Posts Tagged ‘Inc.’

Violating a Consumer Fraud Act regulation can result in individual liability for employees or owners

Written by Michael Pisauro on August 15th, 2011 in Consumer Fraud, Home Improvement | No Comments »

Recently, the New Jersey Supreme Court issued a new opinion further defining the reach of New Jersey’s Consumer Fraud Act. In Allen v. V and A Bros., Inc., the Supreme Court ruled that an employee or owners of a company who has violated a regulatory provision can be liable under the consumer fraud act.  It is not new that owner can be liable with their own intentional misrepresentation of fact and thus liable under the consumer fraud act.  What is new is that a violation of a regulation, which may be truly a technical violation and not one that requires intent, can lead to the personal liability of an owner or employee responsible for the implementation of the regulation.

It has been the law for many years that an officer or employee could be liable for their affirmative act of misrepresentation or omission under the CFA. It was the individual’s acts that created the liability against them as well as their corporate employer.  In Allen the question became, in the absence of an affirmative act of misrepresentation, could an employee or owner of a company be personally liable under the CFA for violating a regulation.  A regulatory violation is a strict liability and does not require an affirmative act.  In this case, the plaintiffs allege that the contractor violated several regulations affecting home improvement contractors.  They alleged that the contractor did not have a written contract under NJAC 13:14A – 16.2; failed to obtain final approval for the construction before obtaining final payment as is required by NJAC 13:45A-16.2 (10), and finally that the contractor failed to obtain their consent for modifying the design as required by NJAC 13:405A -16.2 (a)(3) (IV)

Each of the regulations alleged to have been violated regulated the conduct of a “seller.”  The regulation’s definition of the “seller” means a “person engaged in the business of making or selling home improvements  . . .” and included not only the business entity but “their officers, representatives, agents and employees.”  NJAC 13:45A-16.1A.  Given the regulations’ definitions and the definition of person under the CFA, the Court had little trouble finding that an employee or officer could be liable based upon the liberal interpretation required of the CFA.

In this instance the Court had little trouble finding the owners and employees could be liable for violating the particular regulations and therefore, the Consumer Fraud Act.  The Court was also quick to point out that not all regulations may result in the liability of the individual.  Individual liability would be decided based upon the wording of the regulation.  So if a regulation only regulated the conduct of the business entity and did not extend to its agents, then only the entity could be liable for the violation.  Also the Court noted that if the business entity had a “policy” of not requiring a written contract, than its employees may not be liable for carrying out that policy because the employee had little choice in the employee’s actions.

The lesson to be learned is if you are an employer make sure you and your employees understand and follow the law.  If you are an employee it is for your own protection to understand what the law requires of you and not to violate it.  Neither the employee/owner nor the business entity wants to liable to a customer for triple the customer’s damages and to pay the customer’s attorney.  Violating a regulation, even if unknowingly, could put you and the business in that position.

Employees may "own" their own web-based emails

Written by Mike Pisauro on March 31st, 2010 in Uncategorized | No Comments »

Nearly  a year ago I wrote about the trial court’s decision in Stengart v. Loving Care Agency, Inc  in which the court decided that an employee’s emails were the company’s property and could be used against the employee. Yesterday, the NJ Supreme Court has decided whether an employer owns an employee’s personal emails.

But first, a little background is in order. In this case, Ms. Stengart made use of her company laptop to send emails, discussing her planned suit against her employer, to her attorney.  Those emails were sent not using the company’s email system but her personal, password protected Yahoo account.  After Ms. Stengart filed suit, her former employer had an image made of the laptop’s hard drive and examined the contents.  Unknown to Ms. Stengart the company had installed software that logged her activity on the laptop and that software had saved copies of her emails to and from her lawyer.

Yesterday, the NJ Supreme Court found that “under the circumstances” Ms. Stengart had a ”reasonable expectation of privacy” in her emails.  As the emails were sent to her lawyer, the Court further found that the employee had not waived the attorney-client privilege by using the company’s laptop to send the emails.  The Court went even further by writing that, even if the company banned all personal use of their computers,  an employee’s use of a personal password protected email account to send email to their attorney would not allow the employer to break the attorney client privilege.

Outside of the attorney-client area, the Supreme Court has given guidance to both employees and employers as to what to expect.  The Supreme Court based its decision on whether the employee has a “reasonable expectation of privacy”.  That expectation is determined by  the company’s policy on the issue. The Court looked at Loving Care’s policy, assumed that it was in effect at the time, and applied to Ms. Stengart both assumptions were in contention. Loving Care’s written policy was found in its employee handbook and provided:

The company reserves and will exercise the right to review, audit, intercept, access, and disclose all matters on the company’s media systems and services at any time, with or without notice. . . .

Email and voice mail message, internet use and communication and computer files are considered part of the company’s business and client records.  Such communications are not to be considered private or personal to any individual employee.

The principal purposes of electronic mail (e-mail) is for company business communications.  Occasional personal use is permitted; however, the system should not be used to solicit for outside business ventures, charitable organizations, or for any political or religious purpose, unless authorized by the Director of Human Resources.

The Court noted that there was no mention in the policy that the company was making images or copies of its employee’s activities on the computer.  The policy also did not define some of the terms it used, such as , like “media systems and services” and did not discuss at all the ramifications of using a personal, web-based email account.  The policy was also silent as to whether the company considered the personal email account message as part of its email system and its property or whether such accounts were considered outside the company’s property interests.  Given the many ambiguities created by the policy, the Court found Loving Care’s Employee Handbook was  ambiguous and unclear.

As lawyers learned in “Contracts 101” is that, in a contract, ambiguities will be construed against the drafter.  In this case, because the employee handbook was  ambiguous and unclear, the Court gave the benefit of the doubt to the employee.  As the policy did not clearly apply to password protected web-based emails, the Court was not going to apply to the company’s policy that emails were part of the company’s business records to Ms. Stengart’s yahoo emails.

From an employers’ prospective it is clear that if you want to “own” all the activity that occurs on a company computer, you must make that position very clear in your handbooks and policies.  If a company is going to use logging or imaging software to track usage, that fact needs to be disclosed as part of the company’s written polices.  Even with very clear policies in place, I am not sure that a Court would enforce a handbook policy that results in the company owning, and being able to use, personal emails from an employee to their physician or accountant, etc.   An employer probably could ban all personal use of the computer and also  could install filters and software to prevent employees from going to certain websites, such as Yahoo mail, AOL or gmail.  However, while these options may be legal and technically possible, I do not believe that such tactics acknowledges modern reality:  Employees need access to computers and the internet on a daily basis for personal use.

From an employee’s perspective, it is reassuring to know that, if you do not send personal emails using the company’s email program and email accounts, your information may be protected as confidential and your personal information.  What you may not know is whether the company is recording and monitoring your activities on the computer.  If they are and if they review your activity it is little solace that they cannot actually own your emails.  Your discussions with your doctor, accountant or lawyer or your personal spat with your signification other will have already been made public to at least one person.   The lesson to be learned from this case is that if you must use your company’s computer to send emails make sure you to use a web-based service, such as Yahoo, gmail, AOL,  or even your ISP’s own web-based email system.  Do not save your web-based email passwords on your work computer.  Better yet do not use your company’s computer for any activity that you would rather keep private.  If you must send emails of a personal nature during the work day, it is far better to use your personal cell phone’s email capabilities than it is to use your work computer.

Prior Posts:

Are your electronic communications at work private or employer property?

Appellate Division Restricts Company’s Computer Usage Policy

Why it’s important to establish a computer usage/electronic communication policy ?