Risky Business

• Jurisdiction: United States,Federal
• Publication year: 2005
• Citation: Vol. 1 No. 2

Shidler Journal of Law, Commerce & Technology Volume 1, Issue 2, Winter 2005

Corporate & Commercial

Cite as: Nicole J. Nyman, Risky Business: What Must Employers Do to Shield Against Liability for Employee Wrongdoings in the Internet Age?, 1 Shidler J. L. Com. & Tech. 7 (Feb. 2, 2005), at [http://www.lctjournal.washington.edu/Vol1/a007Nyman.html]

Risky Business: What Must Employers Do to Shield Against Liability for Employee Wrongdoings in the Internet Age?

By Nicole J. Nyman(fn1)

(c) 2005 Nicole J. Nyman

Abstract

Recent suits filed by the recording industry have raised the issue of employer liability for copyright infringement by employees. In fact, legal consequences for an employer do not end with copyright infringement liability, but extend into many other areas. This Article discusses several legal concerns raised by employee Internet use and examines steps an employer should take to minimize or avoid liability for inappropriate employee actions, including a discussion of benefits and drawbacks to various approaches.

Table of Contents

IntroductionRisks Employers Face Due to Employee Internet ActivitiesFundamentals and Limitations of the Company Internet PolicyPrivacy Interest Concerns of EmployeesSoftware Solutions to Enforce an Employer's Internet PolicyConclusionPractice Pointers

Introduction

[1] Employers may be held liable for the wrongdoings of employees, an issue raised by some highly publicized copyright infringement actions recently initiated. In April 2003, the Recording Industry Association of America ("RIAA") announced an out-of-court settlement of one million dollars with Integrated Information Systems ("IIS"). IIS is a technology company that, ironically, offers software for the secure electronic transmission of copyrighted material. The company allegedly allowed employees to share MP3 files over its internal network and ran a dedicated server for this purpose.

[2] The RIAA's policy appears to involve pursuit of companies connected in any way with copyright infringement. According to its senior vice president of business and legal affairs, the IIS settlement "sends a clear message that there are consequences if companies allow their resources to further copyright infringement."(fn2) This settlement, in combination with the confirmation by RIAA that it has identified business accounts in the search for pirates, has made employers more aware of possible liabilities that may arise from the Internet activities of employees.

[3] When employees download MP3 files at work, employers may face vicarious liability for copyright infringement. This, however, is only one of many legal problems that employers may face when employees interact with the World Wide Web. Employers should educate themselves regarding the various legal risks that arise and how to effectively avoid liability for employee misconduct. Employers should re-evaluate the company policy regarding Internet usage, including privacy issues that might arise as a result of the adoption of new technologies, and implement software solutions to monitor and enforce the company policy. These steps are likely to shield the employer from charges for an employee's illegal actions.

Risks Employers Face Due to Employee Internet Activities

[4] In addition to employee file sharing of music, employers face possible liability for employee misconduct in several other areas. The Internet puts numerous copyrighted resources at the fingertips of employees, including streaming video, music files, power point presentations, articles, software, logos, artwork, and pictures.

[5] When an employee infringes copyrights, the employer may be held liable under two theories: contributory and vicarious infringement. Contributory infringement requires the employer have "knowledge of the infringement" and have made "material contribution to the infringement."(fn3) Actual knowledge, however, is not always necessary. "Willful blindness is knowledge, in copyright law (where indeed it may be enough that the defendant should have known of the direct infringement)."(fn4) Thus, the fact that an employer was unaware of the illegal conduct of its employee does not fully preclude liability. In addition, the second theory, vicarious infringement, contains no knowledge requirement, but only requires that the employer receive "a direct financial benefit" and have "a right and ability to supervise the infringers."(fn5) In the employment setting, the second element is virtually always found, leaving the question of financial benefit to control the inquiry.

[6] Thus, unauthorized use of any copyrighted material may give rise to employer liability, especially when: (i) the employer enjoys a benefit because of the employee's infringement, (ii) the copyrighted material is shared using company time and equipment, or (iii) the employer has taken no steps to...