United States: The Legal Risks Of Monitoring Employee Conduct

Investigating suspected employee theft, monitoring telephone usage, and random drug testing are just a few of the common practices used by employers to increase productivity and ensure safety in the workplace. Employers are well aware that such actions may expose them to claims for breach of contract if they depart from established employment policies, disparate treatment claims under Title VII if they treat similarly situated employees differently on the basis of a protected characteristic, and emotional distress claims if they do almost anything that upsets an employee.

In addition to these common claims, however, such employer action may implicate a number of privacy issues. Increasingly, employees have relied on a variety of privacy protections as yet another avenue for asserting claims against employers. The most common claim asserted is invasion of privacy, sometimes called "intrusion upon the seclusion of another."

The employee privacy area can be difficult for employers to navigate because cases generally turn upon whether an employee had a reasonable expectation of privacy while engaging in the act that is being monitored by an employer, and whether the employer’s means of monitoring was unreasonably offensive. As one might expect, it is difficult to predict what expectations of privacy courts will deem to be reasonable and what means of investigation they will find unreasonable. Analyzing some of the most recent court decisions in this area does, however, offer some guidance.

In a recent Illinois case, the court found that an employer may have unreasonably intruded upon its workers' privacy rights when it hired undercover investigators to pose as employees and report their observations to management.¹ The employer, K Mart, suspected that employees were stealing, vandalizing merchandise, sabotaging operations, and using and selling drugs in a distribution center where some 500 people were employed.

To identify the responsible individuals, K Mart hired two private investigators to work undercover at the center, mingle with employees, and periodically submit confidential reports to the general manager of the center. K Mart assigned one investigator to focus on theft, sabotage, safety, and drug use. A second investigator was also asked to report any evidence of theft or drug use.

The trial court granted K Mart's motion for summary judgment on the employees' invasion of privacy claim, finding that there was no unauthorized intrusion because the employees voluntarily disclosed their personal information in conversations with the investigator-employees. Although a voluntary disclosure of private information will normally defeat a claim for invasion of privacy², the Illinois appellate court reversed the trial court, finding that the conversations were not truly voluntary because they were induced by deceptive means³.

Accordingly, the court found that the employees had a reasonable expectation of privacy in their conversations with co-workers, and it was a question of fact as to whether the unauthorized intrusion into matters relating to their private lives would be offensive or objectionable to a reasonable person⁴.

Note that the court did not find that undercover investigations were per se unreasonable intrusions into employees' privacy expectations. Instead, it focused on the fact that the investigation exceeded the limits of a legitimate business purpose, such as reducing theft, vandalism, and drug use in the workplace.

The evidence showed that, despite the specific instructions given by K Mart, the two investigators included in their reports information about the criminal conduct of employees’ children; incidents of domestic violence; impending divorces; sexual conduct of employees, including the frequency and the gender of sex partners; employment plans, such as, which employees intended to quit without giving notice and which employees were looking for another job; employee complaints about the employer; and employee health problems, such as who had prostate cancer and who was suspected to be an alcoholic.

The court noted that even though K Mart admitted that it had no business purpose for gathering such information, it never instructed the investigators to change their practices or exclude such highly personal information in the reports. Accordingly, it appears that an employer would not be intruding upon an employee's reasonable expectations of privacy if such an undercover investigation is narrowly tailored to discover information solely limited to legitimate business needs.

Another recent case out of Texas further illustrates that courts will not find an employer liable for invasion of privacy when the investigation has a direct relation to business purposes and uncovers information related to that interest. In Oyoyo v. Baylor Health Network, a federal court entered summary judgment for the employer, finding that the employee had no legitimate privacy interest in her use of Baylor's office telephone⁵. After multiple meetings with the plaintiff regarding her performance, during which she was warned to limit personal telephone calls to her break periods, the employer began examining her telephone records and monitoring her calls.

The court found that Baylor's policy of limiting the use of its phones for business purposes only was a valid concern, and that its investigation and monitoring of plaintiff was reasonable and justifiable as a matter of law⁶. The court also held that the plaintiff's manager did not invade her privacy by photocopying the plaintiff's personal calendar on which plaintiff had written derogatory remarks about the manager. The court found that because the calendar was hanging on a wall, the plaintiff had not made any effort to keep it private, and thus, had no expectation of privacy that was violated by the manager's actions⁷.

In the area of employee surveillance, the courts have also followed a pattern of determining liability by weighing the employer's business needs against the employee's privacy expectations. In Delaware, a federal court used a five-part test to decide whether firefighters' privacy rights were violated due to a supervisor being placed in the same room with each individual to monitor him or her when the individual provided a urine sample for random drug testing⁸. Under the balancing test, the court looked at 1) the degree of the intrusion, 2) the context, conduct, and circumstances surrounding the intrusion, 3) the employer's motive for the intrusion, 4) the setting in which the intrusion occurred, and 5) the expectations of those whose privacy was invaded⁹.

The court found that the employer's motive was to insure the integrity of the sample and that the danger of tampering was a significant concern that warranted monitoring. The court next examined the circumstances, setting, and degree of the intrusion, and found that it was no more intrusive than required because the monitor did not directly watch the individual but only generally observed his or her movements.

Weighing these factors, the court ruled for the employer, finding that it used the least intrusive means to satisfy its business concerns. The result may not be applicable, however, because the court found that firefighters did not have the same expectation of privacy as ordinary individuals because they work in a highly regulated industry and are charged with protecting public safety. . However, the rule that intrusions into privacy should be no more extensive than required to satisfy business needs should be a guiding principle for all employers contemplating investigations or surveillance.

In another surveillance case, the employer lost on summary judgment because the means used by the employer to monitor for suspected employee theft was not as limited as it could have been, and inadvertently captured on video employees receiving medical examinations in a nurse's office¹⁰. In that case, the employer placed a hidden video camera in the ceiling tiles of the nurse manager's office after learning from security personnel that items were disappearing from the office. Although the employer denied knowing that medical examinations occurred there, the court found that there was a question of fact regarding whether the employer should have known, because at least one nurse supervisor was aware that exams occurred there¹¹.

The court further found that because the employer used a camera with a wide angle lens instead of, for example, simply pointing the camera at the entrance to the office to determine who entered and exited, a question of fact existed regarding whether the employer used the least intrusive means to observe activity in the room. As a result, the court found that an issue of fact precluded summary judgment about whether a reasonable person would find surveillance highly offensive where videotapes possibly included employees receiving sensitive medical treatment in various states of undress.

While the typical invasion of privacy claim brought by employees involves some kind of allegation that the employer's monitoring or investigation was unreasonably intrusive, plaintiffs have begun adding an invasion of privacy claim to a sexual harassment lawsuit in which they allege the same conduct that constituted the alleged harassment also violated a personal zone of privacy. In four recent cases, the courts rejected this attempt by the plaintiffs to add another state law tort claim to their Title VII sexual harassment lawsuit.

In Pospicil v. The Buying Office, a federal court in Georgia refused to recognize a claim for invasion of privacy that was based on allegations that the same conduct underlying the plaintiff's sexual harassment claim also constituted an invasion into the plaintiff's "psychological sanctity."¹² In that case, the plaintiff sued her employer for sexual harassment alleging that a supervisor told sexual and other off-color jokes, used vulgar language repeatedly, and used sexual innuendo in conversations with her.

The court found that these allegations did not support a cause of action for invasion of privacy because they did not involve any physical invasion or any prying into the plaintiff's personal affairs.¹³ The court also found that the plaintiff could not establish a claim for invasion of privacy based on a theory of being portrayed in a false light when the defendant contacted her new employer and referred to the plaintiff as a "psycho," because the expression was merely the supervisor's opinion and thus was incapable of being true or false for purposes of evaluating whether it portrayed her in a false light.¹⁴

Following the same reasoning, two other courts rejected claims for invasion of privacy based on the same facts underlying a harassment suit. In Benn v. Florida East Coast Railway Co., the court found the plaintiff's allegations that her coworkers placed a dildo in her work space, left a sanitary napkin stained with ketchup in the cafeteria, made comments about her breasts, and had sexually explicit pictures and drawings hanging at the work site did not support a claim for invasion of privacy.

The court found that none of the allegations involved an offensive touching of the plaintiff or that any other zone of privacy in the workplace, such as the women's bathroom, was invaded.¹⁵ Harsh names, bad manners, and insulting conduct in public work areas are insufficient to constitute a prying or intrusion to create a claim for invasion of privacy.¹⁶

Even where an employee alleged that some of her managers touched her and rubbed against her in a sexual manner, in addition to using profanity and vulgar language, and taking controlled substances at work, a Texas court found that the allegations failed to establish a claim for invasion of privacy, which requires an invasion into a person's property or an intrusion into private affairs.¹⁷

Finally, the Tenth Circuit affirmed summary judgment for an employer on a claim of invasion of privacy based on allegations of sexual harassment that included coworkers asking the plaintiff about her sexual preferences. The court found that requests for information that reveal nothing do not constitute an invasion of privacy and that liability only arises when an unwelcome invasion by physical or other means "actually gleans private information."¹⁸

While the scope of an investigation can implicate privacy concerns, the manner and means of investigating employees can raise issues under other laws. For example, the Employee Polygraph Protection Act (EPPA)¹⁹ was recently used by the plaintiff in Veazey v. Communications & Cable of Chicago to bring a claim against his employer after he was fired for insubordination.²⁰ The plaintiff was suspected of having left a hostile and threatening message on a co-worker's voice-mail. During its investigation, the employer asked the plaintiff to read a transcript of the message into a tape recorder. After the plaintiff twice refused to read the transcript, the employer fired him.

The EPPA makes it unlawful for employers to use lie detector tests, and further prohibits the discharge or discipline of employees who refuse to submit to such tests.²¹ The statute contains a broad definition of what constitutes a lie detector test, including a polygraph, a voice stress analyzer, a psychological stress evaluator, and any other similar device that is used or generates results that are used to determine the honesty or dishonesty of an individual.²²

As a result, the Seventh Circuit reversed the district court's dismissal of the plaintiff's case. Although use of a tape recorder alone to compare voice samples would not violate the EPPA, the court found that the plaintiff was entitled to proceed with his case to determine whether the employer intended to use the recording in conjunction with another device covered by the EPPA to decide whether the plaintiff was lying when he denied leaving the threatening voice-mail.²³

The Fair Credit Reporting Act (FCRA), which usually only comes into play when employers conduct background checks of prospective empolyees, has recently been used by plaintiffs in an attempt to get the results of investigations which form the basis of employment decisions. Plaintiffs have asserted that the results of investigations conducted by attorneys hired by the employer to investigate the plaintiff constitute "consumer reports" and, therefore, argue they must be furnished with a copy.

Under the FCRA, a consumer report is defined as "any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer's eligibility for . . . employment purposes."²⁴ Because the FCRA specifically excludes from this definition any "report" that contains information solely about the "transactions or experiences between the consumer and the person" reporting, an employer's internal investigation is not covered by the FCRA.²⁵

However, plaintiffs have alleged that when the employer hires outside counsel or other consultants, the results of their investigation should be disclosed pursuant to the FCRA. The key questions to be asked when this argument is advanced are 1) is the report used to make an employment decision, and 2) does the outside investigator come under the definition of a "consumer reporting agency?"²⁶

In two recent cases where plaintiffs attempted to get such reports, the courts found that the FCRA did not entitle the plaintiff to be furnished with copies of the results of the investigation. In Robinson v. Time Warner, Inc., the employer hired outside legal counsel to investigate a charge of race discrimination.²⁷ The court found that the attorney's report was prepared in order to give legal advice to the employer, not to evaluate the plaintiff and making an employment decision regarding him. Accordingly, the court found that it was not a "consumer report."²⁸

In Friend v. Ancillia Systems Inc., the employer hired outside legal counsel, and the attorney hired an outside accounting firm to investigate the plaintiff to determine whether there was cause for his termination.²⁹ The court found that the plaintiff was not entitled to the reports prepared by the law firm or the accounting firm because there was no evidence that either "regularly engages in the practice of assembling credit information" and therefore, neither was a "consumer reporting agency" as defined by the FCRA.³⁰

The early results of plaintiffs' attempts to obtain the notes and reports prepared by outside counsel or consultants suggest that the courts will restrict the application of the FCRA and refuse to compel the disclosure of such investigative findings. Not only will outside counsel likely fall outside the definition of a "consumer reporting agency," the attorney work-product privilege and the attorney-client privilege will offer strong protection against the disclosure of any notes, discussions, or other materials prepared by counsel and discussed with the employer. Thus, it appears unlikely that the use of outside counsel to conduct investigations will result in the compelled disclosure of counsel's findings to a plaintiff.

The cases reveal a consistent theme for invasion of privacy claims in an employment context. Before investigating or monitoring employee activity, employers should identify the specific business needs they hope to achieve. After identifying those limited needs, they should choose the least intrusive manner by which that information can be obtained and take care not to inadvertently gain extraneous private information about employees.

1.See Johnson v. K Mart Corp., 311 Ill App 3d 573, 723 NE 2d 1192 (1^st D 2000).

2.Id, 723 NE2d at 1196.

3.Id.

4.Id, 723 NE2d at 1197.

5.2000 WL 655427 *7 (N.D. Tex).

6.Id.

7.Id.

8.See Wilcher v. City of Wilmington, 60 F. Supp.2d 298 (D. Del. 1999).

9.Id, 60 F Supp 2d at 303.

10.See Acuff v. IBP, 77 F. Supp.2d 914 (C.D. Ill. 1999)

11.Id, 77 F Supp 2d at 923.

12.71 F. Supp 2d 1346, 1361 (N.D. Ga. 1999).

13.Id.

14.Id, 71 F Supp 2d at 1362

15.1999 WL 816811, *8 (S.D. Fla.).

16.Id.

17.See Shadid v. HCH Enterprises, Inc., 1999 WL 202581, *4 (N.D. Tex).

18.See Pascouau v. Martin Marietta Corp., 1999 WL 495621, * 14, 185 F3d 874 (Table) (10th Cir).

19.29 U.S.C. § 2001 et seq.

20.194 F3d 850 (7th Cir. 1999).

21.29 USC § 2002.

22.29 USC § 2001(3).

23.See Veazey, 194 F.3d at 858-60.

24.15 USC § 1681a(d)(1).

25.See 15 USC § 1681a(d)(2)(A)(i); Friend v. Ancillia Systems Inc., 68 F. Supp 2d 969, 974 (N.D. Ill. 1999).

26.A consumer reporting agency is defined as "any person which, for monetary fees, dues, or a cooperative non-profit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information...on consumers for the purpose of furnishing consumer reports to third parties." 15 U.S.C. § 1681a(f).

27.187 FRD 144 (SD NY 1999).

28.Id, 187 FRD. at 148, n. 2.

29.68 F. Supp. 2d at 974.

30.Id.