What does defamation mean for SMEs?

It is important for all business owners to know where they stand with respect to defamation, given the implications and risks of this particularly complicated area of the law.

Defamation has become an increasingly relevant issue for small-to-medium enterprises (SMEs) to consider, especially as new and improved technologies, especially in the digital arena, have broadened the platforms for two-way communication on a global scale.

Generally, defamation refers to the publishing of material that is likely to cause harm to a person’s reputation by having others think less of that person. This includes causing others to shun, hate, ridicule or avoid the person, or affecting the person’s private or professional character.

The law considers material to be ‘published’ when it is communicated to someone other than the defamed person. ‘Publishing’ includes written comments, photos, videos and audio shared or posted on social media channels and/or websites, as well as in more traditional forms such as printed materials.

Claims of defamation can be brought about by any individual against the publisher responsible for the defamatory material.

Defamation claims may also be brought against individuals who take part in the re-publication or distribution of defamatory material.

Australian law suggests that in order to make a claim of defamation, you do not have to prove that you have suffered any economic loss as a result of the defamation. However, unless the court is otherwise satisfied, there is a limitation as to the maximum amount of damages that may be awarded in defamation claims that only involve non-economic loss.

Defamation and small businesses

It is crucial for SMEs to be aware of their position under the law, as they can both sue others for defamation and be accused of defamation themselves.

An SME may be accused of defamation by any individual, if that enterprise publishes defamatory material that harms another person’s or business’ reputation.

However, Australian legislation has limited the ability of businesses to sue for defamation. A corporation can only sue for defamation if it employs fewer than 10 people and is not related to another corporation, or it is a not-for-profit organisation.

What to be mindful of

In the digital age, it has never been more important for SMEs to clearly understand and recognise defamation, both to prevent claims against them and to identify potential claims against others.

New media and technological advances have resulted in the introduction of many more platforms for businesses to reach wider audiences. Online publishing has further complicated defamation law due to its trans-border nature.

Recent case law indicates that the law applicable to online defamation is that of the jurisdiction in which the defamatory material was received or read.

SMEs that use social media as a communication or marketing tool need to be mindful of potential defamation claims to operate confidently online. This is particularly important in modern times, as digital material can easily be recorded and shared to a wide audience.

It is important for businesses and individual employees, especially those responsible for social media content, to understand and appreciate their potential liability in defamation, as the law uses an objective, reasonable person test in determining whether they are liable.

It is also important for businesses to recognise that social media allows individuals the ability to instantly publish public statements about SMEs, which can quickly spread and damage their reputation.

Considering the limitation Australian legislation imposes on corporations, SMEs should ensure they address any damaging statements appropriately, and be aware that their own public responses may potentially expose them to accusations of defamation.

Additionally, employers may also be liable to claims of defamation when writing or giving references to other employers, even if at the request of an employee.

Accusations of defamation often arise when false information is provided in references that results in damage to a person’s reputation.

What to do if your business is accused of defamation

If a business has been accused of defamation, or becomes aware of defamatory content, it is important that the material be removed immediately.

The nature of digital technology is instant, and it is likely that online material may have been saved or shared despite the original material being deleted.

Due to the complexities of defamation law, legal advice should be sought immediately.

There are several defenses that may be pleaded in relation to accusations of defamation. The defenses available differ between jurisdictions; however they may include:

  • Justification
  • Contextual truth
  • Absolute or qualified privilege
  • Publication of public documents
  • Fair reports of proceedings that are of public concern
  • Honest opinion
  • Implied or express consent
  • Innocent dissemination
  • Triviality

Defamation law has become particularly complex with the introduction of new media and digital technologies.

It is important for SMEs to understand and recognise defamation and their legal obligations, to effectively prevent accusations and also identify potential damage to their reputation.

Scott Dougall is a partner at Carroll & O’Dea Lawyers.

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