I. Introduction
As many newspaper accounts have shown in recent years, illegal activity in the workplace continues to occur unabated. Many of these problems are entirely preventable, but are occurring for very understandable reasons. With the advent of the "dot-com" revolution, the number of available employees has shrunken dramatically. Employers who would often have dozens or hundreds of applicants for open positions in the past, are now finding they have very few applicants for such positions. When there is a small applicant pool for a position that must be filled immediately, employers are tempted to "settle" and to hire the best person in that small pool, even if that person would not have met the employer’s hiring standards in the past. In some cases, primarily at smaller companies, employers are so anxious to fill a position they do not conduct even a brief background check of new hires.
Even as the applicant pool shrinks, many employers are finding it extremely difficult to retain their employees at reasonable salaries. Competitors often are found raiding each others’ employees, usually with promises of bonuses and/or salary increases. This, in turn, has caused employers to increase their salary levels across the board out of fear of losing employees.
With salary increases pushing employer costs higher, and with increased worldwide competition forcing employers to cut costs in order to stay competitive, two things have happened: (1) Employees are not firing lower level employees who are perceived as somewhat productive because employers are concerned they will not be able to find suitable replacements; and (2) Employers are cutting costs by eliminating the middle managers who, in the past, would supervise lower level employees on the "front lines." It was those middle managers who had previously ensured that every worker was doing his or her job properly, and who would fire employees who either disrupted the workplace or who were even suspected of engaging in illegal behavior. In other words, those middle managers eliminated potential employment problems before they ever occurred.
Those supervisors are now gone. As a result, many workers who would never think of engaging in illegal behavior if carefully supervised, are now tempted because they see there is little hands-on supervision and, to the extent there are supervisors, they are not willing to fire employees for small transgressions. This creates a work environment where illegal behavior is more likely to occur.
II. THE TYPES OF ILLEGAL ACTIVITY THAT OCCUR IN THE WORKPLACE
Illegal activity in the workplace normally will take five forms: (1) Acts of violence or threatened violence against the company’s current employees or customers; (2) Theft of funds from the employer or from the employer’s customers; (3) Use of the Internet to traffic in pornographic materials, including photographs of children; (4) Use of the Internet by employees or by outsiders to harass or threaten employees via their computer workstations; (5) Engaging in trademark or copyright infringement, or in the theft of proprietary information of the employer or of the employer’s competitors. Below, I will briefly discuss the employer’s duty in each of these situations, as well as suggest methods by which the employer can minimize the risk of being held liable for an employee’s illegal acts.
A. Workplace Violence
Crime victimization studies that were conducted between 1992 and 1996 give us some interesting facts to consider. Two million U.S. residents were victims of violent crime in the workplace each of those years. 1.5 million of those incidents involved simple assaults. The remaining episodes included 395,000 aggravated assaults, 51,000 rapes and sexual assaults, 84,000 robberies and 1,000 homicides. Source: U.S. Department of Justice, Bureau of Justice Statistics, National Crime Victimization Studies of 1992-1996.
Only about 12% of these incidents involved law enforcement officers. Almost 15% occurred to retail sales workers, 7% to teachers, and 6.5% to medical workers. More than 35% of the violent incidents were in the "other" category, which would include office workers. 58% of the offenders were identified as white and 29% as black. More than 80% of the offenders were males and 47% of the offenders were over age 30. Id.
These statistics should be a red flag for all employers. Under New Jersey law, an employer has a duty to provide a safe work environment for employees. See N.J.S.A. 34:6A-3. Similarly, if a visitor or contractor is the victim of violence in the workplace, the inevitable lawsuit will often name the employer. Causes of action may include negligent hiring, negligent retention, negligent supervision or negligence in failing to provide proper security. See DiCosala v. Kay, 91 N.J. 159 (1982) (Recognizing torts of negligent hiring and negligent retention of incompetent, unfit or dangerous employees).
Obviously, the best way to avoid a charge of negligent hiring is first to improve the hiring process. Depending on the position, a lengthy written application, followed by one or more interviews and some form of a credible reference or background check, is the very least an employer should require.
The negligent retention or supervision issue is a bit more tricky because employers are cutting their supervisory personnel in order to stay competitive. As long as this situation exists, lower level employees are going to have more room to engage in violence in the workplace. If the employer wants to prevent such illegal behavior in the workplace, it is either going to have to (1) implement electronic and/or computerized methods of tracking worker behavior on a daily basis (often achieved these days by tracking an employee’s use of his or her computer); or (2) re-thinking the current business strategy of reducing costs by cutting middle management to the bone. Most importantly, the employer is going to have to implement and enforce a zero tolerance policy that mandates discipline against any employee who engages, or threatens to engage, in any type of violent behavior in the workplace.
Aside from duties to outsiders, employers also must provide proper security to their own employees. Two areas of increasing concern are domestic violence spilling over into the workplace, and stalking. This makes sense because, while a person can move her residence or change her telephone number, she will still often be found at her job.
Once an employer knows or should know that an employee is facing a credible threat of violence, the employer must intervene to protect the employee. The police should be called immediately and a police report should be prepared. The employer may want to assist the employee to obtain a restraining order which prevents the estranged or ex-spouse, or stalker, from going near the business premises. If these steps are not sufficient, the employer may want to hire a security guard to protect not only the targeted employee, but the entire workforce, from a violent incident.
B. Theft of Funds from the Employer or Employer’s Customers
No employer wants to be the victim of theft by its own employee, but such thefts continue to occur frequently. Once victimized, some employers fire the employee and do not report it to law enforcement authorities, especially if the theft involved a relatively small amount of money or merchandise. Other employers immediately call the police.
In this context, a telephone call to outside counsel is usually in order. Certain employers, such as public companies (pharmaceutical companies, medical providers, security companies, casinos), companies in regulated industries, or companies that handle funds for third parties (brokerage companies, banks, third-party administrators, etc.), may have a legal duty to report such thefts to their shareholders or their clients. Others should have the police involved just in case the employee later falsely claims that he or she was wrongfully terminated.
If the employer fails to handle an employee’s theft properly, there are two scenarios that can be especially troublesome to the employer. First, the employee, once fired, will claim that he did nothing wrong and that he was wrongfully terminated. He may claim instead that he was fired because of his gender, race, or religion, in violation of New Jersey’s Law Against Discrimination. N.J.S.A. 10:5-1 et seq. Second, the employee will claim that (a) he was forced by a company executive to assist the executive in the criminal scheme; or (b) the company executive was the actual thief (or was engaging in some other illegal activity) and the employer retaliated against him in order to conceal the theft. This action, known as a "whistleblower" lawsuit, is recognized under New Jersey’s Conscientious Employee Protection Act. That statute provides as follows:
An employer shall not take any retaliatory action against an employee because the employee does any of the following:
a. Discloses, or threatens to disclose to a supervisor or to a public body an activity, policy or practice of the employer or another employer, with whom there is a business relationship, that the employee reasonably believes is in violation of a law, or a rule or regulation promulgated pursuant to law, or, in the case of an employee who is a licensed or certified health care professional, reasonably believes constitutes improper quality of patient care.
b. Provides information to, or testifies before, any public body conducting an investigation, hearing or inquiry into any violation of law, or a rule or regulation promulgated pursuant to law by the employer or another employer, with whom there is a business relationship, or, in the case of an employee who is a licensed or certified health care professional, provides information to, or testifies before, any public body conducting an investigation, hearing or inquiry into the quality of patient care; or
c. Objects to, or refuses to participate in any activity, policy or practice which the employee reasonably believes:
(1) is in violation of a law, or a rule or regulation promulgated pursuant to law, or, if the employee is a licensed or certified health care professional, constitutes improper quality of patient care;
(2) is fraudulent or criminal; or
(3) is incompatible with a clear mandate of public policy concerning the public health, safety or welfare or protection of the environment. N.J.S.A. 34:19-3.
In contrast, some employers may want to avoid police involvement. Reasons for this may be a fear that the thief will disclose to the police that the employer is violating the law in some way, such as by overbilling customers, by illegal dumping of hazardous waste, or by failing to follow proper procedures under contracts with state or federal agencies.
In either case, it is wise to contact outside counsel to get independent advice from an outside labor and employment attorney in order to get a disinterested opinion concerning the handling of the matter and whether it is wise, or legally required, to notify law enforcement authorities.
C. Use of the Internet to Traffic in Pornography
Federal law prohibits the use of the Internet to traffic in pornography. Most recent federal investigations involve the exchanging or purchasing of photos which depict minors naked and in sexually explicit poses or engaging in sexual acts. In either case, the exchange or purchase of such photos violates federal law. Penalties are very severe, including substantial jail terms and lengthy treatment as a sex offender.
Every employer must protect against the use of its computers to traffic in child pornography. This may involve use of software to prevent certain communications over the Internet. But, in order to protect the employer, there should be written policies distributed to, and signed by, every employee, expressly stating that participation in any communication, or the viewing of any sexually explicit photographs, will result in severe discipline, up to and including dismissal. The policy should also require all employees to report to management any and all conduct which they suspect may be in violation of these policies.
D. Use of the Internet by Employees or by Outsiders to Harass or Threaten Employees via their Computer Workstations
There has been a drastic increase in the use of computers to harass or threaten others. The incidents we most often hear about are in schools, but many of these incidents are now occurring in the workplace.
In order to avoid detection, the perpetrator will often use some method of concealing his identity. Methods may include use of another person’s computer, use of services which agree not to divulge users’ identities, or forwarding the message through other persons’ computers to the target.
Once these messages are received in the workplace and reported to management, the employer should act immediately. First, the police should be notified and asked to investigate the source of any threatening messages. Second, the employer should take steps to prevent the offensive messages from reaching the targeted employee, including blocking messages, changing the targeted employee’s e-mail address, or determining the source of the messages in order to obtain an injunction. If the messages include threats, the employer may have to increase security in and around the workplace in order to protect the employee.
The employer also has to be sensitive to the nature of the computer threats or harassment. If they refer to the targeted employee’s race, gender, national origin, religion or sexual orientation, the employer has a wholly separate set of duties with which it must comply. Otherwise, the employer risks a claim that it condoned the harassment or that it maintained a "hostile work environment" in violation of federal or state anti-discrimination laws.
E. Engage in Trademark, Copyright or Patent Infringement or in the Theft of Proprietary Information
The theft of intellectual property of others is a federal crime. In years past, government entities had no substantial interest in pursuing such claims. However, we are now finding that the federal government is keenly interested in maintaining the integrity of the marketplace. Accordingly, federal law enforcement authorities are targeting for prosecution those individuals or companies who wrongfully convert another’s intellectual property. These prosecutions may involve production of counterfeit goods, such as Gucci luggage, video games, perfumes or pharmaceuticals, see 18 U.S.C. §2320, infringement on a copyright, such as those associated with video games or computer software, 18 U.S.C. §2319, or the outright theft of proprietary information from companies around the world.
The criminal penalties for such violations are severe. A person convicted of reproducing or distributing at least ten (10) copies of a copyrighted work with a total retail value of more than $2,500 faces up to five (5) years imprisonment and a fine of up to $250,000 for a first offense and up to ten (10) years for second or subsequent violations. 18 U.S.C. §2319(b)(1). If an individual is caught trafficking in counterfeit goods he or she can be jailed for up to five (5) years and fined $250,000. If a company is convicted, the maximum fine is $5 million.
III. THE FEDERAL SENTENCING GUIDELINES
Employers have another very good reason to prevent criminal offenses by its employees. An employer can and will be held liable for criminal acts of employees which are in the course and in furtherance of the employer’s interests. Under federal law, all organizations convicted of federal offenses will be sentenced under the United States Sentencing Guidelines ("USSGs").
The USSGs were implemented in order to ensure that organizations found guilty of committing federal crimes were held responsible for their actions. Accordingly, the USSGs require violators to make full restitution to all victims. If the offenses are especially serious, the organizational defendant also can be fined up to $72,500,000. See USSG §8C2.4. Similarly, if an organization is operated for what is primarily a criminal purpose, or primarily through illegal means, fines can and will be imposed "to divest the organization of all its net assets." USSG §8C1.1. (Emphasis supplied).
A sentencing court may actually impose a higher fine in cases where the offense involved any of the following:
1. Risk of death or bodily injury, USSG §8C4.2;
2. Threat to National Security, USSG §8C4.3;
3. Threat to the Environment, USSG §8c4.4;
4. Threat to the integrity of a market, USSG §8C4.5;
5. Official corruption, USSG §8C4.6; or
6. Exceptional organizational culpability, USSG §8C4.11.
Obviously, these fines can be draconian. However, employers can avoid these sanctions under the USSG. First, the maximum potential fine will be reduced if the employer demonstrates that it had in place an "effective program to prevent violations of law" and that the offense occurred despite these company safeguards. USSG §8C2.5(f).
Second, and perhaps most often, an employer can reduce its fine exposure if it reports wrongdoing within the company and cooperates with federal authorities in their investigation of the crimes. However, in order to get the full benefit from that cooperation, the company must meet the following conditions:
1. The organization reports the criminal activity to law enforcement authorities (a) "prior to an imminent threat of disclosure or government investigation" and (b) within a reasonably prompt time after becoming aware of the offense;
2. The organization "fully cooperated" in the investigation of the offense; and
3. The organization "clearly demonstrated recognition and affirmative acceptance of its responsibility for its criminal conduct."
USSG §8C2.5(g).
Finally, an organization found guilty of an offense can reduce its exposure by cooperating against other third parties. Specifically, the court may, upon motion by the prosecution, depart downward from the prescribed fine range if the defendant organization has provided "substantial assistance" in the investigation or prosecution of (a) "another organization that has committed an offense" or (b) an individual not directly affiliated with the defendant.
IV. CONCLUSION
In sum, illegal activity in the workplace can have a substantial impact on the employer. This includes: (a) lawsuits based on negligent hiring and supervision and failure to provide adequate security; (b) financial losses due to employee theft; and (c) criminal liability and the potential dismantling of the employer’s business if an executive of the company is operating the organization in an illegal fashion. When illegal activity is uncovered, outside counsel should be contacted immediately in order to ensure that the situation is properly addressed.
