Since Facebook recently modified its privacy settings, the lines between what is public and what is private in the workplace have become blurred. As a result, it is more important than ever that employers and employees understand where the lines are drawn.

Many Facebook users (your employees included) face a risk of having private details of lives exposed if they opted for settings Facebook recommended back in December 2009. Users may not have understood what they agreed to when opting for the recommended settings.

Moreover, privacy settings have real-world consequences, as Arnstein & Lehr attorney Misha Kerr, an associate in our West Palm Beach, Florida office recently observed in an interview with e-Commerce Times. Misha and I saw this first hand in a case we worked on last year where a client’s private information was exposed to world, including the opposing party in our litigation.

Privacy settings and how you use them are becoming the subject of litigation more and more. In our case, Misha and I represented a client who inadvertently attended a film shoot for an adult (i.e. porn) website staged to look like a “wild party.” Our client never signed a release for her images but ended up on the adult site anyway.

After we filed suit the defendant responded by showing photos our client had posted on Facebook which were risqué at best. Taking the photos out of context our opponent argued that our client’s reputation could not be damaged. Meanwhile, if our client had simply corrected her privacy settings this issue could have been avoided.

Last winter, a dispute in Canada over Facebook photos also brought this emerging privacy issue to light. According to news reports, Nathalie Blanchard’s insurance company cut her disability benefits after an agent found photos of her on vacation through Facebook. When she was diagnosed with severe depression her psychiatrist told her to go on vacation. Until the payments ended last fall, she had been receiving monthly sick-leave benefits.

Manulife told Blanchard that her Facebook photos showed that she was able to work. According to Blanchard’s attorney, Manulife claimed that pictures of Blanchard having a good time at a Chippendales bar show, at her birthday party and on a vacation were enough proof to show that she was no longer depressed. Her attorney says she had the right to go on a vacation and claims that she was wrongfully dismissed from her benefits.

Manulife has reportedly said in a statement that the company would not deny or terminate a valid claim simply because of published information on social networking sites like Facebook. Blanchard responded by suing Manulife claiming that Manulife terminated her disability benefits without proper medical recommendations, relying instead on Blanchard’s Facebook photos, even after her doctor had recommended she go on vacation.

Employees need to treat information posted on social networking sites such as Facebook or Twitter like public information, not a private diary. Employees should also make sure that their Facebook privacy settings are appropriately set.

The recommended settings on Facebook give Facebook the right to publicize your own Facebook page’s private information, including your photos, status updates and other items you’ve posted. Everyone should consider changing the settings for (1) things you share, such as your status updates, photos, videos and other posted items; (2) who your personal information can be viewed by; and (3) whether your account is accessible to search engines like Google.

Fortunately, all of these settings, as well as other settings, may be modified to make your account more private.