- Ralph, a purchasing manager at XYZ company, sends an e-mail over the Internet to a friend, the director of purchasing at Big Inc., in which he comments that XYZ company pads its invoices and robs its customers blind. Six months later, XYZ Company loses the Big Inc. account for reasons unrelated to the e-mail, and the two companies end up in litigation. Then Ralph’s e-mail turns up in discovery, and his company now has to also defend itself against trade disparagement.
- Big Inc., a nationwide company with an extensive computer system, is involved in litigation over a contract with a supplier. The court orders Big Inc. to produce any documents that evidence communication concerning the supplier. Although the e-mails end up having no impact on the litigation, the cost of finding, retrieving and producing these e-mails costs Big Inc. more than $50,000.
- Two employees, John and Mary, are romantically involved and use the company’s e-mail system to send romantic and, at times, sexually explicit descriptive notes. Although John and Mary carefully delete the e-mails as soon as they’re opened, the systems’ administrator happens on several of them while performing normal system maintenance. Soon word of the relationship spreads around the company, John’s wife files for divorce and John sues the company for invasion of privacy.
As these examples illustrate, the digitization of business and personal activities on the job is transforming litigation. Electronic data has become a critical source of discoverable evidence, often tipping the scales in favor of plaintiffs. By learning how to better manage computer data, you can save your company from exposure to liability—including expensive retrieval costs, burdensome searches, unprofitable hours—and million-dollar plus settlements. Human resources managers, therefore, need to work more closely with legal and technology experts to determine what to store, for how long and why.
Indeed, recent lawsuits have redefined the battlefield. A company’s written policies regarding e-mail and electronic data files need to be developed as if they’re litigation liability policies, rather than physical security policies. In the past, HR has focused on use policies and security measures. Today, that’s not enough. Says Heidi L. McNeil, a partner with Phoenix-based Snell & Wilmer LLP: "In-house counsel needs to be involved in developing policies as opposed to delegating this duty [solely] to [in-house] computer experts."
E-mails can land a company in court.
What’s happening today, McNeil explains, is a struggle about how laws that were written before e-mail can be applied in a new situation. Sally D. Garr, an attorney at the Washington, D.C. office of Pillsbury, Madison & Sutro LLP, explains further: "It’s not so much that new laws are developing in this area, it’s the impact that e-mail is having on existing laws." In other words, it’s the way the law is being prosecuted today that can put companies on the defensive. "Old legal rules are getting transplanted into cyberspace," adds Eugene Volokh, cyberlaw expert and acting professor at University of California, Los Angeles. So courts have been making decisions about e-mail—in litigation—the same ways they make decisions about the discoverability of any other type of record.
Says Stuart Smith of Chicago-based Gordon & Glickson P.C.: "Although courts and juries naturally will be less familiar with records produced in electronic form than in paper form, there’s been an increasing acceptance of evidence submitted in electronic form." (Voicemails also are making their way into court, but not at the same rate as e-mails.)
Under the best evidence rule, he says, an original document must be offered at trial unless an exception allows a copy to be introduced. Under the Federal Rules of Evidence, if data is stored in a computer system or similar device, "any printout or other output readable by sight, shown to reflect the date accurately, is an original." (In settings other than a courtroom, the legal requirements for acceptable records may be different.)
E-mail evidence tips the scales of justice.
Having proved successful, using e-mail as evidence has increased dramatically, according to Samuel A. Thumma, of Brown & Bain, P.A. in Phoenix. For example, in 1997, there were at least 28 generally available e-mail cases decided each quarter, with a total of 125 e-mail cases decided during the year. Thus, in 1997, there were more than four times the number of e-mail cases in 1993. "The sole common theme is that e-mail played a significant role in each of these decisions," he says. "It will undoubtedly continue to be a source of smoking guns in a variety of disputes."
The e-mail cases in 1997, he adds, addressed a variety of issues in different areas. But nearly half (58 of 125 e-mail cases) involved employment issues. Others addressed attorney regulation issues; personal jurisdiction issues; procedural issues; criminal law and commercial law contexts.
In one case involving Seattle-based Airborne Freight Corporation, a jury ruled in favor of the plaintiff, John Michael Kelley, after a ten-day trial in 1996. The jury found that Airborne had willfully discriminated against Kelley on the basis of his age in violation of state and federal age discrimination laws. After 19 years of service, Kelley—a high performing regional manager for the Airborne Express subsidiary located in Massachusetts—was informed that March 24, 1993 would be his last day at Airborne. Then 46, Kelley was replaced with a 37-year-old manager, according to court records.
In the course of the litigation, Kelley’s attorney, David G. Hanrahan, routinely asked the company for every type of document and recording that was relevant to the case. Among the findings cited in public records were incriminating e-mails written by the CEO, the executive vice president and Kelley’s supervisor, an area vice president. One of the e-mails was forwarded to HR with the message: "[The supervisor] will be calling you for your help on this one. Hopefully, we have enough data to avoid a wrongful termination." Hanrahan says the e-mail definitely tipped the scales in favor of his client. The district court entered judgment against Airborne in the amount of $3,136,858 on the state claim. (Airborne declined to be interviewed for this article. The company then filed for a rehearing enbanc—a hearing with a full bench—despite the three-judge panel’s opinion. The request has since been denied.)
What’s Hanrahan’s advice to employers? "If a person needs to be terminated, it shouldn’t require a great deal of effort. The simplest termination is for good cause; simply stated and written by the person making the decision." In other words, there were too many cooks stirring the pot. And that’s what led to the unfortunate trail of evidence used against Airborne.
No such thing as ‘delete.’
One of the gravest errors HR managers can make is not educating oneself and employees about the legal perils of e-mail. Up to now, the neglect is understandable. Five years ago, we didn’t even know what the Internet was all about. Today, there’s no excuse. Indeed, the ease of use, perceived confidentiality and perceived lack of permanence can make e-mail a prime medium for improper communications. In fact, the "delete" key doesn’t actually delete, warns John Jessen, president and CEO of Seattle-based Electronic Evidence Discovery Inc. (EED), a pioneer in the field of electronic discovery and litigation risk reduction.
When a file is "deleted" by the computer system, only the directory entry is marked to indicate that the space on the computer’s hard disk is available for reuse. But all of the file’s data is still out on the hard disk until it’s overwritten. Also, some "deleted" files can be only partially overwritten—leaving orphaned fragments of files that haven’t been entirely obliterated, explains Andy Johnson-Laird, a Portland-based forensic software analyst.
How long a "deleted" file survives varies, he adds. It depends on the operating system. "It might be three seconds or three years, depending on the usage of the machine and where on the disk the file originally resided." In short, even if "deleted" files were overwritten, you could have incriminating fragments still lurking in cyberspace that say: "Spandex Queen," "president of the amateur gynecology club," or "The technology is a pipe dream. Let the [customer] have the pipe." (All are real examples.)
Also, ensuring an e-mail message is destroyed is especially difficult because individuals receiving e-mail may save the messages on their own computer hard disks. Most e-mail systems automatically save all messages on backup tapes for a set amount of time. As such, e-mail is both easier to lose track of and harder to destroy than paper documents, explains McNeil.
Companies, therefore, should be more proactive. HR can take advantage of such firms as EED to help manage their e-mail systems and minimize their companies’ chances of landing in court. According to Jessen, EED can address the risk-associated problems early on. Its experts can:
- Eliminate unnecessary data
- Restructure systems to prevent the unnecessary accumulation of data
- Prepare IT and legal departments to respond to electronic discovery requests
- Modify corporate policies, procedures and practices to address the role of electronic information
- Provide software solutions that reduce risk and discovery costs
- Modernize paper-based records’ programs to include electronic data
- Train corporate staff
- Conduct periodic compliance audits.
The safest route for HR is to implement a comprehensive policy for systematic retention, removal and overwriting of electronic records. By doing so, your company will minimize its liability in the future.
Align your retention policy with business needs.
In developing a clear retention policy, HR must coordinate the effort with all appropriate parties. That includes legal counsel, those creating and using records and the IS department. "IS involvement is crucial because the policy must take into account how and where electronic records are stored," says Smith. "You should create categories of records and set appropriate retention periods based on business needs and legal requirements."
With respect to electronic commerce, a company’s policy must ensure that the necessary records are preserved to later authenticate electronic contracts under the applicable laws or contractual agreements.
"As electronic data enters its final stage of life, plans must also be made for its ‘burial,’" he says. Again, IS involvement is crucial to ensure that unneeded records are removed from every location where they reside: laptops, individual PCs, optical media, backup tapes, CDs and floppy disks. Records must be fully destroyed or overwritten—not just deleted as many deleted records can be restored and discovered by experts as explained above.
As companies increasingly provide employee access to the Internet, establishing use policies is only the first step. No policy will be effective without HR providing continual training and education. "Good judgment can’t be reduced into a policy," says Volokh. HR, he advises, should talk to lawyers and put on joint seminars so employees learn the legal ramifications of carelessness and unprofessional business practices when using the features of the Internet. For all its valuable benefits, don’t let the Internet derail your better judgment.
Says Thumma: "Last year’s cases provided only a glimpse into the types of cases that creative litigants and litigators may bring based, at least in part, on e-mail. Only time will tell the bounds of the creative—and oftentimes powerful—purposes to which e-mail can be put in litigation."
Workforce, July 1998, Vol. 77, No. 7, pp. 36-41.