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But do companies enjoy the same legal protections as newspapers and individuals?

The libel protections that newspapers enjoy are well illustrated in the 1981 Sydney Pollack movie, Absence of Malice. In the film, an overly aggressive government prosecutor leaks information to a newspaper reporter in order to put pressure on an alcohol distributor suspected of wrongdoing. The evening before the article is to be published, the reporter expresses concern to the newspaper's lawyer that she lacks proof that the allegations are true. The lawyer tells her that truth is not the issue. Instead, the issue is whether the newspaper knows the allegations to be false but publishes them anyway. Absent that "malice," the lawyer says, the newspaper is protected. In the course of the movie, having seen how her article has ruined the victim's business and even led to a suicide, the reporter learns that a story can be accurate, even though it isn't true.

So, do companies enjoy that "malice" standard that has been established for newspapers or the strong free speech standards afforded individuals? The answer is: sort of. Companies are entitled to free speech, but their commercial speech is less protected. The lower protection comes in the form of a higher standard of care for truth and accuracy. So, when company employees participate in social media on behalf of their employer, they subject the company to the same risks as a newspaper or individual, but with less protection.

It is in a company's interests to teach its employees about these risks and to train them to protect the company when they blog or answer the question, "What are you doing right now?"

Product reviews provide a simple example. A Web site's review features are supposed to be the province of consumers. But what if company employees or agents seed reviews of that company's products without disclosing their relationship to the company? The Federal Trade Commission has warned that those actions can violate consumer protection laws. While Facebook, Twitter and other social networks invite companies to participate, companies need to remember that they bring to those sites their own baggage filled with media laws regulating advertising and marketing.

In order to mitigate these risks, companies need to prepare their employees. A social media policy is part of that preparation. Such policies are about labor law, but also about advertising, marketing, public relations, product liability and other activities that carry legal implications. When employees or agents participate in social media as part of their work, basic legal doctrine dictates that the company is responsible for their actions. But even if an employee is blogging or posting outside the course of employment, the company can still be liable if the employee's audience has a reasonable expectation that the employee is speaking for the company. That false expectation can be set up by an employee who states that he works for a company but is not clear that he lacks authority to speak for the company.