According to recent press reports, in an expensive lesson in self-censorship, Courtney Love has paid out more than $430,000 to settle the world's first Twitter libel lawsuit rather than risk facing a jury over tweets in which she allegedly accused the claimant of theft and being a criminal.

Employees (and contractors) should be warned not to publish anything publicly on a social networking site that they would not be happy to have printed in a national newspaper. In particular, when the user identifies their employer, discusses the nature of their work or updates their social networking site during the course of the working day, they must behave in accordance with the terms and conditions of their employment.

To minimise the serious risks of reputational and other damage which can be caused by your employees' non-work-related internet use, you should ensure that your social networking policy is up to date and comprehensive and that all your staff are signed up to it as ambassadors of your firm.

If you do not have a formal policy in place, you should protect yourself by formulating one which is detailed enough to cover the fundamental issues while being sufficiently general to accommodate the pace of technological change. For business reasons it may not be practical or desirable to block the use of social networking sites within working hours, but parameters of acceptable behaviour must be set.

The PCC's decision in the Sarah Baskerville case suggests that by issuing social networking updates which are publicly available, an employee may be forfeiting their right to privacy.

To protect the employer (and the employee), Twitter accounts should be locked to limited access to those officially "following" the user and to limit the number of followers, so that tweets are not visible to the general internet public. Twitter accounts and blogs, and any other networking capability that can be tailored to do so, should include a disclaimer against the user's profile that "the views expressed are my personal opinions and are not necessarily representative of my employer". Facebook and My Space accounts should be limited to the highest of privacy settings, so that content can only be viewed by those connected to the user as "friends".

The problem with Twitter and other "real-time" social networking sites is that any interesting (or inflammatory) post is likely to be "re-tweeted" without the originating user's consent. With a whole section of Google now devoted to real-time results, a user researching your company could easily stumble across your employee's comments, potentially propelling a controversial tweet to a wide public audience.

Employees should be encouraged to take steps to protect their own personal information wherever possible and proactively to manage their social networking profiles, removing now (rather than when it is too late) any content which could cause problems in the future. Once in the public domain, as well as potentially having an immediate impact, their social networking updates and photographs connected with them may also be traceable by anyone researching their background in the future, such as subsequent employers, banks or educational institutions.

A salutary tale from across the pond is that of an off-duty 25 year old trainee teacher who was refused her graduate degree for having posted a picture on her MySpace page showing her at a party wearing a pirate hat and drinking from a plastic cup, with the caption "Drunken Pirate". In a decision that will strike fear into many "work-hard-play-hard" employees, she was deemed by the Dean of her University to have promoted drinking in virtual view of her under-age students. Employees would be well advised to keep their friends close and their enemies behind a firewall.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.