A Growing Role for the FTC in Regulating Workforce Management
The FTC may be joining other federal agencies—such as the U.S. Department of Labor, the Equal Employment Opportunity Commission (“EEOC”), and the NLRB—in regulating the employment relationship, especially in the technology industry. On May 29, 2015, the FTC indicated that it would begin scrutinizing employer social media policies. Pursuant to the FTC’s new guidance, an employer should ensure that its social media policy requires employees to disclose their connection to the employer prior to endorsing any of the employer’s products on social media. Without such a policy, the employer may be held liable for false advertising because of the employees’ failure to make an adequate disclosure.
FTC regulations require a person who endorses a product to disclose any material connections with the seller of that product that affect the endorser’s credibility. For example, video game reviewers must disclose that they are paid for their reviews by the games’ manufacturer. The regulations also provide that the recipient of an endorsement “should advise” the endorser that “the connection should be disclosed, and it should have procedures in place to try and monitor his postings for compliance.”
Under the new guidance, employees must disclose their employment relationship when endorsing their employer’s product. Employers are not expected “to monitor every social media posting” by their employees. An employer’s social media policies, however, should advise employees of their disclosure obligations. Further, employers “should establish a formal program to remind employees periodically of [the employers’] policy.” And if an employer learns that an employee has posted a review without an adequate disclosure in violation of company policy, the employee should be instructed to remove the review or correct it to contain a disclosure.
This guidance comes in the context of increasing FTC scrutiny of the technology industry. The FTC’s guidance was issued in response to changing technology and provided specific guidance to bloggers, video game reviewers, and Internet-based businesses. The FTC has also been active in seeking to regulatecrowdfunding and the sharing economy. These categories of products often blur the lines among customers, suppliers, and employees. Many sharing-economy companies specialize in creating a marketplace for labor, including car rides, pet sitting, and miscellaneous household chores. The FTC is looking to promulgate regulations that place the burden on sharing-economy businesses to protect other market participants. The agency will be accepting comments on this issue until August 4, 2015. This rapidly developing area of the law will likely spawn new regulations governing the independent contractor relationship and may even result in a new category of worker, other than employees or independent contractors, governed by a different set of regulations.
Finally, although employers are aware that non-compete and non-solicitation agreements should be carefully drafted so as not to run afoul of the antitrust laws, the FTC may begin scrutinizing the anticompetitive effect of settlement agreements resolving these cases. The agency has been aggressively scrutinizing “pay for delay” settlement agreements in which plaintiff brand-name pharmaceutical companies pay defendant generic pharmaceutical manufacturers not to enter the market (whereas, in most settlements, the defendant pays the plaintiff). Last year, we discussed how agreements among employers not to compete for employee talent can violate antitrust law. Settlement agreements in which either party receives concessions that it could not have received had it prevailed in the lawsuit may soon be subjected to similar scrutiny. For example, settlements in which both plaintiff and defendant agree not to hire or solicit each other’s employees for a period of time may soon be subject to FTC investigation.
All employers, but especially those in the technology industry, should keep abreast of new legal developments, which may come from unexpected directions. An informed employer will be better positioned to adapt to, and even shape, developments without paying to litigate the test case.
16 C.F.R. § 255.5.