Originally launched in 2004 as a networking site just for Harvard University students, Facebook rapidly became a firm fixture in Australian workplaces after its registration system was freed up to allow anyone to register in September 2006. The site now boasts more than 67 million users worldwide, with Australia having the fifth largest number of users.

Issues of worker productivity aside, Facebook and other Web 2.0 sites have opened up the door to a range of legal concerns, including issues of privacy, copyright and defamation and harassment, which businesses are now turning to law firms for advice on.

Deacons partner and Sydney office chairman, Nick Abrahams, has been steadily building up a practice advising clients with respect to legal risks associated with Facebook and other Web 2.0 sites.

One issue business should be particularly wary of, Abrahams said, is the potential for discrimination or harassment claims.

“Organisations need to be wary of how employees are using Facebook, to ensure they’re not using it in a manner that could be regarded as bullying, discrimination, or harassment” he said.

“Facebook is just another way of people interacting in the workplace, and employees need to be aware that their behaviour on Facebook towards another employee is no different to their behaviour in the office.”

Instances of copyright infringement by employees using Web 2.0 applications at work could also directly affect employers, Abrahams said.

“If a court determines that an organisation had the power to prevent the infringing activities of its employees and failed to take reasonable care to avoid such infringement, the organisation may be considered liable,” he said.

Equally, however, employers should carefully consider privacy and discrimination issues with regard to their own use of such sites, a particular concern being the growing trend of companies towards screening the Facebook and MySpace profile of potential candidates when recruiting new employees.

“That’s dangerous for a couple of reasons,” Abrahams said. “Firstly, it can lead to discrimination claims on the basis that irrelevant considerations have been taken into account because of something that the person has said, or something that is apparent, from their Facebook or MySpace page. You’re really opening up liability there.”

The second issue, he said, is that according to Facebook’s terms and conditions of use, the site can only be used for personal non-business purposes, meaning that organisations using the site to screen employees are in breach of that condition.

“Though I question what the ultimate legal liability with that is, if you’re a significant corporation and this is a policy you use regularly, the issue could become quite significant.”

It terms of managing employee usage of Web 2.0 sites, Abrahams explained that an organisation’s individual circumstances and concerns will dictate what the best policy is for them to take.

“It really depends on doing an analysis of what the major issues are for the organisation,” he said. “Is it the legal issue that people will reveal confidential information, is it the system performance issue because people are downloading too much video content, or is it a productivity issue because people are spending to much time on it?”

One route that some organisations have gone down is to completely block access to such sites. A side effect of this, however, is that it can impact negatively on staff moral, Abrahams said.

“Particularly with knowledge workers and generation Y, they use social networking sites for their own business networking. To block it essentially has an ill effect on their abilities to function as they would like to do normally,” he said.

This is a problem that law firms themselves are not immune from, as UK firm Allen & Overy discovered recently. The firm implemented a firm-wide ban on Facebook, but was later forced to retract it because of the number of staff complaints, the website Legal Week reported. Employees can now freely access the site, with the exception that they can’t download videos.

Short of blocking or restricting access, organisations should at least put policies in place regarding usage, Abrahams said.

Among other things, the organisation’s policy should include terms advising employees not to disclose the company’s confidential information and intellectual property, and it should state that usage of these sites shouldn’t hinder the fulfilment of the employee’s workplace obligations.

The policy should also refer back to the organisation’s general policy regarding harassment, and it should also clearly state that a breach could result in termination of employment.

“Organisations have to come to grips with Web 2.0, and the fact that it is a different world,” Abrahams said.

“They need to formulate their policies around what the particular issues are for the organisation, balancing the positive and negative. The negatives being your system performance, productivity and the legal liability; against the positive, which is that it’s a great thing to have tens of thousands of people around the world connecting with each other in an informal manner.”

See Lawyers Weekly next week for our follow-up story looking at law firms’ policies for managing employee use of Web 2.0 sites.