Springer 2007

Journal of Business Ethics (2008) 80:175180

DOI 10.1007/s10551-007-9449-6

Management and Legal Issues Regarding

Electronic Surveillance of Employees
in the Workplace

ABSTRACT. Since the attack on the World Trade

Center in New York, and on the Pentagon in the
United States, concerns over security issues have been
at an all-time high in this country. Both state and
federal governments continue to discuss legislation on
these issues amid much controversy. One key concern
of both employers and employees is the extent that
employers, espousing a need to know mentality,
continue to expand their capability and implementation
of surveillance of employees in the workplace. With
the technology typically growing faster than the speed
of legislation, protective or permissive, the management
and legal issues involved in electronic monitoring of
employee communications in the workplace, are and
well should be on the agenda for discussion of every
management and legal team in American business
today. Companies have a legitimate right to protect
their trade secrets from disclosure by disgruntled
employees. Similarly, companies also have a duty to
protect their good names and reputations from unauthorized employee communications with outside parties, and even other employees, that may damage them.
It is also a prime duty of management to ensure, in
their direction of their workforces, that the employees
execute their responsibilities by working full time on
their stated objectives. In this regard, any management
that fails to oversee its workforce to ensure that
employees are not expending valuable company time,
for which they are being compensated, on personal
business, including unauthorized communications, is
remiss in its responsibilities to its shareholders. The
company may see a reduction of the price of its shares
in the marketplace if it does not protect the economic
interests of its shareholders.
KEY WORDS: security issues, surveillance of employees

David Halpern
Patrick J. Reville
Donald Grunewald

Legal analysis
Historical and current statutory authority
In 1986, the United States Congress passed into law
the Electronic Communications Privacy Act
(ECPA)1, commonly known as the Federal Wiretap
Act. This Wiretap Act was formerly known as the
1968 Omnibus Control and Safe Streets Act. Said
statute provides for criminal and civil sanctions for
any person who...intentionally intercepts, endeavors to intercept, or procures any other person to
intercept ... any wire, oral, or electronic communication.2
In addition to said Federal law, virtually every
state has some sort of statute dealing with eavesdropping, wiretapping, and the like, setting forth
limitations and prohibitions on said activity, by
individuals, employers, and governmental authorities. For purposes of this article, we will concentrate
on the Federal statute set forth above.
Of key interest is the concept of intercept and/
or what constitutes an interception. Intercept is
defined as the aural or other acquisition of the
contents of any wire, electronic or oral communication through the use of any electronic, mechanical,
or other device.3 If an electronic communication
held in electronic storage is later examined, as
opposed to contemporaneously listened to while
happening, the courts have held that this in itself is
not an intercept within the meaning of the prohibition.4 So when an employer copied the electronic
mail from an employees hard drive, it did not

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violate a statute prohibiting electronic interception

of personal telephone calls without a warrant, absent
proof that the employees electronic mail was
obtained while it was being transmitted.5 Yet, the
courts have also concluded that one does not have to
listen in on a communication to constitute an
interception.6 For the record, by the way, just what
is an aural acquisition of a communication?
Apparently, it simply means to come into possession
of same by use of the sense of hearing.7 But, just
because someone comes into possession of an email
message by inadvertently seeing same on a computer
screen, this alone would not be a violation of
the statute, because there would be no unlawful
interception under those circumstances.8

The statutory exceptions

The ECPA as set forth above contains a number of
exceptions, including: (a) the Business Extension
exception; (b) the One Party Consent exception;
and (c) an exception regarding the Employer protecting its Rights or Property. All three of these deal
with permitted interceptions of communications.
In addition, the ECPA allows for access to and
examination of (d) stored employee communications.
(a) The so-called Business Extension exception
allows interception of communications by an
employer when, as typically is the case, the telephone, equipment, or facility is furnished by the
employer and used in the ordinary course of business.9 Thus, listening in may constitute an interception, but be at the same time exempt from
applicability of the general prohibition of the statute.
However, the statutory exception is narrowly
interpreted as to what is in the ordinary course of
business, so that a branch manager who used a
business extension to monitor an employees conversation with a former employee, under a suspicion
that confidential business information was being
disclosed, fell within the exception, while recording
22 hours of employees personal calls with a device
purchased at an electronics store (not provided by
the telephone company) was held beyond the scope
of the ordinary course of business.
(b) The One Party Consent exception falls
under Sec. 2511(2)(d), which states: It shall not be

unlawful...for a person...to intercept a wire, oral, or

electronic communication where one of the parties
to the communication has given prior consent to
such interception... Obviously, then, a person who
records his or her own phone conversations with
another does not violate the law. (But what about an
employer claiming that employees have consented to
the employer intercepting/monitoring/recording
communications? It appears that the employer
should make it abundantly clear to the employees
that communications would be so monitored, as a
mere warning to employees that there may be
monitoring to cut down on personal use of the
telephones would not be enough to fall under
the consent doctrine. Advice to an employer: Get
the consent provision in writing, make it part of the
employee agreement, and even have said provision
separately acknowledged.
(c) Should not the employer be able to intercept
communications in order to protect its rights to
business trade secrets and the like? Sec. 2511(2)(a)(i)
answers in the affirmative, as long as it is in the
normal course of his employment while engaged in
any activity, which is a necessary incident to the
rendition of his service or to the protection of the
rights and property of the provider of that service...
In U.S.A. v. Mullins), the 9th Circuit Court of
Appeals upheld and clarified the right of an
employer to so protect itself.
(d) Monitoring/retrieving stored communications, as set forth above, would not be considered
interceptions under the law. In addition, Sec. 2701
of 18 USC deals with unlawful access to stored
communications. This section generally makes it
unlawful to access communications in electronic
storage, but Sec. 2701(c)(i) contains an exception, in
that it expressly states that Subdivision (a) of this
section does not apply with conduct authorized(1)
by the person or entity providing a wire or electronic communications service. As a result, as far as
communications stored on the employers equipment, there is no prohibition of access.

Recent case law

Since its enactment in 1986, there have been
numerous cases that have made their ways through
the courts, where litigants have attempted to receive

Management and Legal Issues

interpretation of the prohibitions and exceptions set
forth above. Naturally, as indicated in the citations
contained herein, interpretations of terms under
prior statutory and case law have been helpful.
In Fraser v. Nationwide Mutual Insurance Company,
the United States Court of Appeals for the Third
Circuit recently dealt with some of the issues set forth
hereinabove. Fraser was an independent insurance
agent for Nationwide Insurance Company, and got
terminated by Nationwide. He sued for wrongful
termination under state law, and for damages under
the ECPA, claiming unauthorized access to his email
account. It was admitted by Nationwide that it had
accessed his email, and had found evidence of disloyalty. The court, in citing the Steve Jackson Games
case, concluded that there could be no intercept of an
email in storage, as an email in storage by definition is
not an electronic communication. The court also
found that the email was stored on Nationwides
system. The court took some issue with the lower
(District) courts interpretation of what constituted
electronic storage, but nevertheless affirmed,
concluding (a) that there was no interception, and (b)
the Sec. 2701(c) exception applied.

Legal conclusions
In dealing with the management issues set forth
herein, care must be given by management to balance its objectives of protection of property rights,
bolstering productivity and profitability, and maintaining employee morale. In addition, management
must exercise care to comply with all relevant Federal and State laws.
In dealing with the legal issues, the conclusion
reached by the authors hereof is that employees face
an uphill battle in bringing actionable complaints
against employers regarding electronic workplace
surveillance activities, as long as management has
taken the care cited above in legal compliance. As an
employee, you must almost presume that Big
Brother is (legally) watching.

Management analysis
The ethical and managerial issues of what constitutes
good management practice with respect to the

177

activities of employers in using electronic surveillance of employee communications, must balance

the competing interests of companies with that of
their employees.
Clearly, under the law, companies have a legitimate right to protect their trade secrets from disclosure by disgruntled employees. Similarly,
companies also have a duty to protect their good
names and reputations from unauthorized employee
communications with outside parties, and even
other employees, that may damage them.
It also is a prime duty of management to ensure, in
their direction of their workforces, that the
employees execute their legal and ethical responsibilities to work full time on their stated objectives. In
this regard, any management that fails to oversee its
workforce to ensure that employees are not
expending valuable company time, for which they
are being compensated, on personal business
including unauthorized communications or some
other private non-company related purpose, is remiss
in its responsibilities.
For example, if employees were using company
time to play computer games or to gamble over the
internet or to use the internet for non-company
purposes such as watching sports programs when
they should be working on company-related business, these employees are in effect not meeting their
legal and ethical responsibilities to the company. If
such employee activities are taking place on company time, it might affect the productivity of the
company adversely to the detriment of the company
and its shareholders.
However, the question of how management is
best able to bring about and maintain expected
standards of worker productivity is a very complex
issue as it relates to questions of controlling and
monitoring employee communications on the job. It
seems to be clear, based upon the legal issues
discussed above, that management is permitted by
law, under a variety of circumstances, to monitor
employee communications in the workplace. Such
controlling and monitoring of employee communications is a complex managerial policy decision
that should take into account certain important criteria and considerations.
Specifically, what type of corporate culture is
desirable and appropriate for a particular company is
a critical consideration with respect to monitoring

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employee communications on the job. If a company

places a premium on a relaxed informal culture that
strives to encourage creativity and innovation among
its employees, then management must be very
careful with respect to instituting a policy of electronic surveillance of employee communications.
Implementation of such a new company policy
could have a very chilling effect in what was formerly a very open and relaxed atmosphere in the
workplace of the company. This new policy could
have very negative effects upon creativity and
innovation.
Under these circumstances, employees may resent
managements intrusions into communications
that they consider private and appropriate in the
workplace. Employees may then conclude that
management does not trust them anymore. If
employees under these circumstances begin to resent
and/or fear management, then an essential ingredient of creativity, namely, esprit de corps, may be lost,
resulting in a substantial diminution of creativity.
Presumably, companies that are on the forefront
of technological innovation as well as firms in creative fields such as advertising, marketing, and
entertainment, would be examples of companies that
place very high demands upon the creativity of their
employees. From a management perspective, even
though electronic surveillance of employee communications would be legal, such surveillance might
be quite counterproductive for such companies to
institute a policy of monitoring employees communications without much discussion with the
employees.
The more complex issue from a management
perspective is whether to institute a policy of
monitoring employee communications in companies that do not place a premium on creativity and
innovation. One could assert that management
should institute such a policy if doing so would
improve employee productivity. This requires a
judgment call by management, who may be
influenced by the past practices of employees
regarding their communications practices at work.
If management has been lax in this area, resulting in
abuse by employees of company communication
privileges with respect to their interactions, it might
be appropriate for management to institute a policy
of surveillance of employee communications at
work.

Such managerial decisions should probably not be

predicated solely upon an abuse test. It may be
appropriate in some cases for management to institute a policy of surveillance of employee communications in the absence of any evidence that
employees have abused company time and property
to engage in unauthorized communications of a
personal nature. Despite the absence of evidence of
such abuses, management may still want to institute a
policy of surveillance of employee communications
where, in the judgment of management, this policy
would make the employees more efficient and, thus,
hopefully more productive.
One way for management to introduce such a
new policy of surveillance of employee communications would be to begin by conducting open and
transparent studies of employee communications
practices in their firms, which will demonstrate to
employees the necessity of instituting ongoing
practices of surveillance of employee communications to increase efficiency.
Specifically, if the result of such a company study
by productivity experts clearly demonstrates to the
employees that instituting such a policy will improve
efficiency and productivity, then it may be much
easier for management to convince employees that
such a policy of surveillance of employee communications is both ethical and fair to all concerned.
In theory, employees should have a definite
interest in improving productivity in their company,
because this would hopefully improve profitability.
If the company will become more profitable, then
wise management will share these increased profits
with employees in the form of higher compensation.
Instituting a policy of surveillance of employee
communications after a careful efficiency study as
indicated above, may serve another very important
purpose. If a logical rationale can be advanced by
management as to the propriety and necessity of
employee communication surveillance to improve
productivity, then employees may not view such a
new policy as either arbitrary or punitive in nature.
This is critical, because if employees understand that
such a policy is not being instituted to harm them, or
because the management does not trust the
employees, but instead to benefit all the companys
stakeholders, then this may help serve to prevent any
potential negative effects, such as a diminution of
morale or increase in employee turnover. Perhaps

Management and Legal Issues

such a new policy, could be shown to be a win for
management in the form of higher productivity and
resulting higher profitability and a win for the
employees in the form of higher compensation, and
possibly greater job security, because the company
would be financially healthy and presumably less
willing to eliminate jobs to save on costs.
Support of the workforce will help make the
policy more effective than, if the advantages of the
new policy are not clear to the workforce who
might then oppose or obstruct the new policy. This
is why, the proposed new change in policy needs to
be discussed with employees and their feedback
encouraged to make sure that the new policy will be
fair to all concerned and will be effective when it is
instituted. The policy should also be instituted only
after public notice to all concerned.
In developing and implementing a policy of
employee communication surveillance, management
should be careful to abide by, the dictates of all
applicable Federal and State statutes, once the decision is made to implement the new policy so as to be
able to defend the company against potential
employee litigation in this area.
As cited above, company practices in this area
must make a very clear distinction between monitoring employees communications, which constitute
interceptions and in gaining access to communications already in electronic storage, both of which are
impermissible under the Electronic Communications
Privacy Act of 1988 (ECPA), unless said practices fall
under statutory exceptions. The authors recommend
that management should make company policy with
respect to employee communication surveillance a
condition of employment and should require that all
employees sign a written waiver to this effect to
comply with the dictates of the ECPA, as discussed in
the legal section of this paper, if it decides to adopt
such a new policy of surveillance of employee
communications.
Before a new policy of surveillance of employee
communications is instituted by management, it
should carefully vet the wording of such a new
policy with the companys legal department and/or
outside legal counsel to ensure that the policy
complies with all of the statutory requirements as
discussed in the legal section of this paper above.

179

Conclusions
In dealing with the managerial and ethical issues set
forth in this paper, care must be given by management to balance its objectives of protection of
property rights, bolstering productivity and profitability, and maintaining employee morale. In addition to balancing these objectives, management must
exercise care to comply with all relevant Federal and
State laws regarding surveillance of employee communications.
In dealing with the legal issues involving a policy
of surveillance of employee communications, the
conclusion reached by the authors of this paper is
that employees face an uphill battle in bringing
actionable complaints against employers regarding
electronic workplace surveillance activities, as long
as management has taken the care cited above in
legal compliance. Employees must almost presume
that Big Brother is (legally) watching.

Notes
1

18 U.S.C. 2510 et seq.

18 U.S.C. 2511 (1) (a)
3
18 U.S.C. 2510 et seq.
4
Steve Jackson Games Inc. v. U.S. Secret Service,
36 F. 3d. 457 (5th Cir. 1994).
5
U.S. v. Simons, 29 F. Supp. 2d. 324 (E.D. Va.
1998), affd in part, remanded in part, 206 F. 3d. 392.
6
George v. Carusone, 849 F. Supp. 159 (D. Conn.
1994).
7
Smith v. Wunker, 356 F. Supp. 44 (S.D. Ohio
1972).
8
Wesley College v. Pitts, 974 F. Supp. 375 (D. Del.
1977), affd, 172 F. 3d. 861 (3rd Cir. 1998).
9
18 U.S.C. 2510 (5) (a).
10
Briggs v. American Air Filter Co. Inc., 455 F.
Supp. 179 (N.D. Ga. 1978) affd, 630 F. 2d. 414 (5th
Cir. 1980).
11
Deal v. Spears, 980 F. 2d 1153 (8th Cir. 1992).
12
U.S. v. Hodge, 539 F. 2d. 898 (6th Cir. 1976).
13
Deal v. Spears, infra.
14
992 F. 2d. 1472 (9th Cir. 1993), cert. denied, 510
U.S. 994 (1993).
15
352 F. 3d. 107 (3rd Cir. 2003).
16
Steve Jackson Games, infra.
2

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David Halpern et al.

David Halpern
Management,
Iona College, Ph.D., New York University,
New Rochelle, NY, U.S.A.
Patrick J. Reville
Business Law,
Iona College, J.D., Fordham University,
New Rochelle, NY, U.S.A.

Donald Grunewald
Strategic Management,
Iona College, D.B.A., Harvard University,
New Rochelle, NY, U.S.A.
E-mail: [email protected]
Donald Grunewald
5 River Road #307, Wilton, CT, 06897, U.S.A.