a wide range of interests 29% of candidates received awards and accolades 24% of candidates profile was creative

SCREENING AND BACKGROUND CHECKS Of those hiring managers who have screened job candidates via the Internet and social networking profiles, one-third reported they found content which caused them to dismiss the candidate from consideration; top areas for concern among these hiring managers included: 41% of candidates posted information about them drinking or using drugs 40% of candidates posted provocative or inappropriate photographs or information (potential sexual harassment or gender discrimination claims) 29% of candidates had poor communication skills 28% of candidates bad-mouthed their previous company or fellow employee 27% of candidates lied about qualifications 22% of candidates used discriminatory remarks related to race, gender, religion, etc. 21% of candidates were linked to criminal behavior 19% of candidates shared confidential information from previous employers

MONITORING EMPLOYEES

EMPLOYEE PRODUCTIVITY Nucleus Research July 2009 Survey 237 Randomly Selected Office Workers Employers are losing 1.5 workers per 100 in employee productivity to social networking Nearly two-thirds of those who have Internet access visit social networking sites during working hours Those who visit these sites at work do so for an average of 15 minutes each day Of those who visit social networking sites at work, 87% could not define a clear business reason for it Of those who visit social networking sites at work, 6% never use it anywhere else, meaning one in every 33 workers do all of their social networking during work hours

RECOMMENDATIONS “It may look harmless, but it's a legal land mine for employers.” The National Law Journal July 6, 2009 The California Supreme Court has ruled a former employer providing a recommendation owes a duty to protect employers and third parities and cannot misrepresent the qualifications and character of an ex-employee where there is a substantial risk of physical injury. (Randi W. v. Muroc Jt. Unified School District (1997) 14 Cal.4th 1066.) The law arguably places employers who give recommendations in a Catch-22, which ultimately raises the risks to the insurers – if an employer fails to disclose an accusation because of insufficient credible evidence, then the employer risks being sued by third party victims; however, if the employer does mention an accusation, the ex-employee can arguably sue for defamation.

POTENTIAL RISKS INVASION OF PRIVACY CLAIMS Generally, under federal and California state law, employers may utilize social networking sites to conduct background checks on employees if: The employer conducts the background check itself The site is readily accessible to the public The employer does not need to create a false alias to access the site The employer does not have to provide any false information to gain access to the site The employer does not use the information learned from the site in a discriminatory manner or otherwise prohibited by law

DISPARATE IMPACT DISCRIMINATION CLAIMS Even where an employer is not motivated by discriminatory intent, employers are prohibited from using a facially neutral employment practice that has an unjustified adverse impact on protected classes According to the latest data collected from Quantcast, users of social networking sites are primarily Caucasians age 20-40 (on LinkedIn, only 4% of users are African-American, 8% are Asian, and just 2% are Hispanic) Recruiting on social networking can result in disparate impact on groups without a large social networking presence

DISPARATE TREATMENT DISCRIMINATION A PICTURE I$ WORTH A THOU$AND WORD$ AND MORE If you are not careful, a picture may be worth a claim of employment discrimination. Take a look at the following slide and photographs which have been uploaded to, and freely obtained from various FaceBook, MySpace, and blog sites. What information can you gain from these photos which would otherwise be “off-limits” when making employment decisions?

UNLAWFUL DISCRIMINATION WHAT CHARACTERISTICS ARE PROTECTED? Age (40 years or older) Association/affiliation (including political) Disability/medical condition (physical or mental) Marital status National origin/ancestry (including language use restrictions) Race/color Religion Retaliation for engaging in protected activity or requesting a protected leave of absence Sex/gender (including gender identity) Sexual orientation Veteran status Self-explanatory. The diagram is intended to suggest that most people will fall into at least one protected category.

ON-DUTY CONDUCT Imagine you are the manager of a Burger King restaurant and you have just discovered how to use MySpace. You decide to check the profiles of the employees who work the midnight shift. While perusing one employee's profile, you notice a link to a video. As you click on the link, you are immediately faced with the employee, possibly in his birthday suit, taking a bath in one of the restaurant's utility sinks. You instantly imagine every horrible situation that may result from this incident: health violations, customers getting sick, bad public relations. This situation is no fabrication. It actually occurred at a Burger King in Xenia, Ohio.

WORKPLACE TWITTER WHAT WOULD YOU DO?

MANAGING RISKS OF MONITORING EMPLOYEE SOCIAL NETWORKING Employers have the right to monitor employees’ social networking activity if it occurs during work hours and as it relates to the employer’s business Employers can reduce the potential of claims for invasion of privacy and discrimination by: Ensuring employees are aware their computer usage may be monitored (policy, policy, policy) Monitor everyone – and equally Use reliable monitoring techniques

LOSS CONTROL RECOMMENDATIONS Construct Clear Policies on Employee and Applicant Screening Processes When screening applicants and researching employees on social networking and blog sites, employers should create strict policies concerning which company representatives may research individuals, what they may research, and what methods of research they may use In order to guard against discrimination suits, employers should designate a neutral party who is not an employment decision-maker to research the applicant or employee’s social networking profiles and blogs Employers should instruct that neutral party to withhold any and all information pertaining to an individual’s protected class or characteristics when reporting back to the decision-maker The neutral party should not unnecessarily delve into research that would focus on any of these protected traits

LOSS CONTROL RECOMMENDATIONS Construct Clear Policies on Employee and Applicant Screening Processes When researching employees or screening applicants on social networking and blog sites, individuals conducting research should not employ questionable tactics to gain access to profiles, blogs, and other information Employers should not try to “friend” an applicant or employee for the primary purpose of investigation Employers should also not attempt to obtain passwords or access to the profile from other employees, as the other employees may feel compelled or obligated to provide the employer such information

LOSS CONTROL RECOMMENDATIONS Construct Clear Policies on Employee Use The policy should be designed to implement clear rules regarding the extent of allowable usage and whether it is permissible for employees to affiliate themselves with the company Social media policies should be developed along the same guidelines as electronic communication policies and incorporated into existing confidentiality and technology policies whenever possible The policy should be disbursed in a manner that will provide confirmation that the employees have read and understood the policy Employers should also take care to ensure the policy is effectively communicated to the workforce and should consider providing training sessions or include the content of the policy in orientation seminars

LOSS CONTROL RECOMMENDATIONS What Should Be Included In the Policy (Include a specific statement of what is prohibited.) Disclosing confidential or proprietary information Disclosing the name of the business in personal websites or purely social networking sites except professional networking sites (e.g., LinkedIn) Revealing the name of the company on a site with sexual or violent content Using the company's intellectual property (e.g., trademarks) Infringing on the intellectual property rights of others

LOSS CONTROL RECOMMENDATIONS What Should Be Included In the Policy (Include a specific statement of what is prohibited.) Making statements adversely affecting the company's interests or reputation Criticizing customers or other important business partners Making statements supporting competitors Issuing defamatory, harassing, or disparaging language Issuing content that violates the law (e.g., obscenity) Writing or commenting on content that would constitute a violation of any other policies, rules, standards of conduct, or requirements applicable to employees

Social Networking & Data Security (Cyber) Issues

Thank You!