1. Employer Alert: New Duty to Police Illegal Activities in the Workplace Presented by M. Karen Thompson

2. Jane Doe v. XYC Corporation New Jersey Appellate Division December 2005 Employees’ known or suspected illegal activities impose new duty on employers:Employees’ known or suspected illegal activities impose new duty on employers: –Investigate –Act to stop conduct –Report conduct to the authorities –Prevent harm to third parties

3. Facts Somerset County employer with 250 employeesSomerset County employer with 250 employees Computer specialists discover employee accessing pornographic websites with company computerComputer specialists discover employee accessing pornographic websites with company computer No further investigation done over two year periodNo further investigation done over two year period Complaints from supervisors and co-workersComplaints from supervisors and co-workers IT Manager confirms employee’s access, including one site with name suggesting child pornography, but does not access those sitesIT Manager confirms employee’s access, including one site with name suggesting child pornography, but does not access those sites Employee instructed to stop unauthorized actionsEmployee instructed to stop unauthorized actions

4. Facts (Cont’d) Supervisor discovers renewed activities but takes no actionSupervisor discovers renewed activities but takes no action Employee arrested on child pornography chargesEmployee arrested on child pornography charges Videotape and photos of 10 year old stepdaughter recently had been transmitted to child pornography website from company computerVideotape and photos of 10 year old stepdaughter recently had been transmitted to child pornography website from company computer Nude photos of stepdaughter and other children stored on company computer systemNude photos of stepdaughter and other children stored on company computer system More than 1,000 pornographic images downloaded to company computerMore than 1,000 pornographic images downloaded to company computer

5. Lawsuit Against Employer Employee’s wife, and mother of child, files suit against employer in February 2004, claiming:Employee’s wife, and mother of child, files suit against employer in February 2004, claiming: –Employer knew or should have known of employee’s conduct –Employer had a duty to report actions to authorities for workplace crimes –Employer breached that duty, enabling employee to continue activities –Stepdaughter harmed by resultant molestation and photography –Money damages for resulting harm (treatment and care)

6. Trial Court Decision Employer had no duty to monitor its employees’ Internet activities or e-mailsEmployer had no duty to monitor its employees’ Internet activities or e-mails Employer breached no duty by failing to report actionsEmployer breached no duty by failing to report actions Employer lacked affirmative evidence or knowledge of employee’s actionsEmployer lacked affirmative evidence or knowledge of employee’s actions Employer acted reasonably under the circumstancesEmployer acted reasonably under the circumstances Ultimate harm to child not caused by employerUltimate harm to child not caused by employer Complaint dismissedComplaint dismissed

7. Appellate Division Analysis Did the employer have the ability to monitor its employee’s use of the Internet?Did the employer have the ability to monitor its employee’s use of the Internet? Did the employer have the right to monitor his activities?Did the employer have the right to monitor his activities? Did the employer know, or should it have known, that the employee used its electronic equipment for an illegal purpose?Did the employer know, or should it have known, that the employee used its electronic equipment for an illegal purpose? Did the employer have responsibility for conduct outside the scope of employment?Did the employer have responsibility for conduct outside the scope of employment? What action should the employer have taken, once it knew of illegal actions?What action should the employer have taken, once it knew of illegal actions?

8. Appellate Division Analysis (Cont’d) Did the employer have the ability to monitor its employee’s use of the Internet?Did the employer have the ability to monitor its employee’s use of the Internet? –YES because: Employer had already conducted limited investigation of activitiesEmployer had already conducted limited investigation of activities Employer had software that allowed regular monitoringEmployer had software that allowed regular monitoring Employer could have kept a log of sites visited by the employeeEmployer could have kept a log of sites visited by the employee

9. Appellate Division Analysis (Cont’d) Did the employer have the right to monitor his activities?Did the employer have the right to monitor his activities? –Yes, because: Written company policy permitted itWritten company policy permitted it Employee had no reasonable expectation of privacyEmployee had no reasonable expectation of privacy

10. Appellate Division Analysis (Cont’d) Did the employer know, or should it have known, that the employee was using its equipment for an illegal purpose?Did the employer know, or should it have known, that the employee was using its equipment for an illegal purpose? –Yes, because: Employees complained of activitiesEmployees complained of activities Supervisory personnel confirmed access to porn sitesSupervisory personnel confirmed access to porn sites More thorough investigation would uncover child pornography accessMore thorough investigation would uncover child pornography access

11. Appellate Division Analysis (Cont’d) Did the employer have responsibility for employee’s conduct outside the scope of employment?Did the employer have responsibility for employee’s conduct outside the scope of employment? –Yes: Employer can be held responsible for damages caused by criminal conduct if: 1)the employee engages in the conduct on the employer’s premises 2)the employee uses the employer’s equipment 3)the employer has the ability to control the conduct 4)the employer knows or should know there is a reason to exercise control

12. Appellate Division Analysis (Cont’d) Where did XYC Corp. go wrong?Where did XYC Corp. go wrong? –Should have conducted immediate and thorough investigation –Could have terminated the employee –Should have reported activities to law enforcement authorities –Breached dual duties: public policy against possession or viewing child pornographypublic policy against possession or viewing child pornography obligation as employer to prevent its employee from intentionally harming others or creating unreasonable risk of bodily harm to themobligation as employer to prevent its employee from intentionally harming others or creating unreasonable risk of bodily harm to them

13. Obligations Of Employers Prevention of injury to third partiesPrevention of injury to third parties Greater responsibility imposed when illicit activities are suspected or reportedGreater responsibility imposed when illicit activities are suspected or reported –Duty to investigate Duty to act once employer knows or should know of illegal conductDuty to act once employer knows or should know of illegal conduct –Take effective action to stop activity –Inform relevant authorities –Preserve evidence Decision provides authority to take action without fear of employee reprisalsDecision provides authority to take action without fear of employee reprisals

14. Contexts In Which Duty Could Arise Internet piracy/terrorist activitiesInternet piracy/terrorist activities Identity theftIdentity theft Employee privacy violationsEmployee privacy violations Drug dealingDrug dealing Child abuseChild abuse

15. Unanswered Questions If the employer has a computer monitoring policy, how consistently must it be used, if at all?If the employer has a computer monitoring policy, how consistently must it be used, if at all? What is the level of suspicion that will trigger the duty to investigate?What is the level of suspicion that will trigger the duty to investigate? Must the employer access all unauthorized Web sites being visited by its workforce, or only those with suspicious names?Must the employer access all unauthorized Web sites being visited by its workforce, or only those with suspicious names? If the employer has no computer monitoring policy, must it implement one? Should it purchase monitoring software?If the employer has no computer monitoring policy, must it implement one? Should it purchase monitoring software? Policy

16. M. Karen Thompson mkthompson@nmmlaw.com Areas of Practice: Labor & Employment Products Liability Defense Litigation Alternative Dispute Resolution Admitted to Practice in: New York and Jersey State and Federal Courts Education: Rutgers University, J.D. Monmouth University, B.A., magna cum laude