Business reputation: key aspects and nuances of protection

Tetiana Borysenko, attorney at Skliarenko, Sydorenko & Partners attorneys at law, specifically for YURLIGA

With the continuous extension of quarantine and the introduction of an emergency regime, it became clear that Ukrainian business would fully feel the economic consequences of the COVID-19 coronavirus pandemic. After all, the government, introducing restrictive measures, in fact in no way cared about companies, which in the new conditions should independently seek compromises in respecting labor rights and guarantees of citizens.

In this plane, conflicts will inevitably arise between workers who go on forced vacations or lose earnings or even work, and employers balancing on the brink of survival. These and other conflicts, when they fall into the public domain, inevitably affect the business reputation of the company, which was built and guarded for more than just one year.

What should take into account the head of the company or business owner in matters of maintaining and protecting business reputation, we will try to consistently explain.

A bit of theory

At the legislative level in Ukraine there is no definition of the term “business reputation”. The Civil Code, as well as the existing judicial practice allow us to conclude that business reputation is a non-property good of any legal entity. The Tax Code says that goodwill has its value, which is called goodwill (this is an intangible asset, the value of which is defined as the difference between the market price and the book value of the assets of the enterprise as an integral property complex, resulting from the use of the best managerial qualities, a dominant position in the goods market , services, new technologies, etc.).

But goodwill as a component of business reputation in the practice of the European Court of Human Rights is considered property and is subject to protection in the understanding of Protocol 1 to the Convention for the Protection of Human Rights and Fundamental Freedoms. And here it is important to note that the Ukrainian courts are required to apply this Convention and the practice of the European Court of Human Rights as a source of law when considering cases.

Who encroaches on the reputation

Spreading false or inaccurate, in particular incomplete, information, discrediting the company (way of doing it or the results of entrepreneurial activity) is the humiliation of goodwill. As a result, the value of its intangible assets decreases.

Violations are possible both from competitors who are trying in such an unfair way to gain advantages in the market, and from their own employees who, in today's conditions, get additional personal or professional reasons for frustration and seek revenge on the company.

In the latter case, the employer should take into account that the solution of the problem with employees in the vast majority of cases lies outside the scope of labor legislation. Indeed, according to the Code of Labor Laws, workers are only liable for harm caused when they violate their labor duties. In other words, if the employee is not a PR manager and his job responsibilities do not include writing posts on social networks, then he will not be responsible for the negative posted there.

Establish violations

Therefore, the remedy will be requirements for:

- compensation for property or moral damage;

- the refutation of false information.

They are presented as part of the civil process directly to the author, as well as to the online publication, the administrator of the social network group, television channel or print publication that disseminated the information.

Since we are dealing with an offense, taking into account the recommendations of the Supreme Court, there must be elements of its legal composition:

1) certain actions: the fact of the dissemination of information. That is, bringing it to the attention of at least one person in any way;

2) the content and quality of information: it should relate to the activities of a particular person and be unreliable;

3) harm and connection with actions: harming certain goods by disseminating information.

But in practice, difficulties arise in the process of proving the fact of humiliation of business reputation, identifying those responsible for violations, determining the amount of moral harm, proving a causal relationship between the actions of specific individuals and the presence of moral harm. Let's consider them in more detail.

The nuances of the spread

Of course, everyone has the right to freedom of expression. This right, as understood by the European Court of Human Rights, includes freedom to hold opinions and freedom to receive and transmit information. However, this right may be limited, including to protect reputation.

Distribution is publication in print, broadcast on radio, television or using other means, distribution on the Internet, statements, letters to other persons, communication in public speeches, in social networks, as well as in any other form, even to one person. Also, the demonstration in public places of posters and slogans, distribution of leaflets is considered spread.

But a citizen’s complaint to a government cannot ruin a business reputation. The Supreme Court is convinced of this. Since sending letters to various institutions in order to verify that the competent authorities are unlawful, according to the applicant, the activity is the exercise of the constitutional right to appeal guaranteed by the Constitution.

Therefore, if your employee or an extraneous "well-wisher" writes in a complaint to a state agency that the company violates the law, this will be the exercise of the law. And the official will be required to consider the appeal and give an answer.

Negative impact assessment

It is clear that the dissemination of truthful facts that are not confidential information at the company will not be considered damage to the reputation.

Only false information can harm! Such information is deemed to be false. That is, it contains information about events and phenomena that did not exist at all or that existed, but information about them does not correspond to reality (incomplete or distorted).

But at the same time, not any inaccurate information will entail satisfaction of claims in court regarding its refutation and compensation for harm. This perspective has only one that is negative. That is, where it is alleged that a violation of the law, violation of moral principles and the like. It should be understood that only negative violates the human right to respect for his business reputation.

Judgments go unpunished

But value judgments are not subject to proof, and therefore can not be refuted. Because according to the law on information, no one can be held liable for their statements.

Value judgments include statements that do not contain factual evidence, criticism, an assessment of actions, and statements that cannot be construed as containing factual data. One of the signs is the use of linguistic-stylistic means (hyperbole, allegory, satire).

That is, if someone made public the information that he considers the head of the company to be a scoundrel, such an expression will most likely be regarded by the court as a value judgment, and there will be no question of compensation for harm.

Calculating losses

The amount of damage in any case must be proven and justified. Otherwise, the prospects of the dispute can be considered insolvent. And in terms of proving the damages as a result of business reputation humiliation promising approach it is through the determination of its value.

As in other matters, it is worth looking for the most relevant and interesting judicial practice. So, in one case, the total amount of damage suffered by the business reputation of the company was tried to be divided into two separate components. They tried to recover from the culprit both the monetary equivalent of damage due to the undermining of business reputation (goodwill), and the money for undermining the image, reducing prestige and undermining confidence in the company. It will be interesting to know the final decision.

And if the legal entity does not have accounting for goodwill as an intangible asset, such a company can justify the monetary equivalent of humiliating business reputation with other evidence, in particular expert opinions.

When the PR manager did harm

If you have to sue ordinary employees in the event of a conflict, then those who shape the image of the business and maintain its reputation in the market (PR or SMM managers) may be liable directly to the company.

But it must be understood that, according to the Code of Labor Laws, an employee is liable for direct actual damage, provided that such damage is caused by a) guilty and b) unlawful acts or omissions. And such responsibility, as a rule, is limited to average monthly earnings.

The recommendations of the Supreme Court will again help in determining the direct actual damage. Here we are talking about:

loss, deterioration or reduction of property value or other values,

the need for the company, institution, organization to bear the costs of restoration, acquisition of property or other values, or

the need for extra (due to violation by the employee of labor duties) cash payments.

Indirect harm to the employee of the enterprise, as a rule, is not compensated.

If there is a contract

Another case is when a contract is concluded between the employer and the employee. This is a special form of an employment contract in which the rights, obligations, responsibilities of the parties and other issues may be established by agreement.

That is, the contract may stipulate liability for the dissemination of negative, inaccurate information about the employer. And according to the Labor Code, the basis for termination of an employment contract may be the basis stipulated by the contract.

The only problem with the use of such a remedy is that the contract cannot be concluded with any employee. The list of "permitted" posts is also limited. In particular, the position of the head of the company applies to them.

Conclusions

Any restrictions on human rights, including the right to freedom of expression, must be carefully weighed by both the employer when concluding contracts and the court in deciding whether to satisfy a claim for damages to a person’s business reputation.

This category of cases, as a rule, is difficult and lengthy. Each circumstances of the case are unique and should be thoroughly studied before deciding on the presence or absence of a violation and the possibility of applying measures of responsibility to the violator.

As for the employees and former employees of the companies, we recommend that they, first of all, protect their reputation and not spread false information about their employer in revenge, but go and challenge the violation of their labor rights in court. And if you disseminate information, it is only in the case when the employee is confident or has sufficient reason to assume that the company has violated the law or moral and ethical standards. At the same time, it is necessary to weigh your words and not allow offensive statements and deliberate exaggerations, especially in difficult financial conditions.