Having players who are employees always explicitly identified by the game seems like a bad idea from the get-go. It exposes them to unusual user behavior, both from users that will not misbehave when they see an employee is present, and from users who will deliberately antagonize the employee. It also places employees in a situation where they may be tempted to pull rank on their customers; if they aren't identified as employees, they have no way of credibly doing so.

Most other online games I've played have had a policy of not identifying players as employees unless they're actively acting as a moderator (e.g, gamemasters in MMORPGs, who aren't really playing the game anyways). I'm very surprised that Riot isn't following their lead here.

My guess is that it serves to quench the common player criticism of "omg, this game is so unbalanced, it's like the developers don't even play their own game!"

And, from what I remember, the LoL community generally really enjoys playing with Riot employees. Back when I used to play (several years ago now) I don't remember running into a single toxic Riot employee. Then again they didn't have very many employees then.

I think that's the point - they're great playing the game, but not when they ruin it as trolls.