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Although many, if not most, large companies monitor the e-mail and Internet use of their employees, there still tends to be certain squeamishness on the part of employers in actually using the information. Employers often feel that even though they have provided the computer, e-mail and Internet service, they are somehow breaking the law or violating the employee’s right to privacy by viewing what the employee may have (mistakenly) believed to be private communications.

The 3rd U.S. Circuit Court of Appeals’ recent decision in Fraser v. Nationwide Mutual Insurance Co. should disabuse employers of the fear of reading and using their employee’s e-mail. The decision also provides the 3rd Circuit’s latest discussion of the status of at-will employment under Pennsylvania law.

Independent Contractor

In Fraser, Richard Fraser was an independent insurance agent for Nationwide in the suburbs of Philadelphia. Although Fraser was an independent contractor, he had agreed to sell Nationwide’s products exclusively and he used Nationwide’s computer system for e-mail and other uses. The agreement between Fraser and Nationwide was terminable at will by either party.

Fraser was fired from selling Nationwide’s products in September 1998. He claimed that his termination was caused by his criticism of the company in his capacity as an officer of the Nationwide Insurance Independent Contractor’s Association. He had also filed complaints against the company with the Pennsylvania Attorney General’s Office and had worked to pass legislation that independent insurance agents could be terminated only for “just cause.” These activities, he argued, were protected by public policy. He also claimed that he had been wrongfully discharged. This claim was unsuccessful under state law.

E-Mail Search

Nationwide explained Fraser’s discharge by relying on its discovery that he was undermining the company to its competitors and therefore had been disloyal. Specifically, Nationwide learned that Fraser had drafted letters to two competing companies expressing dissatisfaction with Nationwide and seeking to determine whether the competitors would be interested in acquiring certain of his (and others’) policyholders. The company became concerned that Fraser might also be revealing company secrets to its competitors. Nationwide’s associate general counsel then directed a systems expert to open Fraser’s e-mail in order to view the “to,” “from ” and “ re:” headers for relevant information. Nationwide’s general counsel testified during discovery that the e-mail search confirmed Fraser’s disloyalty. As such, his contract with the company was terminated.

Fraser brought suit against Nationwide, alleging various claims, including the aforementioned wrongful discharge action. He also claimed a violation of the Electronic Communications Privacy Act. He claimed that Nationwide’s actions in accessing his e-mail without his permission violated Title I of the ECPA, which prohibits “interceptions” of electronic communication such as e-mail. He also claimed that the company’s search of his e-mail violated Title II of the act, which creates liability for accessing, without authorization, electronic communication while it is in “electronic storage.”

Interception issue

The primary issue in Fraser’s Title I claim was whether Nationwide had “intercepted” the e-mail when it accessed his e-mails in storage. The 3rd Circuit joined every other appellate court addressing the question in finding that there can be no “intercept” of an e-mail in storage because the ECPA defines the term as requiring that interception be contemporaneous with the communication itself.

As the 11th Circuit noted earlier this year in United States v. Steiger, a case addressing similar issues, “there is only a narrow window during which an e-mail interception may occur — the seconds or milliseconds before which a newly composed message is saved to any temporary location following a send commend. [Under these circumstances], interception of e-mail within the prohibition of [the ECPA] is virtually impossible.”

Fraser also alleged that Nationwide had violated Title II of the ECPA by reading his e-mail. Title II creates liability for a party that does not have authorization to access electronic communication in electronic storage or one that exceeds its authorization to do so. The district court granted summary judgment for Nationwide, finding that the e-mail system did not constitute “electronic storage” as defined by the statute.

The 3rd Circuit affirmed on different grounds, passing on the question of whether the e-mail, which was saved on the server, was in “backup” storage (part of the definition of “electronic storage”). Instead, the court found that Nationwide was the “provider” of the “service” and “service providers may do as they wish when it comes to accessing communications in electronic storage.”

Wrongful discharge rejected

Fraser also claimed that his termination violated Pennsylvania public policy so as to support a claim for wrongful discharge. Fraser’s strongest claim was that he was fired for having filed complaints with the Pennsylvania Attorney General’s Office, complaining of Nationwide’s discriminatory refusal to write auto insurance for unmarried and new drivers.

As it has in the past, the 3rd Circuit viewed the exceptions to Pennsylvania’s at-will doctrine in the narrowest of terms. While Fraser had, in fact, complained about Nationwide to the Pennsylvania Attorney General, he was under no statutory obligation to have done so. As such, he could not claim that his “private whistleblowing” rose to the level of public policy to support a violation of the commonwealth’s public policy.

This is an important decision for employers as a whole and specifically for those in Pennsylvania. The court’s approval of Nationwide’s use of Fraser’s e-mail affirms employers’ legally unfettered access to the e-mail of employees who use their e-mail systems. It is one of the few cases where an employer acknowledged reading e-mail and made the decision to terminate based on information found. Employees, on the other hand, need to understand that what they say on e-mail may as well be put in a memo and laid on the desk of their supervisor as the information can, and sometimes will, be used in making employment decisions.

With respect to the wrongful discharge claim, Fraser had done what he argued his civic duty required: that he report his employer’s alleged wrongdoing “to the authorities.” He claimed that he was terminated as a result of his actions. Without even considering whether Fraser was able to establish a causal connection between his actions and his firing, the court found that without a specific statutory duty to report the alleged wrongdoing, Fraser’s job would not be protected by Pennsylvania public policy.

SID STEINBERG is a partner in Post & Schell’s business law and litigation department. He concentrates his national litigation and consulting practice in the field of employment and employee relations law. Steinberg has lectured extensively on all aspects of employment law, including Title VII, the FMLA and the ADA.

(Copies of the 15-page opinion in Fraser v. Nationwide Mutual Insurance Co ., PICS No. 03-1978, are available from The Legal Intelligencer . Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information. Some cases are not available until 1 p.m.)

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