New Jersey Supreme Court Holds That Employees Disciplined for Stealing Confidential Company Documents in Support of Discrimination Claims Can Sue for Unlawful Retaliation

Employment Law Alert
(Gibbons P.C.)
December 14, 2010

The New Jersey Supreme Court has just announced a new test under which an employer may be held liable for unlawful retaliation when taking action against an employee who misappropriates and uses confidential company documents against the employer in support of a discrimination claim. Those who believe that simplicity is a virtue not practiced often enough will not have their minds changed by the New Jersey Supreme Court’s decision in Quinlan v. Curtiss-Wright Corporation, in which the Court, by a 5-2 majority, established a complex and confusing seven-part “balancing test” for determining whether an employee’s wrongful taking of company documents nevertheless constitutes “protected activity” under the New Jersey Law Against Discrimination (the “LAD”). Applying this test, the Court held that the plaintiff in Quinlan could have been terminated for the wrongful taking of documents, but should not have been terminated for her attorney’s use of one of the documents at a deposition.

The Quinlan decision has serious implications for employers who seek to protect their confidential information and demand the loyalty of their employees. The clearest takeaway from this decision is that extreme care must be taken when dealing with an employee who has misappropriated confidential documents in conjunction with a discrimination claim. Presumably the employer in Quinlan would have avoided liability for retaliation if it had terminated the employee before the document at issue surfaced in the deposition. But under the Court’s seven-part balancing test, this might not have been the case under similar but not identical facts. Any employer action must be supported by a clear and consistent policy. Quinlan reinforces the importance of having clearly worded and effective policies concerning confidential business and personnel information and of consistent and uniform enforcement of those policies.

Background

 Joyce Quinlan, Executive Director of Human Resources for Curtiss-Wright Corporation, alleged that her employer had discriminated against her by giving a promotion she sought to a man who was then made her supervisor. In an attempt to prove that Curtiss-Wright had engaged in sex discrimination, Quinlan gathered over 1800 pages of confidential documents, which were available to her by virtue of her position in the Human Resources department, and turned over copies of them to her attorney. Curtiss-Wright learned that Quinlan had taken these confidential documents when she produced them during discovery in her discrimination lawsuit. Quinlan continued to copy confidential documents even as she was requesting documents through the proper discovery channels. One of these documents was her supervisor’s prior performance appraisal. Instead of producing this document in discovery, Quinlan’s attorney surprised the supervisor with it during his deposition. Shortly thereafter, Curtiss-Wright terminated Quinlan’s employment for breach of company policies and theft of company property. Quinlan then added a retaliation claim to her pending lawsuit, claiming that Curtiss-Wright had fired her in retaliation for engaging in “protected activity” in prosecuting her discrimination claim.

The trial court instructed the jury that the company did not engage in unlawful retaliation if it terminated Quinlan for taking the documents but did unlawfully retaliate if the termination was motivated by her attorney’s use of the supervisors’ performance appraisal at the deposition. The jury ultimately returned a verdict for Quinlan on her failure to promote and retaliation claims, awarding her in excess of $10 million, including punitive damages. The Appellate Division reversed and remanded the retaliation verdict. The appellate panel agreed with Curtiss-Wright that the removal of confidential information by Quinlan was not “protected activity under the LAD,” i.e., that an employer can take action against an employee who violates company policies dealing with confidential information without subjecting itself to a claim of retaliation. The Appellate Division reasoned that the distinction drawn by the trial court between the improper taking of the documents and the use of the supervisor’s performance appraisal at his deposition would illogically “transform an unprotected action, copying confidential items, into a protected action on the basis of subsequent use of the confidential material.”

The Supreme Court’s Decision

 The New Jersey Supreme Court reversed the Appellate Division, holding that the trial judge gave the correct instruction on the retaliation claim. Curtiss-Wright could lawfully terminate Quinlan based on her taking 1800 confidential documents, including the supervisor’s performance appraisal, because that taking was not protected activity under the LAD. But the use of the performance appraisal at the deposition by Quinlan’s attorney was protected activity, subjecting the company to liability for retaliation. As there was, according to the Court, sufficient evidence for the jury to conclude that the company terminated Quinlan because of her attorney’s use of the performance appraisal at the deposition, the Court sustained the jury’s verdict in favor of Quinlan.

In reaching its conclusion, the Court began by noting the significance of the issues advanced by both parties. The court acknowledged that “[e]mployers have the right to operate their businesses within the bounds of the law and legitimately expect that they will have the loyalty of their employees as they do so. Employees have the right to be free from discrimination in their employment and the right to speak out when they are subjected to treatment that they reasonably believe violates that right.” Thus, the Court stated that its goal was to “achieve a fair balance of the legitimate rights of employers and employees in circumstances in which those rights conflict.”

Due to the lack of any New Jersey precedent, the court looked to federal law for guidance, but ultimately adopted a new test based on what it termed a “flexible totality of the circumstances approach that rests on consideration of a wide variety of factors, all of which must be balanced in order to achieve the essential goals embodied in the LAD.” Pursuant to that test, courts must evaluate the following seven multifaceted factors in deciding whether an employee is protected for taking or using documents belonging to the employer:

  1. how the employee came into possession of, or obtained access to, the document (i.e., whether the document was obtained in the ordinary course of the employee’s duties, or whether the document was obtained due to the employee’s intentional acts outside of her ordinary duties);
  2. what the employee did with the document (i.e., whether the disclosure was limited to counsel or broader);
  3. the nature and content of the particular document in order to weigh the strength of the employer’s interest in keeping the document confidential (i.e., whether the document is protected by privilege, reveals proprietary business information, or includes personal or confidential information);
  4. whether there is a clearly identified company policy on privacy or confidentiality that the employee’s disclosure has violated (includes an evaluation of whether the employer has routinely enforced that policy);
  5. the circumstances relating to the disclosure of the document, balancing its 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 reason for copying the document rather than, for example, simply describing it or identifying its existence to counsel so that it might be requested in discovery (i.e., whether, if the document was not copied, there was a likelihood it would have been discarded or its authenticity would be called into doubt); and
  7. consideration of the broad remedial purposes the Legislature has advanced through our laws against discrimination, including the LAD, as well as consideration of the effect, if any, that either protecting the document by precluding its use or permitting it to be used will have on the balance of legitimate rights of both employers and employees. The Court described this last factor as “of the utmost importance.”

The Court concluded that a balancing of these seven factors in the case before it supported the trial judge’s determination that Quinlan’s taking of documents in violation of company policy was not protected activity. However, the application of those same factors to Quinlan’s attorney’s use of the performance appraisal at the deposition justified the trial court’s conclusion that the use was protected activity.

The Court attempted to address employer concerns that its decision would “open the floodgates by granting protected status to such conduct,” advising that employees may still be disciplined for “taking documents when they are not privileged [i.e., protected under the 7-part balancing test] to do so” and “even under the best of circumstances, run the significant risk that the conduct in which they engage will not be found by a court to fall within the protection our test creates.” The Court stated that “the risk of self-help is high and the risk that a jury will reject a plaintiff’s argument that he or she was fired for using the document, rather than for finding it and taking it in the first place, will serve as an important limitation upon any realization of the fears that the employers have expressed to the Court.”

The Dissent

Justice Albin, joined by Justice LaVecchia, issued a sharp dissent to the majority’s ruling. The dissent asserted that “the hair-splitting distinction made by the majority” between the taking and the using of confidential company documents “reaches a level of abstraction that defies ordinary understanding.” The dissent further expressed concern that the decision would reward unscrupulous behavior by employees and attorneys, and asserted its belief that “after filing suit, the theft of documents by an employee entrusted with personnel files is intolerable when the employee has at her disposal the machinery of our civil-discovery process and had no reason to fear that the employer will conceal or destroy relevant documents or evidence.”

Conclusion

 The broad seven-factor balancing test announced in Quinlan is confusing both in theory and as applied by the Court, leaving employers with little guidance as to how to deal with an employee who steal confidential documents to support a discrimination claim. The distinction made by the Court between Quinlan’s use of her employer’s confidential documents during a deposition and her initial taking of the documents will likely prove to be artificial and unworkable. The taking and using of such documents are inexorably intertwined, as there is no logical purpose for the taking other than for their eventual use in litigation. Moreover, in most cases, employers will not learn of an employee’s taking of documents until the documents are used in a litigation. As noted by the dissent, “[i]f the theft of the documents is a lawful basis for discharge, then plaintiff should not benefit by a shield of immunity because she rushed to use the documents . . . .”

The only silver lining for employers is that the Court rejected the argument that the LAD should always provide complete protection for any employee who takes and uses company documents for the purpose of helping in the prosecution of a discrimination claim. But while the Court did not hold that the taking and use of confidential company documents will always be protected, the Court’s application of its seven-part test to the facts of the Quinlan case reveals that it will be exceedingly difficult for employers to decide whether they are entitled to discipline employees who violate policies protecting confidential information. The Court’s explanation of why the trial judge got it right when he held that Quinlan’s taking of the 1800 documents was not protected activity but that her attorney’s use of the performance appraisal was protected is far from clear. Predicting how a judge will balance the relevant factors under the Court’s seven-part test in any given future case will not be easy, to say the least.