Safeguarding Trade Secrets In The Information Age

There are no easy solutions to the problem of protecting trade secrets in the information age. But there are definite steps the employer can take, and these include monitoring business equipment and promulgating unambiguous policies.

In the age of instantaneous communication, it is getting harder and harder to keep anything a secret. Every company needs to safe-guard its trade secrets and its business equipment as well. The only way to do this is through specific policies which address use and monitoring of business equipment and maintenance of company trade secrets. Such policies, included in the employee handbook, should be signed by each employee. The company should conduct an orientation at the outset of employment, specifically informing each employee of company policies relating to use of business equipment, monitoring, confidentiality, as well as appropriate behavior in the workplace. This article will discuss notices and training, clearly communicating the employer's intent, expectation of privacy on behalf of the employee, and ways to protect the company's trade secrets.

BALANCING THE INTERESTS

What is the extent of an employee's privacy rights in the workplace and what legitimate right does an employer have to monitor employees in the workplace?

As workplaces have integrated electronic communication and high technology in day-to-day business, and these technologies continue to advance, an employer's ability to monitor its employees has increased. While employers have legitimate reasons to monitor employees, employees increasingly are asserting claims for invasion of privacy in litigation. Federal and state statutes, as well as the common law, provide guidance to employers electing to monitor employees' workplace activities.

Expectations of Privacy: Government vs. Private Employees

The Fourth Amendment of the U.S. Constitution protects citizens from unreasonable searches and seizures. Not specifically referring to the right of privacy, the Fourth Amendment provides in pertinent part that, "the right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated." U.S. Const. Amend. IV. The Supreme Court, however, has consistently interpreted it as preserving the right to privacy. Katz v. United States, 389 U.S. 347, 350, 359, (1967) (holding that the Fourth Amendment "protects people, not places"); Griswold v. Connecticut, 381 U.S. 479, 484-85 (1965).

Public Employees

An expectation of privacy in one's place of work is "based upon societal expectations that have deep roots in the history of the [Fourth] Amendment." O'Connor v. Ortega, 480 U.S. 709, 716 (1987). Searches and seizures by government employers of the private property of their employees are subject to Fourth Amendment restraint. Id. at 715. What is a reasonable search depends on the context with which the search takes place, and requires balancing the employee's legitimate expectation of privacy against the government's need for supervision, control, and the efficient operation of the workplace - judged by the standard of reasonableness under all the circumstances. Id. at 725-26.

Noting that some government offices may be so public that no expectation of privacy is reasonable and that the question must be ad-dressed on a case-by-case basis, the O'Connor Court recalled Katz, quoting: "What a person knowingly exposes to the public, even in his own home or office, is not a subject of Fourth Amendment protection." Id. at 718 (quoting Katz, 389 U.S. at 351). Further, a governmental employee's expectation of privacy depends in large part upon the nature of his or her employment and whether it poses a potential threat to public safety. National Treasury Employees v. Von Raab, 489 U.S. 656 (1989).

Private Employees

Employees of private companies do not have a high expectation of privacy. The Fourth Amendment restrains the conduct of govern-mental agents only, and thus, although it provides privacy protection to public employees, the endorsement of individual privacy rights under the Fourth Amendment does not extend to the employees of private companies. An employer may monitor the workplace for a variety of legitimate business reasons, including maintaining "due diligence" records in regulated industries, assuring a workplace free of discrimination, improving job performance, assuring productivity, and protecting valuable proprietary corporate information.

E-Mail

Although employees assert they have a privacy right in e-mail sent and received on company equipment, the courts have concluded to the contrary.

There is no reasonable expectation of privacy in electronic mail ("e-mail") sent, stored or received at work. Smyth v. The Pillsbury Co., 914 F. Supp. 97 (E.D. Pa. 1996). The computer hardware and software belong to the employer, and so does all the information stored on it. Id. at 101. The Smyth court noted that the e-mail communications were made voluntarily over the company e-mail system and that the company was not requiring the employee to disclose any personal information about himself. Id. Not-withstanding any assurances by the employer that such communications would not be intercepted, no reasonable expectation of privacy could be found. Id. Moreover, the court held that the company's interest in preventing inappropriate and unprofessional comments or even illegal activity over its e-mail system out-weighs any privacy interest the employee may have had in comments made over e-mail. Id.

Trade Secrets

Private employers must inform its employees about policies restricting sending or receiving proprietary or trade secret information over e-mail. If the employer fails to take protective measures, it may lose its legal ability to protect its trade secrets. Employers must instruct employees regarding the types of information the employer deems to be confidential. The employer must forbid the communication of such information over e-mail. Security measures should be in place, such as passwords and user identification information. Employees should be informed that unauthorized use of or access to trade secrets or breach of security measures will result in appropriate discipline. For a more detailed discussion on trade secrets, see the discussion below.

Privacy Rights: A Balancing Test

Privacy rights of employees in private companies have evolved through federal and state statutes, common law and contracts. When considering the issue of privacy rights in the work-place, one needs to balance the employee's right to privacy against the employer's legitimate business interests. The inquiry is formulated as whether the employee had a "reasonable expectation of privacy" under the circumstances. See O'Connor v. Ortega, supra, 480 U.S. at 711-12.

The Electronic Communications Privacy Act of 1986

The Electronic Communications Privacy Act of 1986, as amended, 18 U.S.C. ßß2510-22 ("ECPA"), prohibits the intentional and non-consensual interception of any wire, oral or electronic communication, the unauthorized access of stored communications, or the disclosure or use of any information from an illegally intercepted communication. 18 U.S.C. ß2511. The principal purpose of the ECPA amendments to the federal wiretap law was to extend the prohibitions on unauthorized interceptions to electronic communications, which is broadly de-fined to include e-mail, pager communication and computer data. Brown v. Waddell, 50 F.3d 285 (4th Cir. 1995). Penalties for violating the ECPAcan include criminal penalties, the greater of actual damages plus profits or statutory dam-ages, injunctive and declaratory relief, punitive damages, attorneys' fees and costs.

The ECPA provides three exceptions which permit employers to monitor employees' telephone and electronic communications under certain circumstances: the business extension exception, the consent exception and the ser-vice provider exception. The business extension exception excludes from coverage tele-phone equipment provided by the telephone company and used in the ordinary course of business. Thus, generally, employers can monitor business-related phone calls. Once an employer understands a phone call is personal, however, monitoring must cease. The consent exception requires that there be consent to the interception. Employers must inform employees that their telephone calls will be monitored, not that they may be. Prudence would require the employer to receive written consent from employees. The service provider exception applies to employer-provided phone and e-mail systems and is effective only when the system in question is provided by the employer and that the employer's monitoring activities are to protect the employer's property rights. In sum, the exceptions permit employers to monitor business-related phone calls, to monitor communications when there has been employee consent, and to access stored e-mail transmissions. If any one of these exceptions applies, monitoring can take place.

The Employee Polygraph Protections Act

The Employee Polygraph Protection Act of 1988, 29 U.S.C. ßß2001-2009 (1988), prohibits private employers from requiring or requesting employees or job applicants to submit to a lie detector test. A professionally administered polygraph test may be used, however, in the context of an investigation of employee misconduct, where there is a reasonable suspicion of theft or other illegal conduct. The public sector is exempt from coverage under this Act. 29 U.S.C. ß 2006.

Pending Federal Legislation

The Notice of Electronic Monitoring Act ("NEMA"), legislation which would regulate an employer's ability to monitor the electronic communications of its employees, was introduced simultaneously by the House and Senate in July, 2000. S. 2898; H.R. 4908. NEMA requires employer disclosure of electronic monitoring of employee communications and computer usage in the workplace, and provides a...