ALM Properties, Inc.
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It is increasingly common for employees pursuing claims against their employer to use their access to files and databases to gather, in blatant violation of company policy, confidential documents and data that they believe are relevant to their claims. Counsel often becomes aware of this misconduct during an internal investigation or after litigation is commenced, often when the employee or former employee's work computer is imaged and analyzed. But an employer may not become aware of misconduct until after the employee has filed a charge or a lawsuit, when confidential company documents are referenced in the charge or complaint, or even attached as an exhibit to a pleading.
Consider the following scenarios:
This is just a sampling of the kinds of "self-help" discovery that courts have recently considered.
This type of misconduct appears to be fueled by the belief of claimants and their counsel that employees have an unfettered protected right to engage in self-help discovery to develop their claims. Indeed, many plaintiffs counsel encourage this behavior, advising clients to gather the goods while they are able to so that counsel can later use the fruits of their efforts in demand letters, Equal Employment Opportunity Commission investigations, and litigation. It is clear that an employee engages in protected activity when she, in good faith, makes or takes certain steps legally and legitimately to investigate an internal or EEO complaint. But does protected activity include so-called self-help discovery, such as taking and downloading documents or recording conversations?
When a company learns that an employee is engaging in such behavior, it may hesitate to take action, fearing that the employee will cry retaliation. But, as with other kinds of employee misconduct, the employer should investigate whether the employee has violated company policy and carefully consider whether a termination is justified and defensible. There is an emerging body of case law now recognizing that, except in limited circumstances, employees do not have the right to engage in self-help discovery and that employees who do so can be terminated, even if the evidence was gathered to support anticipated or pending claims.
Courts increasingly have rejected plaintiffs' arguments that self-help discovery rises to the level of protected activity that insulates an employee from termination. Initially, courts appeared willing to offer at least some protection to employees, as long as the documents or data were related to his claim and were not obtained through improper means. However, more recent decisions have recognized that an employee's right to pursue a valid complaint or claim does not permit him to violate employers' policies protecting their confidential and proprietary documents and data. As the court explained in O'Day v. McDonnell Douglas Helicopter Co. (1996):
"We are loathe to provide employees an incentive to rifle through confidential files looking for evidence that might come in handy in later litigation. The opposition clause protects reasonable attempts to contest an employer's discrimination practices; it is not an insurance policy, a license to flaunt [sic] company rules or an invitation to dishonest behavior."
As Judge Ellis vividly explained in JDS Uniphase Corp. v. Jennings (2007), although public policies underlying whistle-blower statutes serve an important purpose, they do not allow employees to "pilfer a wheelbarrow full of an employer's proprietary documents in violation of their contract" in pursuit of their claims.
In determining whether an employee's actions in collecting (and often forwarding to counsel) evidence to support his claims constitutes protected activity, courts generally employ a balancing test that weighs the employer's legitimate interest in protecting its proprietary information with the employee's right to investigate and prosecute his claims. Courts must consider numerous competing interests, including: (1) whether the employee obtained the evidence through innocent or improper means; (2) whether the employee's conduct violated a consistently applied company policy; (3) the impact on the company of the possession and disclosure of the evidence; (4) whether the evidence is relevant to the employee's claims; and (5) whether there was a risk that the evidence would be lost if the employee did not remove or retain it.
In Niswander v. Cincinnati Ins. Co. (2007), for instance, the court affirmed summary judgment for the former employer and held that an employee did not engage in protected activity, and was not unlawfully retaliated against, when she was terminated for collecting proprietary company documents and providing them to her attorney for her retaliation suit.
Significantly, the court was not swayed by the plaintiff's arguments that she had "innocently" acquired the documents in the regular course of business. The court noted that the employee was aware of the company's confidentiality policies, but nonetheless reviewed company files in her possession and provided documents she considered beneficial to her claims to her attorneys.
Likewise, in Lynn v. Gateway Unified School District (2012), the court held that a former employee did not engage in protected activity when he downloaded almost 40,000 e-mails from his former employer's server. The court concluded that disqualifying the plaintiff's counsel and forbidding the plaintiff from introducing as evidence any of the documents he downloaded that would have been discoverable in the normal course of litigation were appropriate sanctions for the plaintiff's misconduct, despite the fact that so many were public records. Although the plaintiff argued that he was merely trying to "preserve evidence," the court noted that only about 100 of the 40,000 e-mails were actually relevant to his claims. Moreover, the court reaffirmed in its ruling that "discovery self-help is not a protected activity."
The New Jersey Supreme Court's controversial decision in Quilan v. Curtiss-Wright Corp. (2010), however, demonstrates the risk that an outlier court may find that a termination for engaging in self-help discovery was retaliatory. In Quilan, the plaintiff photocopied over 1,800 pages of confidential company documents that she thought might support her sex discrimination claim, gave them to her attorney, and even used one of the stolen documents during a deposition of her supervisor.
The New Jersey Supreme Court affirmed the trial verdict for the plaintiff, concluding that the plaintiff's use of the document during her deposition was protected activity because: (1) she gave it only to her attorneys, (2) it was directly relevant to her claim, (3) she reasonably believed that the document would not have been disclosed during discovery, and (4) the document's disclosure did not threaten the operation of the company.
So how can employers combat employees' use of self-help discovery to attempt to support their claims or to gain competitive advantage? As an initial matter, require that employees recertify their receipt of, and compliance with, a thorough confidential and proprietary information policy on an annual basis. Additionally, vigorously enforce such policies and regularly monitor employees' use of company systems and databases.
Although you should proceed with caution, if you determine that an employee stole documents or data in violation of company policy, their misconduct may:
In the event that you face a case of this nature, undertake a full investigation of the circumstances surrounding the removal and use of documents or data. Make certain that any action taken against the employee is consistent with company policies and past practices, including the treatment of other employees who have engaged in comparable misconduct.
For instance, consider imaging and investigating violations of the policy each time an employee is terminated and/or implementing monitoring software that notifies you when there are large downloads of data. An employer's conduct in the immediate aftermath of suspected misconductboth with respect to the employee at issue and with respect to other employees who engaged in similar misconduct in the pastwill play a crucial role in shaping the court's view of an employer's actions.
Connie Bertram is head of Cooley's Washington, D.C., employment and labor and government contractor compliance practice groups, and a member of the firm's litigation department.