Keeping pace with changing technology in franchising

• Part 1 - General legal issues

• Part 2 - Employment issues

Part 1 - Overview

• Social media – general

• Case: ACCC v Allergy Pathway

• Social engineering

• Social media promotions

Social media - general

Social media - general •In sixty seconds:

– 320+ new Twitter accounts – 100+ new Linked-In accounts – 695,000 + Facebook status updates – 79,364 Facebook wall posts – 510,040 Facebook comments (Souce: go-global.com)

•Australians are among the highest ranked social media users in the world. (Source: http://www.socialbakers.com/facebook-statistics/australia)

•Currently, there are over 10 million Facebook users in Australia, being over 62.40% of the online population. (Source:http://www.socialbakers.com/facebook-statistics/australia)

Social media - general

• Not surprisingly, a number of franchise systems have adopted social media to use as a platform for marketing.

• Facebook ‘Fan page’.

• Facebook ‘Wall’.

Social media - general

Social media - general

Cases

• ACCC v Allergy Pathway (No 2) BC201100491

• Issue: When can you be liable for representations which originate from another?

Cases

• Allergy Pathway • Allergy Pathway tested and treated allergies.

• ACCC asserted misleading or deceptive conduct in 2009.

• In 2009 gave court undertakings not to ‘publish’ certain representations.

• In 2011 ACCC issued proceedings for civil contempt for having breached the 2009 undertakings .

Cases

• Four categories of posts: • statements and links to statements posted by Allergy Pathway on its

website and Facebook and Twitter pages;

• testimonials written by clients and posted by Allergy Pathway on its website and Facebook and Twitter pages;

• testimonials written and posted by clients on Allergy Pathway’s Facebook wall; and

• Allergy Pathway’s responses to queries posted by members of the public on its Facebook wall.

• Allergy Pathways conceded categories 1, 2 and 4.

Cases

• Third category of posts • More controversial: Testimonials written and posted by clients on Allergy

Pathway’s Facebook wall. • Are these ‘representations’ by Allergy Pathway?

• Examples of posts: • “My asthma and eye symptoms no longer happen after my treatment”

• “Allergy Pathway is amazing. It has worked wonders for me in so many ways. I had food allergies for as long as I can remember, avoiding seafood and shellfish and even bread! After one treatment I could eat seafood with no noticeable reaction…*Name+, Medical Practitioner”

• “As a practicing naturopath, I have found this technique to be the most effective method of treating allergic reactions and intolerances”

Cases

Per Finkelstein J, Allergy Pathway:

• Knew that others had posted testimonials. • Had not taken any steps to remove them. • Wanted to take benefit of others’ praise. • Thought that testimonials added legitimacy to its business. • Therefore, had ‘accepted responsibility’. • Therefore was deemed to have ‘published’ these representations,

notwithstanding that they originated from others and were posted by others.

Franchise systems - suggestions

• Monitor Facebook ‘wall’ posts.

• Restrict franchisees from creating social media accounts.

• Restrict franchisees from commenting on social media with respect to the franchise system.

• Update operations manuals to keep on top of technological change.

• Train employees.

Social engineering

• ‘Social engineering is the art of gaining access to buildings, systems or data by exploiting human psychology, rather than by breaking in or using technical hacking techniques’.

(Source: Joan Goodchild, Social Engineering: The Basics, 11 January 2010 < http://www.csoonline.com/article/514063/social-engineering-the-basics >

• This information can later be used to compromise the security of a system in a conventional hacking attempt.

• Social media can provide a wealth of information to a potential social engineer.

Social engineering

• In EU and certain US States, there are mandatory data breach notification laws.

• The organisation must notify affected individuals that the security of their data has been compromised.

• No such laws in Australia yet.

• A 2008 report from the ALRC on privacy laws recommended the adoption of a mandatory notification system in Australia.

• Consider educating staff in relation to the practice of social engineering.

Promotions involving social media

A business provides a discount or other benefit on condition that the customer adds the company as a ‘friend’ on Facebook.

Promotions involving social media

• Third line forcing under s 47(6) of the Competition and Consumer Act 2010.

• Notification can be sought.

• Example, notification by Virgin Airlines – offering discounted airfares provided that the customer becomes a ‘friend’ on Facebook.

Summary

• Social media – potential marketing phenomenon. • ACCC v Allergy Pathways – a business can be liable

for representations which originate from others. • Social engineering - staff education. • Social engineering - mandatory breach notification

laws may be introduced in Australia. • Social media promotions - be wary of third line

forcing.

Part 2 - Employment issues

• Overview

• Overarching risk to franchise brand

• Out of hours conduct and associated risks

• Confidential information and social media

Protecting the franchise brand

• In 2009, two employees of Domino’s Pizza in the US released YouTube video.

• Showed employee amongst other things, blowing nose on a pizza.

• Within days, video had been viewed over a million times.

• Caused significant damage to brand in a matter of days.

Social media: out of hours conduct

Social media: out of hours conduct • Why did his boss end with ‘cool wand’?

• Kevin posted this photo on Facebook during his time off work

Social Media: responding to misconduct

• Employer’s options to deal with misconduct:

• Discipline/performance management of the employee

• Give the employee a warning • Dismissal with notice • Summary dismissal

Social media: out of hours conduct

• Employers can exert control over employees’ out of hours conduct if the conduct is:

• likely to cause serious damage to the relationship between the employer and employee;

• damaging to the employer’s interests; or

• incompatible with the employee’s duty as an

employee.

• Misconduct that affects only the business:

Publishing discouraging comments about the workplace:

• Fitzgerald v Smith (Escape Hair Design): – Facebook communication is not only among ‘friends’ – it

can be seen by an “uncontrollable number of people”

– Employer failed to act promptly in response to the comments

Social media: out of hours conduct

• Recent case: O’Keefe v Good Guys (11 August 2011)

Facebook post:

• ‘Damien O’Keefe wonders how the f**k work can be so f**king useless and mess up my pay again. C..ts are going down tomorrow.’

• Profile set on maximum privacy settings

• Perceived as a threat against one female employee

• Unfair dismissal claim rejected

Deputy President: ‘the separation between home and work is now less pronounced than it once used to be’.

Social media: out of hours conduct

Social media: out of hours conduct and other parties

Bridgette Styles v Izzo & Clayton Utz

• Workplace romance went sour

• Allegations of harassment, bullying and sex discrimination

• Facebook group: ‘Clayton Utz Workplace Relations (Sydney) Wh***bags’

Social media: out of hours conduct and other parties

Misconduct involving third parties:

• Bullying: OH&S

• Discrimination

• Sexual Harassment

Vicarious liability of the business

Again, the employer must investigate in accordance with their policies, in a procedurally fair manner:

• Perpetrator:

– Discipline, warn, dismiss with notice or summarily dismiss

• Victim:

– EAP, counselling, dealing with potential claim

• Email / Internet Use Policy • Regulates use of social media during work hours

• Train franchisees on this policy

• Inform employees that you will monitor their workplace internet and email usage

• Prohibit employees from using email or internet to defame, bully, harass or discriminate against colleagues or disparage the franchise

• Warn employees that their out of hours conduct may impact their employment

Social media and confidential information

• Potential to breach confidentiality via posting comments or information online

• How should a franchise deal with LinkedIn? – Employee may have a virtual client list

– If the employee moves to another employer, this is shown on their profile

Social media and confidential information

• Expand the scope of confidentiality clauses

• Ensure you have valid restraint clauses

Take home messages • Difficult for franchisor to oversee daily conduct of

franchisee’s employees.

• Must have clear policies on social media set in place

• Ensure that franchisees, HR and employees are trained in these new policies

• Respond in a procedurally fair manner to misconduct via social media

• Consider altering your employment contracts