Whatever Happened To The Good Old Days When Employees...

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By: Richard G. Vernon

. . . simply downloaded pornography from the Internet?

Although the precise origin of the old adage, “No good deed goes unpunished”, may be unknown, employers are all too often aware of its applicability, where employees are involved. This is particularly true where employers try to establish reasonable policies with respect to employee Internet usage at work. Some employers prohibit personal use of their computer systems altogether. Whether this is effective in ensuring that employees only access the Internet for work purposes can only be ascertained by the employers constantly monitoring employee computer usage. Other employers believe that it is not practical or possible to prevent employees from logging onto their personal e-mail accounts or occasionally surfing the web. These employers are more likely to allow some personal Internet use, generally imposing some limitations such as only allowing access during non-work hours or providing only for “reasonable” personal use.

It is difficult to determine which of these approaches is more effective. What is not difficult to discover, however, is the extent of employee misuse of their employers’ Internet connections. In 2005, America Online and Salary.com conducted a survey which disclosed that the average worker frittered away 2.09 hours per 8-hour workday, resulting in an overall cost to American employers of $759 billion per year on salaries for which real work was expected, but not actually performed. Certainly not all of this was attributable to misuse of employer Internet connections, but nearly 45% of more than 10,000 people polled cited web surfing as their number 1 distraction at work. According to other sources, accessing sexually explicit, gambling, gaming, auction, and social networking websites are among the most frequent misuses of employer computer systems.2

Where employees visit and download materials from pornographic or other sexually explicit websites, employers face additional problems, beyond the lost employee time. Sexual harassment claims, for example, may result from employees seeing objectionable materials that are being viewed by other employees, particularly where supervisors are the offending individuals. Similarly, downloaded porn or, for example, offensive cartoons that are seen by unintended viewers may also provide the basis for hostile environment sexual harassment claims.

All of these consequences suggest the need for employers to adopt, publish, and implement fair policies under which they may, and do, consistently monitor employee computer use. While some may argue that this smacks of “Big Brother watching”, the “2007 Electronic Monitoring & Surveillance Survey” by the American Management Association (see footnote 2) reflects that a growing majority of American employers are retrieving, recording, and reviewing employee communications to and from their work computers. The economics and potential liability are too great to do otherwise.

If these potential issues were not enough, there is a new danger for employers who do not take effective steps to prevent their employees from downloading on-line materials. The new danger involves employees downloading and frequently, distributing recorded music files. On February 28, 2008, sixteen record label companies filed suit in federal district court in New Jersey. This was, what appears to be, the most recent in a number of similar lawsuits filed by the Recording Industry Association of America (RIAA) and various recording companies against a variety of employers whose employees have downloaded music by means of company computers.3

The original defendants in the New Jersey suit are 26 “John Does”, that is, 26 unidentified individuals who are likely employees at one or more companies. They are accused of violating federal copyright laws by downloading and distributing copyrighted sound recordings owned by the plaintiff companies. The entity that was served with the complaint in this matter was Comcast, which is the Internet Service Provider (ISP) through which all of the downloads in question took place. Once the plaintiffs have learned the names of the offending employees’ employers through the discovery process, the suit will almost certainly be amended to bring in those employers as defendants. In pursuing the employers, the plaintiffs are taking the position that the employers’ failures to have adequate steps in place to prevent the illegal downloads make the employers equally liable for the illegal activity.

In the Electronic Age we live in, the courts are trying to stay current, and they have developed two primary theories of copyright infringement liability that come into play in these kinds of situations. Each is a species of so-called “secondary” copyright liability, where the employee is the primary, or “direct” infringer, and the employer, despite not participating in the direct infringement or requiring it as a function of the employee’s job, is nonetheless held secondarily liable for the infringement on the theory that the employer contributed to the infringe¬ment or failed to stop it. These are court-made doctrines, premised on traditional notions of respondeat superior (also called the “Master-Servant Rule”), under which an employer is responsible for the actions of employees performed within the course of their employment.

The Copyright Act itself does not contain a cause of action for liability by anyone other that the actual infringer.

One of these theories provides for a cause of action “for contributory liability” which applies to “one who, with knowledge of the infringing activity, induces, causes or materially contributes to the infringing conduct of another, and who thus may be held liable as a contributory infringer.” To assert a claim for contributory copyright infringement, a plaintiff must assert that the defendant (1) knew of, and (2) substantially participated in the alleged infringement. Significantly, the “knowledge” prong includes so-called constructive knowledge of the infringement (the employer knew or should have known about the infringement), and the “participation” prong arguably includes merely supplying the means (i.e., employee computers) to carry out the infringement. Employers who ignore telltale signs of employees’ file-sharing do so at their own risk, and the ostrich defense is unavailing.

The second cause of action is vicarious liability, which also has a two-prong test. It must be shown that the defendant employer has both: (1) “the right and ability to supervise the infringing conduct,” and (2) “a direct financial interest in such activities.” While it is difficult to imagine that an employer would reap a financial benefit from an employee who downloads music rather than doing his or her job, there is an argument to be made (and some supporting case law) that when an employee-employer relationship exists, the employer is responsible for the employee’s direct infringement under traditional notions of respondeat superior discussed above, regardless of whether a financial benefit can be shown. Under this approach, an employer could be on the hook for an employee’s violation of copyright law, even if it did not benefit from the infringement. 4

In the good old days, then, it was internal concerns -- economic necessity and a desire to avoid internal sexual harassment and related claims -- that prompted employers to take steps to prevent their employees’ misuse of company computers. More recently, employers are facing outside threats from record label companies, the RIAA, and others which are seeking to impose an even greater obligation on employers, that is, to prevent downloading and peer-to-peer (P2P) file sharing by employees using company computers.

1“Wasted Time At Work Costing Companies Billions”, In, July 11, 2005, discussing the findings of the AOL/Salary.com study: http://www.inc.com/news/articles/200507/workers.html
2 See, for example, “2007 Electronic Monitoring & Surveillance Survey”, press release, American Management Association, February 28, 2008: http://www.amanet.org/news/1473.aspx; see also “Excessive Indulgences: Personal Use of the Internet at the Department of Interior”, a report by the Department of Interior’s Inspector General, September, 2006. (Although the report apparently may not be directly accessed, the reader may Google “amount of time lost personal employee internet usage” and find the report as the seventh listed item on the first page of Google results.)
3 For a discussion of the issue of the rights of on-line users, see the website of the Electronic Frontier Foundation (EFF): http://www.eff.org/about . In particular, see: http://www.eff.org/wp/iaal-what-peer-peer-developers-need-know-about-copyright-law
4 A great deal of credit (and my thanks) is owed to two attorneys R. Bruce Rich and Todd Larson of Weil, Gotshal & Manges, New York, New York. Bruce heads Weil Gotshal’s Intellectual Property and Media practice, is a nationally recognized expert in intellectual property law, and helped found the Firm’s pre-eminent music licensing practice. Todd is an associate in the Firm’s Litigation and Regulatory Departments and works with Bruce. I thank them both for providing the information in this and the preceding two paragraphs and for walking me through the complex IP area in which they work.

Rick Vernon c-chairs Lerch, Early & Brewer’s Employment and Labor Law practice. He has been named by the Washington Business Journal as 1 of 5 finalists in its “Top Washington Lawyers” Employment Law category. He also has been by Washington SmartCEO Magazine as one of the Greater Washington Legal Elite. Rick may be reached at 301-907-2818 or rgvernon@lerchearly.com.

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