Methods for Preventing Employee Theft & Embezzlement in the Digital Age

Presented by:

Joel J. Greenwald, Esq.

June 12, 2012

630 Third Ave. 15th Fl. New York, NY 10017 212-644-1310

jg@greenwaldllp.com www.greenwaldllp.com

30 Ramland Rd. Suite 201 Orangeburg, NY 10962 845-589-9300

Non-Compete Issues More Prevalent

Employee turnover
Voluntary and involuntary much more likely now
Especially with sales personnel

Legal trends
Restrictive covenants are more prevalent especially for salespeople (depends on state law)
Enforceability, however, often depends on customization and how narrow

Technology
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Theft is as easy as push of button

 Non-compete agreements

Non-Compete Agreements and Other Restrictive Covenants

Reasonable in geography, duration, scope Must be in writing and protect legitimate business interest Should only be in writing and signed by key employees

Non-solicitation agreements (employees and clients)

More enforceable prevents most harm Should only be provided to and signed by key employees

Confidentiality agreements
Should be signed by all employees Defines proprietary information (trade secrets)
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* Boilerplate vs. specifically tailored agreements

What is the Remedy?

Injunction
TRO

Money damages
Hard to quantify
Lost business Lost profits

Additional Causes of Action Available to Employer

Examples of other causes of action against employee

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Misappropriation of Trade Secrets Common Law Duty of Loyalty Legal right to Protect Against Unfair Competition Protect Against Conversion of Property Protect Against Outright Theft

Computer Protection
Have a snapshot taken in certain circumstances as employee leaves

Monitoring Your Employees

I can read any email my employee sends or receives

True or False

Why Do Employers Implement Electronic Monitoring and Workplace Surveillance Systems?

To prevent theft To improve productivity

How Does Employees Legal Right To Privacy Interact With An Employers Right To Monitor Workplace Activity?
Courts balance the employees expectation of privacy against the employers need for control and operation in the workplace Courts often distinguish between the employees work-related activities (less privacy), and employees private and personal activities in the workplace (greater right to privacy)
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How Much Privacy Does An Employee Have A Legal Right To Expect In Electronic Communications on the Computer?

Under federal and most state law, employer can monitor:

Activity on Company-owned equipment (URLs/ email addresses contacted, times spent) for all communication Content of business-related e-mail on Companyowned equipment
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Email/Internet Policy
What an email/internet policy should contain:
Email procedures All email is property of employer no expectation of privacy
Employer has right to monitor (get consent) Offensive, harassing emails are prohibited Passwords shall not be made available to others

Internet procedures Not for personal use Careful about postings Offensive or harassing messages are prohibited
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What Are The Legal Limitations On Employers Use Of Video Cameras For Surveillance In The Workplace?
Under many state laws, it is illegal (without a court order) to make any video recording in any restroom, locker room, or other area that has been designated by the employer for changing clothes Dont record audio! Selective surveillance e.g., positioning a hidden camera over the desk of one individual employee may be discriminatory
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Can An Employer Monitor The Movement Of Mobile Employees Via Global Positioning Systems (GPS)?
Generally is OK however, should be advised through policies and get consent!! (some states require)

GPS monitoring should probably not be used to track employees during off-duty hours Use only on company equipment it at all
Consult legal counsel before attempting to use any info collected via GPS
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Independent Background Checks

Consent and initial notice required (FCRA) Notice of reason for adverse decision Taking action requires care

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Getting References
Another source of background information
Get them? Give them? Defamation concerns?

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Preventing And Preparing For Theft

Hope for the best but plan for the worst purchase insurance Hire smart use background checks, interviews and testing to screen out dishonest applicants

Electronic monitoring, GPS and video surveillance

Avoid concentrating too much authority in one individual particularly in accounting, bookkeeping, purchasing, and receiving areas

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Investigation Concerns
Investigation report: Be thorough, detailed, factual; include documents, photos, interview notes, every page marked confidential (perhaps get outside agency)
Be careful about your threats to thief! - Extortion

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Taking Action
Internal discipline/termination;

Cooperate with law enforcement/press criminal charges;

File civil lawsuit; Seek restraining order to prevent use of stolen information/trade secrets Do Not withhold wages!!!
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Disclaimer
The foregoing is a summary of the laws discussed above for the purpose of providing a general overview of these laws. These materials are not meant, nor should they be construed, to provide information that is specific to any law(s). The above is not legal advice and you should consult with counsel concerning the applicability of any law to your particular situation. MMXII Greenwald Doherty LLP All rights reserved. These materials may not be reproduced without permission.

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