Proceed With Caution: Protecting Your Business From Employees Who Disclose Confidential Company Documents To Support A Claim Of Discrimination
Mark A. Saloman
Until recently, New Jersey employers enjoyed the unfettered right to discipline or terminate employees who copy, steal, publicize, or otherwise exploit documents in violation of company confidentiality policies. Yet the Supreme Court of New Jersey’s recent approach in Quinlan v. Curtiss-Wright Corp.1 represents a direct assault on that right which virtually insulates employees from discipline for wrongfully taking confidential company documents, provided that the documents are used to support discrimination claims against their current employers. The Quinlan opinion creates a murky, multifaceted “balancing” test that offers New Jersey employers little guidance as to whether and how they can lawfully discipline employees for conduct that violates otherwise valid confidentiality policies or the common law duty of loyalty. Corporate counsel and human resources professionals should be sensitive to Quinlan’s new approach in these circumstances.
THE QUINLAN CASE
The facts of the Quinlan case are undeniably egregious: Over the course of nearly 20 years, Joyce Quinlan rose through the ranks of Curtiss-Wright to become its Executive Director of Human Resources, reporting directly to its CEO. She believed that, as a result of gender discrimination, she had been passed over for promotion in favor of Kenneth Lewis, a male colleague. She consulted with legal counsel, but without their knowledge began gathering evidence to support her claims. In so doing, she took advantage of her trusted position to access personnel documents—including personal and confidential documents about other employees—which she believed she needed to build her case. Remarkably, Quinlan squirreled away more than 1,800 pages of confidential material over an extended period of time, investing hours of work into parsing through, selecting, and photocopying the documents. She also searched for documents concerning other employees to whom she thought she could compare herself. Curtiss-Wright first learned that Quinlan had copied confidential personnel documents after she filed her gender discrimination lawsuit, when her lawyers produced those 1,800 pages in discovery.
Several weeks later, Quinlan received her CEO’s performance appraisal of Mr. Lewis in the normal course of her job duties. She copied this document as well and turned it over to her lawyers. Without producing the appraisal to Curtiss-Wright’s attorneys in discovery, Quinlan’s lawyers used it to cross-examine Mr. Lewis in his deposition—much to his discomfort, as he had not yet even seen the appraisal. The appraisal equally surprised Curtiss-Wright, which now realized that Quinlan was “continuing to steal (photocopy) confidential documents while retaining her position of trust in the company.”2
As a result, Curtiss-Wright discharged Quinlan “for the theft of a document used during the deposition.”3 Quinlan turned around and alleged that “her firing was an unlawful act of retaliation in violation of the Law Against Discrimination (LAD), N.J.S.A. 10:5-12(d).”4 A majority of the Supreme Court consequently held “that Curtiss-Wright could rightfully fire [Quinlan] for the wrongful taking of the documents, but could be held liable if a jury found—as it did—that the firing was for [Quinlan’s] use of the document in the deposition.”5
In determining whether Quinlan was privileged “to take or to use documents belonging to the employer,” the Supreme Court adopted a seven-factor test, “[a]ll of which must be balanced in order to achieve the essential goals embodied in the LAD.”6
Under that test, New Jersey courts must now evaluate the following factors:
(1) “how the employee came to have possession of, or access to, the document”;
(2) “what the employee did with the document”;
(3) “the nature and content of the particular document” and “the employer’s interest in keeping the document confidential”;
(4) “whether there is a clearly identified company policy on privacy or confidentiality that the employee’s disclosure has violated,” or “whether, in the absence of a clear policy, the employee has acted in violation of a common law duty of loyalty to the employer”;
(5) a balance of the document’s “relevance against considerations about whether its use or disclosure was unduly disruptive to the employer’s ordinary business”;
(6) “the strength of the employee’s expressed reason for copying the document” instead of using discovery mechanisms;
(7(a)) “the broad remedial purposes the Legislature has advanced through our laws against discrimination, including the LAD”; and
(7(b)) “the effect, if any, that either protecting the document by precluding its use or permitting it to be used will have upon the balance of legitimate rights of both employers and employees.”7
Despite setting forth such a complex and detailed balancing test, the Court summarily concluded that the trial court correctly drew the distinction between Quinlan’s taking of the document (unprotected) and the later use of it by her lawyers (protected). Consequently, the Court reinstated the retaliation verdict in Quinlan’s favor.
WHERE DOES THIS LEAVE NEW JERSEY EMPLOYERS?
The implications of Quinlan for New Jersey employers are quite broad. The decision repeatedly states its intent to strike a balance between the interests of employers— “legitimately expecting that they will not be required to tolerate acts amounting to self-help or thievery”— and employees “seeking to vindicate their rights.”8 As a practical matter, however, this ruling appears to give free rein to employees who assert claims of discrimination to engage in fishing expeditions through their employer’s confidential records—especially those employees who retain counsel and give their lawyers the purloined documents.
The Quinlan court recognized “that employers may fear that we have opened the floodgates by granting protected status to such conduct.”9 Yet, the opinion does little to allay that genuine concern, beyond the Court’s belief that a rational employee should be deterred from stealing company documents by the theoretical risk that a jury—at some future point in some distant trial—will conclude that the employee was fired for taking documents, as opposed to using them in support of discrimination claims. Of course, once the pilfered material is in the hands of the employee’s counsel—and is then used to prosecute the employee’s case—it will be extraordinarily risky for a New Jersey employer to take disciplinary action. At minimum, employers must have broad and comprehensive confidentiality policies, which are widely communicated and uniformly enforced. Even with those safeguards, corporate counsel and human resources professionals should use extreme caution when advising on the appropriateness of disciplining employees who have improperly taken documents that they may use to support discrimination claims.
Mark A. Saloman is Special Employment Litigation Counsel in the Labor & Employment Department of Proskauer Rose LLP. He is resident in the firm’s Newark, New Jersey office, and represents employers in all aspects of employment law. Mark served as amicus counsel before the Supreme Court in the Quinlan matter on behalf of the Employers Association of New Jersey.
1. Quinlan v. Curtiss-Wright Corp., 204 N.J. 239 (2010).
2. Id. at 277.
5. Id. Before trial, the Superior Court determined that neither Quinlan’s taking of the 1,800 pages of documents nor her copying of Mr. Lewis’ appraisal constituted “protected activity” under the LAD and, therefore, Curtiss-Wright could have lawfully discharged her for those acts. Her lawyers’ later use of those documents in pursuit of her LAD claim, however, was deemed to be protected. Making an extremely fine distinction, the trial judge instructed the jury that Curtiss-Wright could lawfully discharge Quinlan for taking the documents. But, if its motivation for discharge was the fact that she later used the documents, Curtiss-Wright had committed an unlawful act of retaliation. Though the first trial ended with a hung jury, a second jury returned a verdict in Quinlan’s favor on both her failure to promote and retaliation claims, awarding her compensatory and punitive damages in excess of $9 million.
New Jersey’s Appellate Division rejected the trial court’s obtuse distinction between taking and later using confidential company documents, and expressed concern that this approach “would encourage employees to go through their employers’ files and copy confidential material, secure in the knowledge that employers could do nothing so long as that material was later used in litigation.” Id. at 255.
6. Id. at 269.
7. Id. at 269–72.
8. Id. at 245.
9. Id. at 272.