by Peter A. Jones

Few would question that the world has changed. Collectively, social media, unlimited Internet access, and a shift in the way news is gathered and reported have created a different and challenging environment when employees go “public.” Indeed, the very definition of what constitutes “news” is constantly evolving, as is the news cycle. The recent public resignation and simultaneous publication of an op-ed article in the New York Times by former Goldman Sachs executive Greg Smith illustrates some of the risks that this changing dynamic can pose for employers.

Public resignation and commentary
To set the stage, on March 14, 2012, Smith publicly resigned and simultaneously authored a lengthy op-ed article that was published in the New York Times. Smith was pointed in his criticism of his former employer, noting in part, “It makes me ill how callously people still talk about ripping off clients.” In the aftermath of the op-ed piece, much has been written and spoken about Smith’s actions as a former employee, Goldman Sachs as an investment bank and employer, and Wall Street in general.

Another question worth asking (and perhaps a little closer to home for most employers) is whether it could happen to you. The answer to that question is “it certainly could” (although perhaps on a different scale depending on the employer). It’s interesting to note that Smith published a traditional op-ed piece in the New York Times. However, the story has been very much a product of the modern media, with individuals blogging about Smith’s statements and mainstream news media covering the incident. All that has directed a great deal of attention toward Goldman Sachs as an investment bank, a business partner, and an employer.

The number one lesson to learn from the Goldman Sachs incident is that you must consider and prepare for the fact that this sort of situation may affect your business. The matter falls into the category of risk management, and while there’s no way to prevent disclosure (at least not with any level of certainty), there are several proactive steps you can take.

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Employer proactive steps
First, consider confidentiality agreements on the front end of an employment relationship. Thought should be given to which individuals might need to sign an agreement. Given that employees on most any level can publicly assert unethical behavior or in-house quality issues pertaining to their current or former employer, you should think about requiring all employees to sign a confidentiality agreement.

Second, employers have “common-law protection,” which provides legal remedies for inappropriate disclosure of confidential information. However, in cases like Smith’s, when the disclosed information relates not to trade secrets or pricing but to the culture of the organization, the protection doesn’t apply. The common-law theory of defamation might be used to discourage disclosure and potentially pursue offenders, but the standard for a defamation claim is high. Carefully constructed disclosures consisting of factually accurate information and conclusory opinions are very hard to challenge under a defamation theory.

Third, additional thought should be given to separation agreements when employees leave employment. Obviously, an agreement wouldn’t have helped Goldman Sachs because Smith resigned without notice. Additionally, a separation agreement with a confidentiality provision has more value when you, the employer, initiate the separation.

Finally, you would be well served to be ready (to the extent possible) to respond to public disclosures. One helpful proactive step is to designate who will be responsible for assessing and responding to the incident. You should also determine the resources that will be available. Consider having a public relations firm that you can turn to expeditiously in the event of a disclosure. Of course, there is the age- old question about whether it is better to (1) respond to any given disclosure or (2) not respond, and let the media cycle run its course. The answer will be based on an individualized assessment of each case.

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Bottom line
The potential for public and damaging disclosures by current and former employees is a reality in today’s world. Therefore, you should take proactive steps to avoid the underlying issues that result in such high-profile stories. Even the best efforts to avoid situations like the one incurred by Goldman Sachs cannot completely eliminate the risks. You should prepare now so that your response can be as quick and smooth as possible if and when a situation occurs.