Time for a check-up on internet risk

Heidi Leslie, Senior Associate | Monday 12 November 2007

As aggrieved parties flex their court muscles globally - and New Zealand's own laws tighten - it may be time for New Zealand business to tackle the risk of staff emails, text messages and even blogs.

A high profile case involving Australia's Channel Seven and just last month one involving UK football club Sheffield Wednesday add to the growing body of cases where momentary electronic folly can have lasting consequences. Add to that New Zealand's new anti-spam laws, there has never been a better time for companies to check their own house is in order on this front. Having a strong, clear electronic messages policy and educating staff about it may go some way to stopping employees from sending out emails or texts or writing blogs that may put employers at risk of legal action. Once the policies are in place, they need to change as the use of technology changes.

US company Whole Foods Market Inc. was caught on the hop last week when its chief executive made some postings on external internet forums. In reaction, Whole Foods changed its code of practice to stop employees from making postings about the business of Whole Foods or its competitors on external internet forums not sponsored by Whole Foods. While companies will always need to react to circumstances as they arise, some risks are known and should be accounted for in a good internet and email policy. The following are some key risks that should be covered off.

Evidence

Electronic messages can be introduced in evidence in litigation. The recent high profile Australian case of Seven Network Limited v News Limited is one example of how employee emails were used as evidence to the detriment of the company. The C7 pay TV operation, owned by Seven Network Ltd (Channel Seven), was shut down in 2002 after failing to secure the Australian rules football and rugby league pay television rights. Subsequently, Channel Seven brought a case against News Limited and others claiming that a bid made by them for the AFL rights constituted anti-competitive conduct under the Trade Practices Act 1974 (Australia). Several damning emails written by employees were used in evidence against Channel Seven in proving they failed to make their best offer for the AFL rights when they became available. One email in particular stated: "I would actually like to walk away from the AFL. I do want to retain an action...for abuse of market power...providing that we have a reasonable case."

Unsolicited electronic messages

Companies can now be held liable for unsolicited electronic messages sent or posted by their employees. Some companies think this is just an issue for their marketing department or other departments that send out mass emails. However, individual emails that are "unsolicited" breach the Act as well.

Disclosure of information

While disclosing confidential information is a risk for companies even if they don't use computers, access to email and chat rooms at work tends to accelerate the ability to disseminate information. Electronic messages discussing an employer's confidential information including business, strategy or financial information, may have sweeping and detrimental consequences for the employer including:

• the potential invalidation of pending patents;

• if the company is publicly traded, the manipulation of the share price; and

• the undermining of the company's position by tipping off competitors about plans the company has on a larger scale.

Defamation claims

Defamation claims are a growing threat to employers as a result of the increased popularity of employee blogs. An employer may be liable for an employee's defamatory private blog on topics that fall within the scope of the staff member's employment or within the employee's actual or apparent authority. Even if a staff member's statements are outside the scope of employment, an employer may still face a defamation suit if the blogging employee is the supervisor of the defamed individual or the employee's blog references the employer. The chances of an innocent employer being a defendant in defamation claims has increased because bloggers often blog anonymously, leaving the employer as the only readily identifiable entity that an action can be brought against. People who feel they have been defamed on the internet are becoming more aggressive about suing parties who might have been involved in making or publishing the remarks. Earlier this year, Google was sued in defamation for failing to remove from its search engine links to published material. Last month the chairman, chief executive and five directors of UK football club Sheffield Wednesday won a High Court ruling forcing the owner of a website to reveal the identities of disgruntled fans who made anonymous internet postings containing abusive remarks about club management.

Harassment claims

An employer may also be subject to liability for harassment claims based on employee blogging. For example, in the American case of Blakey v. Continental Airlines, a pilot filed a hostile work environment claim against Continental Airlines after derogatory comments about her were posted on a pilots' electronic bulletin board. The court ruled that Continental Airlines had a duty to take effective measures to stop co-employee harassment when it knew or had reason to know that the harassment was taking place in the workplace.

What should employers do?

A good place to start is reviewing your company's electronic messages policy and checking that it is up-to-date by ensuring that:

• employees are aware of their obligations under the Unsolicited Electronic Messages Act 2007;

• the policy does not relate just to emails, but to all electronic messages;

• wherever possible, employees are to make it clear that views expressed in electronic messages are their personal views and not those of their employer, and opinion only and not fact;

• blogs are included in the policy (even blogs that may be written outside of work in an employee's own time). The benefit of adopting policies addressing private blogs is that it puts employees on notice of the standards of conduct that apply to all blog postings associated with the employee or the employer; and

• employees are reminded of their confidentiality obligations.

The policies should be provided to employees when they join the company and regular reminders are also worthwhile.

For further information, please contact your usual Bell Gully adviser or:

Auckland

David Flacks
Partner

Ian Gault
Partner

Alan Ringwood
Partner

Kevin Glover
Senior Associate

Garry Williams
Senior Associate

Wellington

Dean Oppenhuis
Partner

Mark O'Brien
Partner