General Litigation

NY Fed. Court Issues Reminder About Lack of Privacy in Work Emails

Bruce Bent II was an executive and co-owner of Reserve Management Co. Inc. (RCMI) involved in an SEC investigation over alleged securities violations. The SEC sought to compel RCMI’s production of 60 e-mails between Bent and his wife that were exchanged during the two-day period after Lehman Brothers’ bankruptcy announcement, during which a run on the Reserve Primary Fund caused the fund’s collapse and the SEC litigation. Bent’s lawyers tried to assert the “spousal privilege” also known as the “marital communications” privilege which protects confidential communications between spouses from being discovered. Judge Paul Gardephe of the Southern District of NY ruled that the emails had to be turned over because Bent had “no reasonable expectation of privacy.”

The decision went against Bent because RCMI had a clear email policy in its employee manual that advised employees not to use the email system except for official business and to communicate through it only to clients and the general public. It also advised employees to regularly clear the system of any personal messages as messages are stored on the company server. Finally, RMCI’s email policy also warned employees that their email communications are subject to disclosure, whether those communications are directed to clients or to the public at large. This decision followed the rule set forth in In re Asia Global Crossing, Ltd., 322 B.R. 247, 258-59 (Bankr. S.D.N.Y. 2005). In that case the court established a four-part test to determine if an employee has an expectation of privacy in work emails:

(1) does the corporation maintain a policy banning personal or other objectionable use, (2) does the company monitor the use of the employee’s computer or e-mail, (3) do third parties have a right of access to the computer or e-mails, and (4) did the corporation notify the employee, or was the employee aware, of the use and monitoring policies?

This test and the Bent case showcase the importance of having a clear email policy in an employee manual. Corporations that may want to investigate their employees for internal fraud or other irregularities could find their investigations thwarted if a court were to rule that their employees had an expectation of privacy in their own emails. On the flip side, the case is also a warning to employees that their work emails belong to the company if the company has such an email policy in effect. How many employees actually take the time to read the entire employee manual when they come on board at a company? Well those that don’t are in for a shock when they find that what they thought were private communications to their spouses were in fact the property of their employer.

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