Privacy in a Free Country: In Search of Reasonable Principles

Policy Reports | Privacy

No. 243
Monday, April 30, 2001
by Solveig Singleton

Privacy and the Employment Agreement

Figure III - Percent of Large Businesses Monitoring Workers' Internet Use

Most people are pretty comfortable with the idea that their boss may check up on them from time to time; a recent study from the Angus Reid group found that 73 percent of workers thought their employers have the right to monitor e-mail and Internet access at the office.35 We have all had experiences with fellow employees who do not do their fair share of the work, lie to avoid blame for mistakes, carry on disruptive personal affairs or vendettas in the workplace, steal, or use electronic resources inappropriately. Employers monitor and investigate their employees:

  • To avoid liability for employees sending racist, sexist and sexually explicit e-mail,36 for defamation or for violating intellectual property licenses and laws.
  • To monitor productivity.
  • To prevent losses from employee crimes such as embezzlement or theft from the employer or customers, estimated to cost over $400 billion annually.37
  • To protect trade secrets and other confidential information.
  • To avoid workplace violence, estimated to cost businesses $36 million each year.38

Even so, technological changes have raised new concerns about employer monitoring and workplace privacy among some advocates of privacy.

"If a $30,000 employee spends an hour a day browsing online or answering personal e-mail, it costs the $3,600 per year."

Electronic Monitoring at Work. The advent of computerization and other electronic devices has raised difficult issues in employer/employee privacy. Because e-mail and computer networks are relatively new and many do not understand how they work, some employees seem to expect that their e-mail or Internet access will be confidential. At the same time, e-mail and the Internet offer employees a new distraction during work hours and compel employers to keep an eye on workers' productivity. If a $30,000 employee spends an hour a day browsing online or answering personal e-mail, it costs the company $3,600 per year;39 for a $50,000 worker this rises to $6,500.40 One survey reports that half of all employees often surf the Net for personal reasons at work; one in eight men views sex sites at the office, and one-third often download unauthorized software.41 As a result, one survey reports that large businesses are monitoring more and more of their workers' use of the Internet, up from 54 percent in 2000 to 61 percent in early 2001.42 [See Figure III.]

The use of video cameras and other electronic devices also is relatively new and still controversial. About two-thirds of employers use some kind of surveillance to monitor employees.43 Such devices and techniques include:

  • Keystroke monitors that track the individual's productivity in typing.
  • Video cameras monitoring the work area.
  • Reading employee e-mail.
  • Monitoring employee access to the Internet.
  • Monitoring employee telephone conversations.
  • Drug testing and other medical tests.

"Large businesses are monitoring more and more of their workers' use of the Internet."

The use of such devices and techniques has arisen not only because it is possible but because over the past decades courts have been ever more willing to hold employers responsible for their employees' behavior, illnesses, injuries, etc. Faced with this threat of expanded liability, employers seek to defend themselves.44

Using Medical Information. Another controversial practice is the use of medical information in making hiring and promotion decisions. Employers seek this information because:

  • Health issues can affect an employee's ability to perform a job or pose a danger to other employees.45
  • An employee at risk of developing certain illnesses might sue an employer for placing him or her in conditions that precipitate that illness.
  • Because of U.S. tax law, employers often pay for employees' health insurance, and insurance prices go up when an employee uses a lot of expensive medical services.

One survey concluded that 35 percent of Fortune 500 companies use medical information in hiring or promotions.46 This statistic, standing alone, is quite alarming. It naturally leads one to wonder, "Can my boss just look at my medical records any time he or she wants to?" But the answer is generally "no" unless your employer self-insures. Ordinarily one's employer simply cannot access one's medical records at any stage of hiring or promotion, sometimes because of federal or state laws, but more commonly because medical care providers are not willing to share them, consistent with their understanding of the obligations of medical ethics. The survey of Fortune 500 companies is thus somewhat misleading. (Under new federal medical privacy rules, this practice among self-insurers is scheduled to become illegal.) Of course, all employers have access to information from any medical tests conducted on the job, such as a drug test. But it is a little hard to perform such tests without the knowledge of the employee.

"Hard evidence suggests that rates of error in credit reports are as low as 1 to 3 percent."

Using Credit Information. A somewhat less controversial issue is the employer's use of credit information in hiring or promotion decisions. On the one hand, many employers have a justifiable interest in their employee's financial integrity and responsibility. An employee with large debts may have an incentive to steal, and one who does not pay bills may be unreliable in other ways. But credit reports are often perceived as inaccurate and thus their use may be perceived as unfair. However, the hard evidence suggests that, on the whole, rates of error in credit reports are low.47 Two highly publicized but biased studies misleadingly reported high rates of error in credit reporting (from 30 to 50 percent). A 1991 study by Consumers Union relied on its employees and their acquaintances to review their own credit reports and report "inaccuracies." Consumers Union did not check whether those claims of inaccuracy were true or false, or try to identify the source of the errors.48 Ralph Nader's Public Interest Research Group also failed to select a random sample, instead estimating an error rate from a sample of consumers who had paid to review their credit reports - people who probably had reason to suspect they would find errors.49 A more rigorous study of 15,703 consumers, conducted by Arthur Andersen & Co., showed that the true error rate is probably as low as 1 to 3 percent.50

The Current Law of Employee Privacy. Usually, when a private employer notifies an employee that surveillance is being or may be carried out, it is not particularly controversial as a matter of contract or tort law. A survey by the American Management Association reports that more than 80 percent of companies using electronic monitoring inform their employees of their policies.51

Employees are likely to find secret or unexpected surveillance more disturbing; it is in these cases that they are most likely to sue for invasion of privacy or wrongful discharge. But the courts generally hold that employees should be aware that their activities using the employer's property (telephones or computers) or in public places may be observed; the employee has no right to expect privacy under those circumstances. For example, in one case an employee had gotten into the habit of changing her clothes in her cubicle in a large office space after the other employees had gone home. She eventually discovered that there was a video camera monitoring the space and sued her employer. The court held that because the space was essentially open to the public, she could not reasonably expect privacy there. A camera placed in a restroom or dressing room, would be another matter.52

It makes sense to use property rights as a boundary of privacy when the contract between a private employer and employee is silent on the matter of surveillance. It provides a clear, bright line for employers and employees alike. But what if the contract explicitly promises employees that e-mail will remain private? One court has said that the employer may read the e-mail anyway.53 The result seems wrong and likely to be treated as such in future; the whole purpose of a contract is to rearrange the parties' normal rights and duties. The case would in effect make employees even more distrustful of employers by sending the message that employers' explicit assurances about privacy cannot be trusted.

In any case, it is unwise for businesses to spy on their workers, for when the surveillance inevitably is discovered the employees are likely to suffer a blow to morale even if they do not sue. However, the practice is not indefensible. In some cases, announcing surveillance allows employees bent on wrongdoing (such as embezzlement) to take further steps to evade detection; and employees who know they are under surveillance are likely to be more stressed and suffer physical ailments.54

"Limits on what sources employers may consult to learn about employees may have serious unintended consequences."

Several federal and state statutes may also affect privacy on the job. For example, Title III of the Federal Omnibus Crime Control and Safe Streets Act generally prohibits the interception of electronic communications by any device.55 But the law allows employers to monitor employees in the ordinary course of the employer's business,56 or with the employee's consent. State wiretap laws may also apply. As a general matter, of course, federal constitutional rights of privacy apply only to government employees.

The Future of Employee Privacy: The Gossip's Revenge. The current direction in legal discussions of state and federal privacy policy is to urge the enactment of more laws that protect workers' privacy. These proposals include enacting federal or state law to require employers to give notice of surveillance57 (although employers seem to be moving in that direction in any event, as advised by countless attorneys writing on the subject) or supporting judicial activism to apply constitutional rights of privacy to the private sector or to expand privacy torts.58

Limits on what sources employers may consult to learn about their employees may have serious unintended consequences. As described above, there are common-sense reasons that employers want this information. Employers who are shut off by law from reading employee e-mail, credit reports or medical information will not stop wanting the information. They will instead step outside of accurate, professional sources like health records or consumer reports. What will the most likely alternative be?

The "Good Ol' Boys' Network." Employers for a long time hired people they or their friends and family knew. Strangers in town were out of luck. People outside the employer's social circle were out of luck. Often this meant women and minorities were out of luck. The irony of privacy laws that restrict the use of professionally developed and run databases is that those laws would backfire. Employers, shut off from legitimate sources, will go back to inaccurate and unfair gossip.

In view of this, it is probably wise to leave cases of privacy invasion on the job to the courts, which seem to be leaving employers the freedom to gather the information they need, while restraining the more untoward cases involving spying on restrooms.

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