LINKEDIN RECOMMENDATIONS ARE A CATCH-22 FOR COMPANIES: PREVENTING EMPLOYEES FROM WRITING THEM COULD LEAD TO DISSENT BUT ALLOWING THEM RAISES LEGAL CONCERNS.
THE RECOMMENDATIONS on LinkedIn pages are usually pretty straightforward: current and former business colleagues tout the person's skills and experience.
But these online testimonials are anything but simple for companies. On one hand, allowing employees to write recommendations for current or former co-workers raises legal risks, especially for financial services firms. On the other hand, muzzling workers might smack of censorship and create resentment.
"Companies attempting to ban employees from writing LinkedIn recommendations are going to appear overly controlling and out of touch," says Jennifer Benz, founder of San Francisco-based consulting firm Benz Communications. "Aside from being unnecessary and harsh, trying to enforce a policy like that is a poor use of resources."
The recommendations are likely to grow in importance as LinkedIn profiles become a de facto résumé in the digital era. LinkedIn, a professional networking website where individuals can describe their career experiences and connect with others, has mushroomed over the past several years. Launched in 2003, it now boasts more than 90 million members worldwide.
The site makes it easy to ask for references by providing a template for those requests. "Recommendationshelp illustrate your achievements, project credibility and show why people enjoy working with you," LinkedIn states on its site.
The testimonials, however, can trigger trouble for companies, some analysts say. LinkedIn endorsements raise the same legal risks for companies as other references for former employees, labor lawyer Shay Zeemer Hable, from the law firm Bryan Cave, argued in a Workforce Management commentary last year (See: tinyurl.com/4n835c9). If a former worker is suing for discrimination, Hable contends, a positive LinkedIn recommendation from a co-worker could harm the company's case. Praise for a worker fired for poor performance could help that ex-employee argue that the company lied about the reason for termination.
Hable says she has "a number of clients that apply their regular reference policies to LinkedIn, meaning employees are not supposed to write recommendations that may appear to be on behalf of the company for colleagues at the networking site."
-Financial services firms have particular reason to worry about LinkedIn recommendations. A U.S. Securities and Exchange Commission regulation bans certain ads by registered investment advisers, including those that refer "directly or indirectly to any testimonial of any kind concerning the investment adviser."
The Financial Industry Regulatory Authority Inc., which is known as FINRA and oversees securities firms, also has rules related to ads and testimonials that might come into play with LinkedIn recommendations.
A recommendation on LinkedIn merely stating that the writer used the services of an investment adviser likely would pass muster with the SEC, as long as it does not comment positively on the services, says Barry Schwartz, founding partner of ACA Compliance Group, a consulting firm based in Silver Spring, Maryland, that works with financial services companies. Still, Schwartz would like to see clearer SEC guidance on the issue.
SEC spokesman John Heine says that the commission hasn't issued specific guidance related to the investment advisers' ad rule and social media. Whether a LinkedIn recommendation violates the law "depends on the facts and circumstances," he says.
Given the uncertainty, Schwartz says, most financial services companies are prohibiting their financial advisers from publishing LinkedIn recommendations "at least for the time being."
Among the companies taking this approach is Ameriprise Financial Inc. …