Lou Michels and Rod Satterwhite are partners in the Labor & Employment group at McGuireWoods LLP. Both handle employment litigation on behalf of employers, and advise companies on employment issues regularly.

Tuesday, March 14, 2006 - Posts

Suing Former Employees for Hacking (or "Man Bites Dog")

    Typically, employers believe there is very little they can do about misconduct discovered after employees leave the company.  Credit card overcharges, removal of minor company property, etc., are frequently not worth the trouble to pursue.  Notebook computers and their associated peripheral equipment often fall into this category -- frequently the employers are just happy to get the equipment back without regard to the contents of the systems.
 
    However, occasionally an employee decides to maliciously damage her former employer's interests by destroying or interfering with the ability to reach data on a computer, server, or a data file.  Such was the case in International Airport Centers, LLC v. Citrin, No. 05-1522, 7th Cir. March 8, 2006.  Citrin decided to leave IAC and go into business for himself, a decision which coincidentally violated his employment agreement with IAC.  He had a company laptop that he used to record key company data, but which he also used to set up his business while he continued to work for IAC.  Before returning the laptop to IAC, Citrin loaded a "secure erase" program onto the computer which automatically wrote over all files and prevented their recovery.
 
    His employer, unamused and unimpressed by Citrin's IT skills, filed civil suit under the Computer Fraud and Abuse Act, 18 U.S.C. ยง 1030.
 
    Although the district court dismissed the case for failure to state a claim, the 7th Circuit had little trouble finding that Citrin violated the Act by "transmitting" a secure erase program to his computer, resulting in damage as defined by the Act.  The court also noted that Citrin violated the "access" part of the statute by inserting a program that destroyed the files incriminating himself, and other files that were the property of the employer, in violation of the duty of loyalty that agency law imposes on an employee.  The Circuit Court kicked the case back to the district court for further proceedings.
 
    The key point here is to remember that misconduct aimed at damaging or preventing access to company computers has a remedy under the Act, and that the courts are willing to interpret the Act broadly in order to capture exactly the kind of conduct that Citrin is alleged to have committed here.   Given the going rate for an ounce of prevention, it might not be a bad idea to include a brief discussion of duties under the statute as part of the orientation process for employees who will have computer access - or as part of the exit interview process if you have one.

Losing Neverland

We've talked about the potential problems with wage and hour issues in California for quite a while.  But this takes the cake.  In a stunning flex of governmental enforcement muscle, the California Department of Industrial Relations has issued a Stop Order and a $69,000 penalty against Michael Jackson for not providing workers compensation coverage for his employees at Neverland Ranch.   (Hat tip to the ever-vigilant folks at The Smoking Gun for posting copies of the actual notices.) The singer also received notice that he had failed, since December 19, 2005, to pay wages to over 30 employees at the facility.  According to the notice, he has until today, March 14, 2006, to make the more than $300,000 in payments, or "DLSE will pursue appropriate legal action against you on behalf of the People of the State of California to recover the wages due and penalties under the Labor Code."   Who's bad now?  
 
California employment law can be tricky, especially when it comes to matters like paying wages to terminated employees, paying for accrued but unused vacation time, and coordinating leave issues under California leave laws.  It's especially important for non-California employers to get a handle on these laws if they have facilities or even a few employees within the state, because many of these requirements have no minimum employee coverage limits. 
 
Even so, am I the only one enjoying watching the Neverland saga unfold?  Didn't they eventually get Al Capone on tax evasion charges?