Know Your Employees – Or Else!

Recent Appeals Court Case Highlights An Employer’s Potential Liability For An Employee Outrageously Overstepping the Bounds

On a dark and stormy night, your employee abuses her access to your electronic data systems and snoops in an insurance database to dig for confidential information.  She succeeds and then turns that secret information over to her convict boyfriend.  The felon then uses it to physically intimidate a witness.  The boyfriend is caught.  Both the employee and her boyfriend confess to their wrongful and criminal actions.  Clearly, the employee was acting outside the scope of her employment and you as the employer cannot be held responsible by the intimidated witness?  Or can you?

The Massachusetts Appeals Court was recently asked this very question.  And just before the new year, it came up with a surprising answer.  That answer creates yet another “rock and a hard place” choice for employers.

The Information, the Intimidation and the Litigation. In the case, Mark Adams v. Congress Auto Insurance Agency, Inc., Bonnie had a long and successful career history with Acme Insurance Agency, most recently as a customer service manager.  In that role, she had access to the data systems of Good Hands.

Good Hands insured Bonnie’s private automobile.  Nine years after Bonnie was hired, she lent her car to her boyfriend, Clyde, who was on supervised release following a federal firearms conviction.  While driving Bonnie’s vehicle, Clyde led police on a high speed chase which resulted in a crash following which he abandoned the vehicle and fled the scene.  Bonnie’s vehicle was totaled and she reported it stolen to the police.  She also filed an insurance claim with Good Hands.

The owner of the vehicle struck by Clyde, Innocent Bystander, also filed a claim through his own insurer who, in turn, asserted a claim against Good Hands.  Somehow, Innocent Bystander was able to identify Clyde as the driver of Bonnie’s vehicle.

Bonnie was not aware of the identity of that claimant.  Using (or abusing) her access to Good Hands’ data systems, Bonnie was able to see the notes in Good Hands’ file and learn Innocent Bystander’s identity and his contact information, including his cell phone number and home address.  Bonnie then turned that information over to Clyde.

The erstwhile Clyde then telephoned Innocent Bystander claiming to be a Massachusetts State Police officer.  He informed Innocent Bystander that the driver of the other car was a “very, very dangerous man with very dangerous friends.”  He also warned Innocent Bystander to do himself a favor and shut up or “you will have issues.”  Clyde’s “friendly advice” was punctuated with choice profanity.

Innocent Bystander immediately reported the threat to the police.  The police visited Acme in an effort to speak with Bonnie, who refused.  Sometime later, Acme terminated the employment of Bonnie for “serious misuse of access to confidential information.”  Bonnie and Clyde were criminally charged and pled guilty to witness intimidation and conspiracy.

Innocent Bystander sued for emotional distress damages, claiming that Clyde’s threat caused him repeated nightmares about the phone call, high anxiety, intrusive thoughts, racing hot flashes, and feelings of detachment.  No doubt expecting to recover nothing from the real culprits, Innocent Bystander named Acme as a defendant on a theory that it had been negligent in allowing and continuing to permit Bonnie access to confidential information as part of her job.

Not surprisingly, Acme argued that it could not have foreseen that Bonnie had an unsavory boyfriend, that she would lend him her car, that the boyfriend would be involved in a high speed crash following a police chase, that Innocent Bystander’s car would be involved in that crash, that Innocent Bystander would make a claim, that Bonnie would misuse her access to confidential information of Good Hands to find out the name and contact information of the Innocent Bystander, that Bonnie would pass that confidential information along to her boyfriend, that her boyfriend would then use that confidential information to pose as a police officer and make threats against Innocent Bystander, and that Innocent Bystander would then suffer emotional distress from that threat.  The lower court agreed that all of this was simply not foreseeable and dismissed the claims against Acme.

What You Don’t Know May Hurt You. Not so fast, the Appeals Court ruled.  There were things that Acme knew about Bonnie prior to the crash that could have put them on notice that she would go bad and precipitate the chain of events leading to Innocent Bystander’s emotional distress.  Two years before the crash, Bonnie (and Clyde) had been arrested in Iowa for possession of illegal firearms.  Bonnie, who admitted the firearms were hers at the time apparently to protect Clyde, was released on bail and returned to work at Acme back in Massachusetts.

More than a year and a half before the crash, the United States Marshals Service arrested Bonnie at Acme apparently for jumping bail.  She returned to work four days later and explained away the arrest as a misunderstanding and that the ongoing proceedings were “not going to affect her ability to work.”  Acme allowed her to return to work without investigating what had happened with respect to the arrest because it did not think at the time that it was germane to her employment.  No doubt part of the rationale was the employer’s respect for the privacy of one of its employees.

In fact, following her bail-jumping arrest, Bonnie had acknowledged responsibility, successfully completed a pre-trial diversion program and had secured dismissal of the indictment against her as a result.  It was not until seven weeks after the criminal proceedings had been dismissed that Clyde went on his fateful joy ride.

Reversing the lower court’s dismissal of Innocent Bystander’s claims, the Appeals Court held that a jury should be given the opportunity to decide whether Acme had breached its duty to Innocent Bystander.  Despite the outrageous behavior by Bonnie and Clyde, it is a question for a jury to decide whether Acme (a) acted as a reasonable employer would have or (b) should have done more to investigate Bonnie (and arguably her relationship with Clyde) and conclude that her access to the Good Hands’ database and confidential information should have been cut off.

Between the Proverbial Rock and a Hard Place – What Is an Employer to Do? This case presents a dilemma for employers. On the one hand, employers are encouraged to respect their employee’s privacy and give those who have had trouble with the law a second chance.  On the other hand, this case stands for the proposition that an employer who does just that can find themselves in trouble.  How can those two principles co-exist?  More importantly, is there any real world advice that can help an employer negotiate this mine field?

The root of the holding in this case was that the employee’s job put her in a position to cause harm to the public because of her access to confidential information that she could misuse.  The Court likened it to putting the keys to residential apartments in the hands of a property manager who had a history of violence.  If the employer has some inkling of that past history, it cannot turn a blind eye to the potential harm that could result.  In this case, the Court took that concept of physical threat and expanded it to the realm of harm caused by misuse of information.  Where an employer is a gatekeeper of such information, it must be vigilant in knowing who it employs to keep that gate.

Answers to the following questions may help employers navigate these choppy waters:

  1. What is the job? Does the job put the employee in a position where he could pose a threat to the public if he proves to be a ne’er-do-well?
  2.  What does an employer know? If the position is one where there is a risk to the public, has anything come to the attention of the employer that suggests that the employee should not be trusted to keep the gate honestly? If so, how can the employer determine whether the employee’s history suggests such a risk?
  3.  What can an employer do? If the history does suggest that heightened risk, are there intermediary measures that can be taken to reduce or eliminate that risk? Can access be curtailed or limited? Can the employee be more closely monitored? Is termination warranted if there is no other way to manage the risk?

In an area fraught with danger, this step-by-step approach is the best prescription to try to minimize the risk to the public and, in turn, the employer. It also provides the best defense to a claim that the employer failed to act reasonably under the specific circumstances.

About Rich Van Nostrand

Rich is a partner at the Firm. He has extensive experience in general civil trial work, with concentrations in business, commercial and employment litigation. He provides advice and representation in a variety of business and commercial litigation matters, including shareholder disputes, corporate dissolutions, intra- and inter-company disagreements, and intra-family business disputes. Rich also provides ongoing employment litigation and counseling services to numerous clients in the private, public and higher education sectors. In the private sector, Rich represents clients in a broad range of industries including health care, professional services, high technology, industrial and manufacturing. In addition, he is also frequently selected by litigants to assist in the resolution of their disputes as an independent arbitrator or mediator.
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