May 2010

Pregnancy discrimination results in $570K penalty
By Allen Smith 
 
 
Imagine Schools Inc., an operator of more than 70 charter schools in 12 states, will pay $570,000 to settle a pregnancy discrimination lawsuit filed by the U.S. Equal Employment Opportunity Commission (EEOC), the federal agency announced March 18, 2010.
The suit, filed in U.S. District Court for the Western District of Missouri (EEOC v. Imagine Schools Inc., No. 4:08-cv-00731-SOW), charged that Imagine Schools discriminated when it chose not to retain two pregnant employees after closing its charter middle school in Kansas City, Mo., and opening a private middle and high school, Renaissance Academy, at the same location. The lawsuit claimed that the company did not rehire LuShonda Smith, an office manager, and Charity Brooks, an administrative assistant, to work at the new school because they were pregnant.

The EEOC filed the Title VII lawsuit in September 2008 after first attempting to reach a pre-litigation settlement.

“Unfortunately, the EEOC keeps having to drive home the point that no woman should lose her means of earning a living simply because she is pregnant,” said EEOC Acting Chairman Stuart Ishimaru. “This significant settlement should serve as a reminder of that fact to other employers.”

In addition to requiring the payment of $570,000 in back pay, emotional distress damages and attorneys’ fees, the two-year consent decree, which must be approved by the court, requires that the nationwide charter school company disseminate a policy on pregnancy discrimination, provide management training on such discrimination, report internal discrimination complaints to the EEOC and post a notice prominently regarding employee rights under federal anti-discrimination laws enforced by the agency.

“There is no excuse for a company in the business of educating children to discriminate against pregnant women,” said EEOC Regional Attorney Barbara Seely. “We are pleased that Imagine Schools is now setting a good example for today’s youth by recognizing that working mothers deserve the same opportunities as all other employees.”

Pregnancy discrimination charges filed with the EEOC and state and local Fair Employment Practices Agencies rose from 4,160 in Fiscal Year 2000 to 6,196 in FY 2009.

In April 2009, the EEOC issued a document on best practices to avoid discrimination against workers with caregiving responsibilities.

Wal-Mart Settles Sex Discrimination Lawsuit for $11.7 Million 
By Allen Smith 
   
Wal-Mart Stores will pay $11.7 million in back wages and compensatory damages, among other relief, to settle a sex discrimination lawsuit, the U.S. Equal Employment Opportunity Commission (EEOC) announced March 1, 2010. 
 
The lawsuit arose after Wal-Mart’s London, Ky., Distribution Center allegedly denied jobs to female applicants from 1998 through February 2005 to its entry-level order-filler positions. Hiring officials told applicants that order-filling jobs were not suitable for women and hired mainly 18- to 25-year-old males for the jobs, the agency said.  
 
The consent decree settling the lawsuit requires Wal-Mart to provide order-filler jobs, as they become available to eligible and interested female class members, as determined by a claims administrator. Wal-Mart will fill the first 50 available order-filler positions with female class members. For the next 50 positions, female class members will be offered every other job. Then, every third position will be offered to female class members. 
 
“Forty-plus years after the passage of the Equal Pay Act and Title VII of the Civil Rights Act, far too many employers are still blatantly excluding women from particular jobs, segregating their workforces on the basis of sex, and denying women equal pay for equal work,” said Acting EEOC Chairman Stuart Ishimaru. “Let this major settlement serve as a warning: Employers must stop engaging in these outdated and sexist practices, or they will face severe legal consequences.”

Two decisions in New Jersey illustrate the dangers of revoking a job offer and should serve as a warning to employers.

In Schley v. Microsoft Corp., Civ. No. 08-3589, unpublished (D.N.J. 2008), the court refused to let the prospective employer off the hook when a Microsoft supervisor encouraged the prospective employee, a New Jersey resident, to quit his job and start looking for a home near Microsoft’s headquarters in Redmond, Wash. The prospective employer offered the applicant details about good neighborhoods and real estate agents, but after completing a background check decided to revoke the job offer.

An employer may not be able to avoid litigation if it revokes a job offer, but it may be able to ultimately persuade a court that no law was broken. For example, in Sercia v. Red Bull North America Inc., No. A-2530-07T3 (N.J. App. Div. 2008), the court ruled that even though the prospective employee resigned from her old job in reliance on the prospective employer’s detailed promise of employment, she nonetheless failed to show that she had suffered a significant enough detriment in relying on the alleged promise of employment because she had not been induced to spend money or give up her home in an effort to relocate for the prospective employer.

These decisions point to some lessons for employers and executives.

Concern over Criminal Complaint
Mitchell Schley, a New Jersey resident, responded to an Internet job posting for an attorney position at Microsoft in Redmond, Wash. After several telephone interviews, he traveled to Washington to meet with members of Microsoft’s legal department. Michele Gammer, Microsoft’s associate general counsel, offered Schley the position, negotiated the terms and finalized a written employment offer that Schley signed. The offer provided that employment was at-will and “terminable at any time without cause,” and it did not fix any minimum period of employment. It also cautioned that employment was “contingent upon the successful completion of a background check and professional references.”

After Schley signed the agreement, Gammer encouraged him to give notice to his employer, which he did. Shortly thereafter, Schley again traveled to Washington. While there, Gammer suggested that he begin looking for housing near Microsoft’s headquarters and even recommended a real estate agent. While still in Washington, Schley put down a $30,000 deposit on the purchase of a home.

Two weeks later, Gammer advised Schley that his background check had revealed a felony charge. Providing additional details, Schley explained that this was a frivolous criminal complaint from five years earlier that had been subsequently dropped. He followed up by sending Microsoft official documents verifying this explanation. A few days later, Gammer advised Schley that despite successful completion of the background check process, his employment offer was revoked. Schley decided to complete the purchase of the home after already investing $30,000 and sold it two months later. He remained out of work for two years.

Schley’s complaint against Microsoft and Gammer alleged numerous claims, including promissory estoppel, breach of contract, breach of the implied covenant of good faith and fair dealing, fraud and misrepresentation, reckless misinterpretation, negligent misrepresentation, intentional infliction of emotional distress, reckless infliction of emotional distress and negligent infliction of emotional distress.

The defendants moved to dismiss the promissory estoppel, breach of contract, and breach of implied covenant of good faith and fair dealing claims against Microsoft for failure to state a claim upon which relief may be granted and to dismiss all claims against Gammer for lack of personal jurisdiction.

The court denied Microsoft’s motion to dismiss the claim for promissory estoppel under New Jersey law. The defendants made “a clear and definite promise” that they were giving Schley a highly paid position, the court explained. The defendants expected Schley would quit his job and purchase a new home in reliance on this promise and actually encouraged him to quit. When he quit “in reasonable reliance on their promise,” the court found that “as a result, he suffered definite and substantial losses in the form of continued unemployment and lost wages, expenses associated with purchasing a new home in Washington, and emotional damages.”

In a partial victory for Microsoft, the court did find in Microsoft’s favor on the breach of contract and covenant claims and dismissed them, finding that because Microsoft was not contractually bound to provide Schley with any minimum term of employment, the revocation could not be a breach of contract.

Motor Vehicle Infractions Unearthed
In the other decision, Sarah Sercia was employed as a beverage marketing professional when Red Bull contacted her about a job opening in the Philadelphia area. After twice meeting with Red Bull employees, she was asked whether she would like to accept the position. Sercia said she wanted to give proper notice to her current employer, but she conditionally accepted the job offer.

Even though she had asked that Red Bull not contact her current employer until after she had given notice, one of the Red Bull employees informed her approximately a half hour after the meeting that he had told her employer about Red Bull’s job offer to her because he wanted her to start immediately. The next day at work, Sercia’s employer gave her one day to decide whether to remain or accept Red Bull’s offer. She contacted Red Bull to confirm the details of the offer: “a base salary of $48,000, a 20 percent commission bonus, use of a company vehicle, laptop computer and cell phone, and an unspecified amount of money to set up a home office.” Sercia accepted Red Bull’s offer and resigned from her current position.

Two days later, she completed Red Bull’s formal application for employment and also executed a disclosure and authorization to obtain information. The application stated, in part, that “nothing contained in this application, or conveyed during any interview ... is intended to create an employment contract. ... [E]mployment will be at-will, for no definite or determinable period. ... [N]o promises or representations contrary to the foregoing are binding on the complaint. ... This is the entire agreement ... [and] any job offer is conditional, based upon the satisfactory review of my qualifications including any and all background or drug screening which may be required.” The application added,

“You will be informed of a final decision once the entire interview process is completed, which includes a complete background check.” The disclosure and authorization permitted the employer to access “public records including, but not limited to, Social Security number, motor vehicle operation history/driving records, workers’ compensation information and criminal history to the extent permitted by law.”

Sercia claimed that Red Bull advised her that the application was only for administrative purposes. Subsequently, Red Bull informed her that “something had come up relative to her background investigation,” and it rescinded the job offer. Sercia later learned that the revocation was based on excessive motor vehicle infractions.

Sercia filed a complaint alleging promissory estoppel. The trial court granted Red Bull’s motion for summary judgment dismissing the complaint, and the appellate court affirmed the lower court’s ruling. The court recognized that Sercia was offered employment at will, such that Red Bull could have rescinded the offer at any time before she started working or terminated her at any time after she started working.

While Red Bull did not require a reason for its actions since the offer of employment was at-will, the court nonetheless noted that Sercia’s driving record would have caused a reasonable employer to question giving her a company vehicle. The court concluded that the complaint must be dismissed because Sercia had “not established that she incurred a detriment of a definite and substantial nature in reliance on the promise of employment.” The court explained that Red Bull did not induce her to relocate or to sell her home and move to another state; therefore, merely leaving one job to take another is insufficient to create a promise of employment.

Lessons for Employers and Executives
These cases illustrate the risks in making verbal offers of employment and demonstrate the need to expressly condition any offer while still awaiting results of employer-mandated background checks and authorizations. Employers should counsel management and HR professionals to avoid making verbal representations and offering encouragement to potential employees.

Despite the power of the written word, sometimes written words explaining in multiple ways and in bold type that employment is at-will nonetheless will be found insufficient to overcome relied-upon verbal promises and to prevent a lawsuit or convince a court to dismiss such a complaint. Nevertheless, all employers should ensure that their applications and policies are comprehensive and up-to-date. In short, careful planning and training can better insulate employers from these claims.

Finally, a tip for any executives entertaining a job offer at a new company: Proceed with caution while still employed at your current company. Any executive would be wise to wait to resign from any current position until the new job offer has been fully explored, is in writing and is as unequivocally final as possible.

Harris Neal Feldman is a partner with the law firm of Schnader Harrison Segal & Lewis LLP in the Cherry Hill, N.J., office. His broad litigation practice includes representation of corporations and professionals in defense of employment litigation in state and federal courts and agencies at the trial and appellate level.  

Time For Employers To Review Their Severance Agreements: The EEOC's Recently-Issued Guidance Regarding Releases
Kevin B. Leblang and Robert N. Holtzman  
Kramer Levin Naftalis & Frankel LLP
 
Kevin B. Leblang, a Partner, is head of Kramer Levin's Employment Law department and concentrates exclusively on representing management on employment law litigation and advisory matters. Robert N. Holtzman, a Partner, concentrates exclusively on representing management in employment law matters.  

The United States Equal Employment Opportunity Commission (the "EEOC") recently issued guidance in question and answer format entitled "Understanding Waivers of Discrimination Claims in Employee Severance Agreements" (the "Severance Agreement Guidance"). While the Severance Agreement Guidance does not break much new ground, it provides a useful summary of the requirements for a legally enforceable severance agreement and the potential pitfalls into which an employer may stumble.

When Is A Waiver Valid?
As recognized in the Severance Agreement Guidance, a waiver of claims generally is valid when an employee knowingly and voluntarily consents to the waiver; most courts look beyond the language of the severance agreement and consider the totality of the circumstances to determine whether an employee has knowingly and voluntarily waived the right to sue the employer. For example, (a) has the severance agreement been written in a clear manner for the employee to understand the agreement based on his or her education and business experience, (b) has the employer induced the acceptance of the agreement based on improper conduct, (c) has the employee been given adequate time to consider the agreement, (d) has the employee consulted with an attorney or been encouraged or discouraged by the employer from doing so, and (e) has the employee been given the opportunity to negotiate the terms of the agreement? To be valid, the severance agreement must also offer some sort of consideration in exchange for the employee's waiver in excess of what the employee already was entitled to by law or contract, not require the employee to waive future rights and comply with applicable state and federal laws.

The Severance Agreement Guidance expressly recognizes that an employee may file a charge with the EEOC if the employee believes he or she has been discriminated against on any protected basis even if the employee has signed a waiver releasing the employer from all claims. Accordingly, an agreement should not purport to limit the employee's right to testify, assist or participate in an investigation, hearing or proceeding conducted by the EEOC, and any provision that attempts to waive such rights is invalid and unenforceable. In the event the employee settles his or her claims and files a charge of discrimination with the EEOC, the EEOC may nevertheless conduct an investigation and pursue claims against the employer. See EEOC v. Watkins Motor Lines, Inc. , 553 F.3d 593 (7th Cir. 2009).

The Severance Agreement Guidance also includes the EEOC's position that an employee does not need to return his or her severance pay received under a severance agreement prior to filing a charge of discrimination with the EEOC, although it recognizes that an employee may waive in such an agreement the right to recover damages from the employer either in his or her own lawsuit or any action brought on the individual's behalf by the EEOC. The EEOC also takes the position that the employee does not have to return his or her severance pay if he or she files a claim in court under The Age Discrimination in Employment Act of 1967 (the "ADEA"), but the agency acknowledges that the law is less clear under other federal statutes. The EEOC further recognizes that even if a court does not require the employee to return the consideration before proceeding with the lawsuit, the court may reduce the amount of any money awarded if the employee is successful in the action by the amount of consideration the employee receives under the severance agreement.

Waivers Of Age Discrimination Claims Pursuant To The Older Workers Benefit Protection Act ("OWBPA")
The Severance Agreement Guidance also identifies the factors necessary for a valid release of claims under the ADEA: (a) the waiver must be written in a manner that can be clearly understood, (b) the waiver must specifically refer to rights or claims arising under the ADEA, (c) the waiver must advise the employee in writing to consult an attorney before accepting the agreement, (d) the employee must be provided with at least 21 days to consider the agreement, (e) the waiver must give the employee seven days to revoke his or her consent, (f) the waiver must not include rights and claims that may arise after the date on which the waiver is executed and (g) the waiver must be supported by consideration in addition to that to which the employee already is entitled. In the event the release of claims is sought in connection with a group termination program (which the EEOC explains may include a program involving as few as two employees), (a) the employees must be provided with at least 45 days to consider the agreement and (b) additional information must be provided to the employees, including (i) the decisional unit for the program, (ii) the eligibility factors for the program, (iii) the time limits applicable to the program and (iv) the job titles and ages of all individuals who are eligible for or who were selected for the program and the ages of all individuals in the same job classifications or organizational unit who are not eligible or selected for the program. An appendix to the Severance Agreement Guidance provides an example of one way in which the required OWPBA information necessary for group termination programs may be presented to employees.

The most controversial aspect of the Severance Agreement Guidance concerns the EEOC's position with respect to the employer's continuing obligations under the severance agreement if the employee challenges the age discrimination waiver. The EEOC takes the position that if an employee challenges an age discrimination waiver in court, the employer must continue to comply with its obligations under the severance agreement, including the continuation of severance payments under the agreement.

Review Your Agreements
In light of the Severance Agreement Guidance, employers should review their form of severance agreements - both group termination agreements and forms used in connection with individual terminations - to ensure they are legally enforceable. In conducting this exercise, employers should ensure that:

• Their severance agreements are understandable by the average employee and not longer than necessary. Is that 10-page form of agreement necessary, or can the main goal of the agreement from the employer's perspective - a legally enforceable release - be effectuated in a much shorter agreement?
• Their severance agreements do not expressly limit the employee's ability to challenge the release, file a charge with the EEOC (or analogous state or local agency) or testify, assist or participate in an investigation, hearing or proceeding conducted by the EEOC. A severance agreement that includes a covenant not to sue in addition to a general release of claims potentially creates confusion for the employee and unnecessary headaches for an employer.1 A valid general release of claims (which complies with the OWBPA, if applicable) will serve as a complete defense to claims an employee has or may have for any period prior to the individual's execution of the release, but is less likely to cause the sort of confusion created by inclusion of a covenant not to sue.
• They pay attention to state and local law requirements in their severance agreements. By way of example only, the Severance Agreement Guidance notes that under California law, a waiver cannot release unknown claims unless the severance agreement contains certain language specifically providing for such a waiver and under the Minnesota Age Discrimination Act, a release must give the employee fifteen days after signing the agreement to revoke it. Employers should review their agreements to ensure that their severance agreements are compliant with the requirements in all applicable jurisdictions.
• Consider whether their agreements should state that the severance payments or other benefits cease if the employee challenges the agreement. The EEOC may be more inclined to take interest in a charge of discrimination in which the agreement being challenged includes such a provision. In practice, however, an employer will likely frown on continuing to make such payments at the same time the benefit it bargained for - the release of claims - is frustrated. We encourage employers to contact counsel prior to cutting off the payment of severance benefits under a severance agreement.

1 The authors write regularly regarding emplyment law topics. A related article, entitled "Releases: Be Wary of Not Getting What You Paid For" may be found at http://www.kramerlevin.com/news/Detail. aspx?id=1d6f3684-f4a5-4d89-8a6e-46fbe56a8e59.

Please email the authors at kleblang@kramerlevin.com or rholtzman@kramerlevin.com with questions about this article.  

IRS Issues Guidelines on Nontaxable Adult-Child Coverage 

A "child" includes a son, daughter, stepchild, adopted child or eligible foster child, regardless of whether they are a dependent under the tax code 
By Stephen Miller 
 
As a result of changes made by the Patient Protection and Affordable Care Act that became law in March 2010, health coverage provided for an employee's children under 27 years of age is now generally tax-free to the employee, effective March 30, 2010, according to the Internal Revenue Service.

The IRS announced on April 27, 2010, that these changes allow employers with cafeteria plans––plans that allow employees to choose from a menu of tax-free benefit options and cash or taxable benefits––to permit employees to begin making pretax contributions to pay for this expanded benefit.

IRS Notice 2010-38 explains these changes and provides further guidance to employers, employees, health insurers and other interested taxpayers.

“These changes give employers a unique opportunity to offer a worthwhile benefit to their employees,” IRS Commissioner Doug Shulman said. “We want to make it as easy as possible for employers to quickly implement this change and extend health coverage on a tax-favored basis to older children of their employees.”

In the guidance, the IRS explained that employers may provide tax-free medical coverage to children up to age 27. "This tax-free guidance should not be confused with the new health care requirement to provide coverage to dependent children up to age 26. The [reform act] changes to the Public Health Service Act do not parallel the changes to the Internal Revenue Code," explained Frank Palmieri, founding attorney of the law firm Palmieri & Eisenberg, in an alert issued by his firm.

Specifically, the guidance clarifies that:

• The changes to the Public Health Service Act serve to extend coverage to children up to age 26 effective for plan years beginning on or after Sept. 23, 2010.
• The Internal Revenue Code creates an income tax exclusion for children under age 27 as of the end of a taxable year, effective as of March 30, 2010.

This expanded health care tax benefit applies to various workplace and retiree health plans. It applies to self-employed individuals who qualify for the self-employed health insurance deduction on their federal income tax return.

Employees who have children who will not have reached age 27 by the end of the year are eligible for the new tax benefit from March 30, 2010, forward, if the children are already covered under the employer’s plan or are added to the employer’s plan at any time.

Moreover, the IRS clarified that:

• For this purpose, a child includes a son, daughter, stepchild, adopted child or eligible foster child. This new age 27 standard replaces the lower age limits that applied under prior tax law, as well as the requirement that a child generally qualify as a dependent for tax purposes.
  
• Employers with cafeteria plans may permit employees to immediately make pretax salary reduction contributions to provide coverage for children under age 27, even if the cafeteria plan has not yet been amended to cover these individuals. Plan sponsors then have until the end of 2010 to amend their cafeteria plan language to incorporate this change.

In addition, the Patient Protection and Affordable Care Act require plans that provide dependent coverage of children to continue to make the coverage available for an adult child until the child turns age 26. The extended coverage must be provided not later than plan years beginning on or after Sept. 23, 2010. The favorable tax treatment described in the notice applies to that extended coverage.

Information on other health care provisions can be found on this web site, www.IRS.gov.

• The new tax exclusion applies to coverage provided on or after March 30, 2010. Accordingly, coverage prior to March 30, 2010 is subject to taxation if an individual does not qualify as a dependent under the tax code, in the same manner as income is “imputed” for domestic partners.
• The exclusion only applies to coverage in the tax year “before” the child turns age 27. Thus, if a child turns age 27 in 2011, the tax exclusion ceases to apply effective as of Dec. 31, 2010.
• Changes will be permitted under health flexible spending accounts (FSAs) to allow employees to pay for the cost of existing or new coverage on a pretax basis even if the FSA plans are not immediately amended to allow “mid-year” changes in status.
• Employers will have until Dec. 31, 2010 to amend their FSA plans to provide for this coverage. Plan sponsors should consider preparing all necessary amendments when also amending their FSA plans to exclude over the counter prescription drugs for 2011 (except where such OTC drugs are prescribed by a physician or are for insulin).

The alert notes further that some insurance carriers are implementing dependent age 26 coverage prior to 2011. However, coverage is being implemented inconsistently between various carriers. For example, some carriers are allowing coverage for dependents up to age 26 for new hires in addition to continuing coverage for those dependents that would have aged out due to loss of full-time student status. Other carriers appear to only cover dependents that are currently graduating college. Therefore, the firm advises that employers who maintain multiple health plans may wish to wait until Jan. 1, 2011, to introduce consistent coverage for adult children up to age 26.

Imagine a supervisor making an inappropriate remark to one of his direct reports in an after-hours conversation. If he made the comment verbally, and the employee then reported it to the supervisor's employer, any resulting litigation would have involved the usual "he said, she said" situation, in which lawyers would have challenged the employee's credibility.

But what if the comment occurred in a text message? Then, lawyers for the company are at a disadvantage, since a written record of the comment exists.

Harassment by text message -- or "textual harassment" -- is becoming more prevalent. Texas and 45 other states have laws expressly criminalizing electronic forms of harassment, including text messages. Besides the obvious duties involved when investigating a claim of textual harassment, in-house counsel need to be aware of hidden dangers in trying to retrieve text messages or other electronic information as part of an investigation.

When faced with a textual harassment complaint, in-house lawyers for the employer may need to review other text messages as part of an internal investigation. In litigation, employers often want to discover all of the employee's text messages to uncover communications that suggest the employee welcomed the harassment. An employer also may want evidence that the messages, although inappropriate, were not connected to the workplace or were taken out of context. But can an employer access employees' text messages outside of a discovery request without violating their expectations of privacy?

The answer may be no, even if the employer owns or reimburses the employee for the BlackBerry, cell phone or PDA device in which the messages are sent and received. The federal Stored Communications Act generally makes it unlawful for employers to intentionally access stored electronic communications such as e-mails and, likely, text messages without an employee's authorization or in excess of authorization. If, however, the employer is the provider of the communications service used to store the electronic communications, or the employee agrees, the employer may access such communications.

Another applicable law is the federal Electronic Communications Protection Act. It prohibits an employer from intercepting in-transit electronic communications unless the employee consents; the employer is a party to the communication; or the employer provides the electronic communications service and intercepting the messages is necessary to protect the employer's property rights.

CAUSE FOR CONCERN
Recent cases interpreting the SCA and ECPA suggest, however, that an employer may not be allowed to access information from personal electronic communication accounts, which would include text messages, even if they are accessed through an employer's electronic equipment.

According to the U.S. District Court for the Southern District of New York's opinion in Rozell v. Ross-Holst (2007), an employee claimed she was fired in retaliation for reporting sexual harassment. Her employer paid for her private e-mail account. After the employee's termination, the employer accessed and read the employee's private e-mail account and read her personal e-mails, including those to and from her attorney. The former employee accused the company of violating the ECPA by "hacking" into her account, even though the employer paid for the service. The court held that the employer was not automatically authorized to access the account simply because it paid for it.

In a 2008 opinion from the U.S. District Court for the Southern District of New York, Pure Power Boot Camp Inc. v. Warrior Fitness Boot Camp LLC, the employer sued a former employee to enforce a noncompete agreement. The employee inadvertently left his access information for his personal e-mail accounts on the company's computer when he left his job. The employer discovered this information, accessed the accounts and printed e-mails, including one from the former employee to his attorney. The employer believed that it had the right to access the accounts based on a handbook provision that read "e-mail users have no right of privacy in any matter stored in, created on, or received from, or sent through or over" the employee's work computer. The court disagreed and ruled the policy did not expressly cover employees' personal accounts. Consequently, the court found that the employee had a reasonable expectation of privacy in his private e-mail accounts and the employer's review of them violated the SCA.

In Stengart v. Loving Care Agency Inc., a 2009 New Jersey Superior Court decision, an employee exchanged e-mails with her attorney through her personal e-mail using her employer's computer and Internet server. The employer's written policy on electronic communications read "internet use and communication ... are considered part of the company's business" and "such communications are not to be considered private or personal to any individual employee." The court did not believe this language clearly applied to personal, password-protected Web sites and e-mail accounts accessed through the employer's computer system. Thus, the employee's use of the employer's computer system did not convert the e-mails into the company's property.

In Van Alstyne v. Electronic Scriptorium (2009), a 4th U.S. Circuit Court of Appeals sexual harassment decision, an employer accessed an employee's personal AOL account that she used for work and personal reasons. During litigation, the employer produced some of the employee's e-mails as part of its defense of the case. The employee countersued under the SCA, and a jury awarded the employee more than $400,000 in damages.

By contrast, in Borninski v. Williamson, a 2005 wrongful-termination case in the U.S. District Court for the Northern District of Texas, the court explained that an employer did not violate the SCA or the EPCA when it copied e-mails stored on the employee's company-issued computer hard drive and monitored the employee's Internet communications. Copying e-mails stored on the employee's company computer, the court explained, was not considered to be storage within the definition of the SCA. In any event, the access was authorized because the company exercised control over its computer equipment and Internet access, as most businesses do. Notably, the employer's Internet policy specifically stated Internet and Internet mail activity would be monitored while connections and data transmissions are in progress.

Against this backdrop, employers would be wise to ensure their policies recite clear language explaining that employees have no expectation of privacy in personal text messages sent or received on company-owned or reimbursed equipment such as BlackBerrys.

Charles H. Wilson is a management-side employment law associate with Epstein Becker Green Wickliff & Hall in Houston. He is board certified in labor and employment law by the Texas Board of Legal Specialization and defends employers in discrimination and harassment cases involving electronic communications.

First, for those unfamiliar with the concept of sending a text message, “texting” is a simple method of sending a quick message by mobile telephone or similar electronic device to one or more recipients. The communication is usually brief, and obviously is almost always informal. The amount of text messages sent and received is staggering. In a recent quarter, three of the biggest service providers (Verizon, AT&T and Sprint) reported handling over 210 billion text messages. Again, that is for just a three-month period. The number of text messages nearly doubled from 2007 to 2008, has continued to rise in 2009, and is forecasted to continue to grow exponentially for the foreseeable future. The cost of texting isn’t necessarily cheap: Carriers charge an average of 20 cents per text, whether sent or received, although many subscribers have options in their service plans for unlimited texting.

How has texting changed the way people communicate? Those who have grown up in the text messaging world – employees in their 20s – often precede dating with a time period in which texts are exchanged to get to know each other better. It is quite common for people in their 20s and older to use texting as a casual way of flirting. And obviously, whenever people flirt, there is a danger that the recipient isn’t as receptive to the messages as the sender would hope. When that dynamic gets out of hand, it can lead to “textual harassment,” an ever-increasing problem in our modern world. A recent U.S. Justice Department report on stalking found that almost 25 percent of all stalking or harassment victims reported that the perpetrators had used some form of cyberstalking to harass them, increasingly including text messaging.

Some of the hallmarks of the new “harassment by text message” trend sound very similar to the concepts we first experienced about 10 years ago, when e-mail was becoming commonplace at the office. Like e-mail, texting tends to embolden people because of the sense of anonymity involved with communicating electronically. Unlike a face-to-face meeting, the lack of immediate repercussions can lead people to say things they would not say otherwise. Also like e-mail, texting is more informal than memo or letter, and can cause senders to let down their guard. In addition, the communication is instantaneous, cannot be retrieved and survives forever.

However, texting is different than e-mailing in several subtle ways. First, text messages potentially can antagonize recipients in ways not easily ignored. After all, people are usually “connected” to their cell phones, which often vibrate and/or chirp when a text message is received. And because recipients are charged when they receive a text, it can add insult to injury when it’s an unwelcome one. And second, texting feels even more casual than e-mailing because of the nature of the messages, which more easily leads to inappropriate or offensive comments.

So, what does this mean for employers? There is already a growing number of lawsuits and employee complaints that include offensive text messages as evidence of the inappropriate behavior, most commonly flirtatious e-mails from male supervisors to female subordinates or co-workers. Earlier this year, a public university in Michigan settled a sexual harassment case involving text messages as incontrovertible evidence of the behavior. A high-profile harassment claim against the World Wrestling Entertainment company is currently pending in Connecticut, alleging that the harassment can be proven by sexually explicit text messages from a married supervisor. There is no doubt that in the coming years there will be innumerable claims using text messages as evidence to support harassment of all kinds.

So, what can employers do about this growing trend? There are a few important tips to keep in mind. First, employers will want to revise company policies to inform employees that harassing text messages to coworkers or others connected to the firm will be considered violations of the company’s harassment policy.

Second, if an employer issues cell phones to employees, it may want to consider whether text messaging will be allowed on those phones. If so, the employer needs to make sure that the employees using the phones understand that they have no right to privacy, and that all text messages are subject to search and can be obtained by the employer at any time. Third, when investigating a claim of harassment by an employee, the employer may want to review text messages between the employees to obtain an unbiased view of the nature of the communications.

Rich Meneghello, the managing partner of the Portland office of Fisher & Phillips LLP