Lead generators and telemarketers at early consumer touch points are not necessarily the only ones responsible for unlawful telemarketing practices. To minimize liability exposure, other third-parties in the telemarketing chain should take reasonably precautions to comply with the Telephone Consumer Protection Act, the Telemarketing Sales Rule and other federal and state telemarketing laws.
The Federal Trade Commission and, with increasing regularity, state attorneys general, seek to impose liability upon third-parties such as service providers for others’ violations of applicable laws, rules and regulations governing improper telemarketing activities (e.g., caller ID requirements, DNC violations, prompt identity and purpose disclosures, failure to obtain prior express written consent, etc.).
Contract provisions that clearly allocate responsibility for telemarketing activities (e.g., scripts) are absolutely critical and, almost without fail, are considered by regulatory agencies when assessing fault and considering whether to initiate an enforcement proceeding. Amongst the marketers themselves, forward-looking contract indemnity and defense, and insurance coverage for telemarketing related claims are items that should be discussed with a telemarketing lawyer during negotiations.
Third-party liability considerations necessarily include legal concepts such as vicarious liability, agency, apparent authority, ratification, joint and several liability, substantial assistance, the manner and means of control, constructive knowledge and willful blindness. There is more than enough leeway for regulators to find parties liable even if they did not actually place the call.
When it comes to holding service providers vicarious liable for the unlawful telemarketing practices of downstream entities such as call centers and lead generators, the Federal Trade Commission and state AGs often take the position that all those in the stream are jointly and severally liable based, in part, upon the existence of an agency relationship permitting service providers to exercise control over the manner and means of the telemarketing campaign.
Proactive measures to monitor and correct problematic vendor conduct can go a long way toward avoiding the imposition of vicarious liability. So can deliberate measures designed to ensure that telemarketers will be considered independent contractors. The extent of control actually exercised over third-parties that provide call transfers or data is critically important.
Factors that courts will consider when evaluating whether a service provider may be responsible for the actions or omissions of third-party telemarketers include, without limitation, (i) whether telemarketers are required to maintain records of relevant consumers; (ii) whether telemarketers are required to provide regular reports; (iii) whether telemarketers are required to use provided scripts and materials; (iv) whether telemarketers are required to comply with provided guidelines and procedures; (v) whether a service provider trains the telemarketers; (vi) whether the applicable contract reflects an impermanent relationship sufficient to support a finding of independent contractor status; (vii) whether telemarketers provide their own tools, instrumentalities, equipment and place of work; (viii) whether telemarketers set their own hours and compensation structure (e.g., only receive payment if a sale); (viii) whether the work is typically performed under supervision; (ix) the skill required; (x) the degree of control that a service provider exercises over the actual calls; and (xi) the parties’ intent.
Given the foregoing, overarching considerations include balancing the amount of supervision and control to exercise over telemarketers. Too little supervision over the way third-parties are marketing your product/service can result in allegations of failure to exercise due diligence and a lack of justifiable ignorance when it comes to the others’ bad acts. Too much and private plaintiffs and regulatory authorities are likely to attempt to advance traditional agency principles.
The extent of and limits upon control exercised by service providers over telemarketers and other third-parties in the chain are amongst the first issues that plaintiffs’ attorneys, including regulatory staff counsel, evaluate. When setting up campaigns and regardless of your company’s role in the telemarketing stream, relationships should be established by considering numerous factors, including, but not limited to, liability exposure shifting strategies, maximizing the number of available defenses and a well-defined scope of authority for advertising content.
Richard B. Newman is an FTC advertising lawyer at Hinch Newman LLP focusing on advertising, marketing and digital media matters.
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