Since the advent of social media sites like Facebook and Twitter, employers have worried about protecting themselves from harmful speech by employees. In the last few years, however, they’ve had to walk the fine line between protecting themselves and respecting their employees’ right to communicate with co-workers and outsiders as provided in the National Labor Relations Act (NLRA). Along the way, the National Labor Relations Board (NLRB) has issued rulings that have served to guide companies on what they can and can’t do with regard to disciplining an employee for what they deem to be inappropriate social media behavior.

In the three years the NLRB has been issuing rulings on companies’ social media policies and actions, we’ve learned its stance is this: Social media sites are “virtual water coolers,” and whatever employees have a right to discuss around the workplace — including any subject falling within the definition of “terms and conditions of employment” — they may also discuss on social media sites.

But is this a fair analogy? A water cooler conversation includes a handful of people in a closed setting; a Facebook post is likely to reach many more — possibly hundreds, thousands. Is the NLRB is overstepping its authority in taking this position? And how can employers know exactly when a termination over social media behavior is in violation of the NLRA?

The case involving Knauz BMW, a suburban Chicago auto dealer, and one of its former salesmen helps draw the line between what a company can terminate an employee for, and what it can’t. In the June 2010 case, salesman Robert Becker wrote two Facebook posts about his employer. First, during an event the dealership held for customers where it offered hot dogs and bottled water, Becker mocked the company for serving cheap food. “I was happy to see that Knauz went ‘All Out’ for the most important launch of a new BMW in years,” he posted, also mentioning in comments with other Knauz salesmen that the cheap food could hurt their sales commissions. Later that day, after a salesman at Knauz’s neighboring Land Rover dealership let a 13-year-old sit in the driver’s seat of a car and the child accidentally drove it into a pond, Becker posted pictures of the accident with the caption, “This is your car: This is your car on drugs.”

A week later, Knauz fired Becker for the posts and the NLRB filed a complaint on his behalf, claiming his posts were “protected concerted activity.” While the administrative law judge in the case agreed with the NLRB that the post about the customer event was protected because it addressed working conditions (commissions), he ultimately ruled that the car accident post wasn’t because it didn’t discuss terms and conditions of employment, and upheld the company’s decision to fire him.

While the case helped shed light on what constitutes “protected concerted activity” and what doesn’t, it also underscores the NLRB’s focus. The Board takes the position that limiting or prohibiting employees from connecting with each other on social media sites, talking to each other online, disparaging the company, supervisors or other employees online, compensation or other terms and conditions of employment violates the NLRA.

In a separate, currently pending case, NLRB v. Triple Play Sports Bar, the board could establish precedent on whether “liking” a Facebook post that deals with working conditions is “protected concerted speech.” Considering what we’ve learned from Knauz and in the three years the NLRB has been issuing similar rulings, a decision that “liking” can constitute protected activity seems likely.

While this may strike additional fear in already-nervous companies trying to stay well within the parameters of the NLRA, there are a few steps legal departments can take to stay ahead of the game.

1. Make sure your human resources department understands that if it is considering taking action against an employee for something that employee did on social media, an immediate red flag should go up. Before taking any steps, HR should carefully look at the situation and potential wrongdoing and to contact your legal department for guidance.

2. If you don’t have a social media policy, implement one that is conscious of NLRB guidance. If you already have a policy, re-evaluate it and make sure it doesn’t fly in the face of the Board’s standards. If a social media policy is more than a year old, it’s time to review and re-assess it to ensure it’s in compliance with the quickly evolving law.

3. Provide appropriate training to HR, Legal and managers on the Board’s limitations on how companies can limit social media use. Legal departments need to work closely with their human resources departments to create effective social media policy training for managers and employees.

It remains to be seen how far the NLRB will take its “virtual water cooler” analogy and what other analogies develop to help apply the NLRA to the ever-changing world of social media. In the meantime, employers should take the time to understand the NLRB’s position and make an educated and calculated decision regarding how they limit and respond to employees’ social media use.