Wednesday, June 25, 2008

Protected activity does not protect theft of confidential information

Let's suppose an employee opts-in to a class action lawsuit against your company. Let's also suppose after she opts-in to the class action, she believes that her supervisor begins retaliating against her by treating her poorly. As part of discovery in the class action, she provides documents to her attorneys. Those documents not only include documents that might relate to the class action and potential retaliation claim, but also confidential customer files that she believes will jog her memory about specific instances of retaliation. The employer has a Privacy Policy, a Code of Conduct, and a Conflict of Interest Policy, all of which expressly prohibit the disclosure of confidential information, including customer information. When the employer learns of the delivery of the confidential customer files, it terminates her for violating company policy.

Does the delivery of the confidential files constitute protected activity for which the employee cannot be terminated? According to the 6th Circuit in Niswander v. Cincinnati Insurance, decided yesterday, the answer is it depends, but in this case no.

First, the Court analyze the dissemination for whether it constituted "participation" in protected activity. Because the confidential documents were not relevant to her claim, the Court concluded it did not:

This is not a case of an employee mistakenly or inadvertently delivering confidential information out of a belief that the documents provided direct proof of discrimination. Instead, Niswander delivered numerous documents, some of which were copies of e-mails from her supervisors related to her job performance, but some of which were claim-file documents that included confidential personal information of insured individuals....

Our analysis would be different if the documents that Niswander had given to her lawyers, and that they in turn produced to CIC, had reasonably supported her claim of gender-based pay discrimination—or if she reasonably believed that they did.

[C]oncluding that Niswander’s conduct here is protected participation ... would provide employees with near-immunity for their actions in connection with antidiscrimination lawsuits, protecting them from disciplinary action even when they knowingly provide irrelevant, confidential information solely to jog their memory regarding instances of alleged retaliation.

The Court also analyzed whether the dissemination qualified as "opposition" to an unlawful employment practice. The Court laid out 6 factors critical to its determination as to whether the dissemination of the documents was "reasonable" and therefore worthy of protection:

  1. How the documents were obtained.
  2. To whom the documents were produced.
  3. The content of the documents.
  4. Why the documents were produced, including whether the production was in direct response to a discovery request.
  5. The scope of the employer’s privacy policy.
  6. The ability of the employee to preserve the evidence in a manner that does not violate the employer’s privacy policy.

The Court found that the factors generally weighed against Niswander:

Although employees deserve protection when they make reasonable attempts to preserve evidence of illegal employment practices, including discrimination and retaliation, “we are loathe [sic] to provide employees an incentive to rifle through confidential files looking for evidence that might come in handy in later litigation.” To hold in favor of Niswander would turn the opposition clause into “a license to flaunt [sic] company rules or an invitation to dishonest behavior.” (quoting O’Day v. McDonnell Douglas Helicopter Co. (9th Cir. 1996)).

This case underscores the importance for employers to have clearly written confidentiality and other policies to govern employee ethics. The disclosure of confidential materials could very well be transformed into protected activity if the employer does not take active steps to protect the documents' confidentiality.

Moreover, businesses must also act swiftly and decisively when discovering a breach of confidentiality by any employee. Separate from being smart business, consistent enforcement diffuses any claim by an employee like Niswander of pretext - that she was treated differently than employees who breached policy but who had not filed a lawsuit.