10 August 2011
Tim Wilson, Associate
LinkedIn is the world’s largest online professional network. Founded in 2003 in California, LinkedIn now has over 100 million members worldwide, two million of which are in Australia. One source cites the professional networking phenomenon as gaining a new member every second.
This professional networking platform has created significant waves in the business world and is seen by some as the future of professional recruitment and business development. However, as with everything to do with social networking, the opportunities are accompanied by pitfalls.
This article examines these issues. It also examines the implications where an employee uses LinkedIn to inform his/her contacts that they have left their employer and/or moved to a competing business and “solicits” those contacts to follow the employee to the competing business.
LinkedIn’s functionality is already extensively utilised in the recruitment space, particularly in identifying and screening candidates. A 2011 survey in the US found that 73 out of 100 Fortune 500 companies had used LinkedIn as part of their recruitment processes.
Increasingly, our clients are recognising the value of LinkedIn as a professional networking and business development tool. Increasingly, employees in professional industries are expected to seek out networking and business opportunities. The value of LinkedIn is that it provides a convenient and efficient forum in which professionals can connect. A presence on LinkedIn and content posted to a page can extend exponentially further than a standard mail-out list because of the largely “open” nature of LinkedIn pages and its system of first, second and third degree contacts.
The quasi-private / quasi-public nature of LinkedIn presents a number of potential stumbling blocks for employers.
(a) Who owns LinkedIn contacts?
As the value of LinkedIn contacts has become apparent, employers have started to ask who actually owns these contacts. A recent example from the Sydney recruitment market illustrates the difficulties around this point.
Earlier this year, a senior Sydney-based recruitment consultant (“Recruiter”), left a large legal recruitment firm (“Firm”), to move to another high- profile legal recruiter. Reports of the dispute indicate that:
- over a period of years (including during the Recruiter’s employment with the Firm), she developed an extensive network of LinkedIn contacts;
- some time after the Recruiter left the Firm, she updated her profile to reflect her new employer and she began updating her employment history on her LinkedIn profile;
- the Recruiter’s employment contract with the Firm included a six-month post-employment restraint against soliciting clients of the Firm or using its intellectual property (but did not specifically deal with LinkedIn or social networking); and
- when the Firm became aware that the Recruiter had been contacted by a candidate in her network, it commenced Local Court proceedings for damages and to obtain an injunction.
This case is yet to be determined.
These factual circumstances are not unique and raise a number of questions, including:
- Whether all of an employee’s LinkedIn connections are the confidential information or intellectual property of the employer. If not, can a distinction be drawn between connections that were obtained in the course of employment and those that were obtained privately?
- Is there any difference between contacting a client through LinkedIn and any other form of direct communication? What about posting an update?
(b) Confidential Information / Intellectual Property
Whether or not LinkedIn connections are confidential information and any different from client and supplier lists is yet to be determined by the Courts. However, the answer may depend more on how those connections were formed, rather than whether they are recorded in LinkedIn, or elsewhere. That said, some connections might start as private relationships and later become business relationships or vice versa. For this reason it may be more useful to think about the ownership of a client relationship, rather than the individual relationship between an employee and client.
In a 2008 UK High Court case, Justice Richards made a number of instructive comments concerning whether LinkedIn contacts could be confidential information. In that case, Mr Ions, a mid- level recruitment consultant with Hays Specialist Recruitment, announced that he was leaving Hays to set up his own recruitment consultancy. Prior to leaving, Mr Ions sent invitations through LinkedIn to at least two of Hays’ candidates to join his network. At least one of these candidates responded by accepting the invitation and asking Mr Ion to secure them suitable employment.
Although the case was about whether pre-trial discovery should be ordered, Justice Richards examined whether Mr Ions’ conduct could amount to a breach of his employment obligations (including whether he had misused Hays’ confidential information). Mr Ions argued that he had been encouraged by Hays to form connections through LinkedIn and that once his invitations were accepted, the client information was posted to a widely accessible page and ceased to be confidential. Justice Richards disagreed, arguing that if the client information was confidential, by uploading the information to LinkedIn Mr Ions had transferred Hays’ information to a site where the information would be accessible to him after he ceased employment. This was the potential breach, even if the confidentiality of the information was later lost.
In the case of the Sydney recruiter discussed above, part of the Recruiter’s defence appears to be that she established most of the connections in her personal time as part of her involvement in the law, and that many of the connections pre-dated her employment with the Firm and her use of LinkedIn. The Firm’s response was that the information on LinkedIn was capable of being the intellectual property of the employer, “just like any other medium you can record or store information on”. Following Justice Richards’ reasoning, a court may be convinced by this argument in future cases.
The Courts have a great deal of experience in determining whether the post-employment conduct of employees amounts to solicitation. However, it remains to be seen whether direct communications through social networking platforms and undirected announcements (such as postings or updates) will be treated any differently.
A 2010 Minnesota District Court case provides an interesting illustration of how solicitation can play out through LinkedIn. In that case, an IT recruiter contacted former colleagues and clients through LinkedIn to invite them to the recruiter’s new firm.
The recruiter’s contract of employment contained 18-month post-employment, non-compete and non-solicitation obligations. This dispute was settled on the condition that the recruiter provide broad restraint undertakings for a period of up to 14 months.
Commenting on this case, a US practitioner made the refreshingly common-sense statement that, “if you can’t call someone and say it, and you can’t send a letter and say it, then you shouldn’t be doing it on LinkedIn”. As occurred in this case, LinkedIn may provide useful evidence of solicitation occurring.
(d) Other issues
In recent years employers have had to re-examine how much control they attempt to exercise over employee use of social networking platforms at work. This has given rise to a myriad of issues, including employee privacy and appropriate use. Although most often associated with Facebook, these issues apply equally to LinkedIn.
Additionally, the nature of LinkedIn exposes employers to a potentially greater risk that their employees will be seen to be acting on behalf of the employer or expressing its views. There is also scope for confidential or commercially sensitive information to be widely disseminated.
How then do employers reap the rewards of LinkedIn and other social networking platforms whilst minimising their risk exposure?
Some companies in the US are requiring exiting employees to “un- friend” from Facebook and remove from their LinkedIn network contacts that are connected with the company. However, this may be perceived as a difficult and extreme approach.
Employers should check their employment contract templates and ensure that they provide adequate protection. It is not uncommon for senior employees to be employed under unwritten or out-dated contracts or contracts that do not contain any restraints. Likewise, most employers have yet to update their template contracts to respond to the rise of social networking. This could include broadening the definition of confidential information or even solicitation (for example, to extend to employment candidates). Ultimately, whether an employer takes these steps may depend on how harmful it would be were an employee to take their LinkedIn connections with them. Likewise, any such provisions must be tailored to the particular employee to improve the prospects of the restraints being enforceable.
Employers should be proactive about dealing with social networking use in all aspects of the workplace. As discussed above, employee use of LinkedIn raises many of the same issues as Facebook and other platforms. Employers should consider whether their existing policies adequately deal with these issues and whether they need to implement a social networking policy.
Now is the time to ask whether your organisation is appropriately equipped to respond to the many challenges social networking sites can provide.
PCS has a number of templates available for its clients in relation