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Fines For Less-Than-Flattering Reviews?
Monday, September 29, 2014

Last month, a New York hotel, the Union Street Guest House ("hotel"), learned a valuable lesson in online etiquette and the power of personal reviews. The hotel inserted a clause into its wedding guest contracts that informed couples-to-be that they would be personally charged $500 for every negative review placed on any internet site by wedding guests. Specifically, the clause stated:

If you have booked the Inn for a wedding or other type of event anywhere in the region and given us a deposit of any kind for guests to stay at USGH there will be a $500 fine that will be deducted from your deposit for every negative review of USGH placed on any internet site by anyone in your party and/or attending your wedding or event. If you stay here to attend a wedding anywhere in the area and leave us a negative review on any internet site you agree to a $500 fine for each negative review.

Not surprisingly, the PR tactic backfired after the punitive online review policy appeared in the major news outlets like the New York Post. Criticism ensued on Yelp.com, where hundreds complained about the policy and some wrote fake, abysmal reviews about the hotel.

The hotel policy is a perfect example of how businesses try to manage their online reputation - and some, unfortunately, get it very, very wrong. Not only must businesses determine whether there is a legal basis for policies, but they also must consider the reputational impact that such policies might carry with them. Social media and online reviews have made customer feedback much more powerful than it used to be - indeed, it can make or break a business. It is crucial that businesses keep in mind some basic legal concepts when determining how to mitigate the consequences of negative online feedback.

Contract Clauses

The hotel is not the first, and probably will not be the last, business that has attempted to thwart adverse commentary by having customers or clients sign contracts containing non-disparagement clauses. It is true that courts will uphold contracts between companies and consumers as long as there was mutual agreement of the terms, even if those terms restrict the rights of an individual in some way. There is a point, however, when a court will refuse to enforce contract provisions because they are unconscionable (i.e., so grossly unfair or offensive to public policy). Therefore, it is important to consider what the public perception of a non-disparagement clause would be and to consult legal counsel before trying to circumvent an individual's rights through signing a contract.

The hotel later called their policy a "tongue-in-cheek response" to negative reviews, so it is not clear how a court would have ruled on the issue if it actually went to trial. Suffice to say, though, that the hotel did not fare well in the court of public opinion.

Social Media Policies

When things do go awry, the best defense is a good offense. All businesses should have a social media policy in place - both internally (as it relates to employees) and externally (as it relates to customers and clients, competition, vendors, etc.). Social media stories often arise because of a company's response to negativity, which is oft much more damaging than the initial negative comments themselves.

A business should appoint someone to continually monitor their online presence and respond, when necessary, to posts. Keep in mind that not every harsh word needs a reply, but it is important to let individuals know that their concerns have been heard and action, if required, has been taken. A well-written policy will not only specify what sites should be monitored, but how negative comments will be processed and who will be in charge of constructing a response.

Knowing When It is Defamatory

The laws concerning defamation, especially online, are complex due to the intersection of long-standing legal principles with the First Amendment and with technological proliferation. In a defamation suit, the alleging party must prove several things: that the subject statement is false, was communicated to others, and, as a result, caused injury. Kentucky is a defamation per se state meaning, that in some instances, injury is presumed when certain types of statements are made. In other words, the defamed person may recover without allegation or proof of special damages when certain categorical statements are made, including:

1) Attributing to someone a criminal offense;

2) A loathsome disease;

3) Conduct incompatible with his business, trade, profession, or office; or,

4) Serious sexual misconduct (including incest).

If any of these statements are made about you or your business online, then you should contact legal counsel to discuss how to best proceed. The best course of action for a business will vary greatly depending on the circumstances of the case. Some disputes may be resolved by means of a letter to the website owner demanding that the defamatory content be removed. In other cases, it may be appropriate to file a lawsuit to uncover the identity of the poster.

The hotel management attempted to fine customers with a contract, but after all the damaging publicity that resulted, it is obvious the hotel was the one who ended up short-changed. Do not let your business fall victim to online negativity or defamation - be proactive, have a policy, and contact legal counsel if a statement crosses the line.


Sometimes the negativity surrounding your business can come within - from disgruntled current employees. When they are the culprit behind pessimistic or disparaging comments, what can be done? Relying on an internal social media policy is the best way to handle a volatile situations, but employers must use extreme caution when drafting such a policy because the National Labor Relations Board (NLRB) has become highly critical of them over the last few years.

The NLRB is concerned with any language in a policy that may chill employees' Section 7 rights, which allow employees to engage in "concerted activities" for mutual aid and protection. Simply put, it protects the rights of employees to discuss wages and other working conditions, whether around the water cooler or on social media. Policies that prohibit employees from posting comments that may "damage the company" should be avoided. The NLRB has also ruled that policies which ban employees from posting company logos or names are unlawful because employees could construe such prohibitions as limiting protected activities that involve the terms and conditions of employment (for instance, distributing leaflets or protesting with a picket sign). Because the NLRB has taken such a critical stance on social media policies, both for unionized and nonunionized workforces, employers should consult with legal counsel before trying to restrict employees' speech on social media in any way.

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