The Internet and Enterprise Liability

Manageable liabilities are part of the cost of doing business; extraordinary liabilities such as hostile workplace suits, negative public relations and the negligent disclosure of personally identifiable information can go a long way towards sinking your business. So what new liabilities have you brought upon yourself since your company decided to connect to the ‘Net?

The term “hostile workplace” conjures up images of people coming to work with lead pipes or screaming supervisors hitting employees over the head with their staplers. All that has changed: Sally walks past Fred’s cubicle and Fred has the Pamela Lee video running on his screen. Then Fred, who has always had a weird sense of humor, email broadcasts an off-color joke that he thinks is a riot. Most of the recipients think Fred’s joke is marginally funny, if that, but Sally, who is miserable to begin with, is now sent over the edge and decides to retire by slapping a hostile workplace lawsuit on you. Sound like an exaggeration? The Internet has broadened the definition of sexual harassment. Edward Jones, the world’s ninthbiggest

brokerage firm, issued a memo demanding its workers disclose if they sent pornography or off-color jokes over the brokerage’s e-mail system. Forty-one employees who confessed were disciplined, but 19 who failed to come forward were fired. Dow Chemical fired 24 employees and disciplined hundreds of others for storing and sending sexual or violent images on the company’s computers. Twelve librarians in Minneapolis filed a complaint saying that library visitors were downloading porn, including bestiality and child molestation, and leaving it for librarians and patrons to see. The Equal Employment Opportunity Commission (EEOC) ruled against the library in favor of the librarians saying that the library "did subject the charging party to [a] sexually hostile work environment." Losing these lawsuits can be very costly. Recommended restitution for the librarians was $900,000. Chevron agreed to a $2.2 million settlement for a lawsuit brought against it for emails offending women. According to EEOC statistics, American businesses pay in excess of $50 million a year in judgments relating to sexual harassment charges. This bill doesn’t include monetary benefits obtained through litigation nor does it include legal fees and the totally unproductive time of defending these lawsuits. And this doesn’t just apply to blue chip companies. According to AIG insurance, the EEOC is fervently pursuing small to medium sized business with average awards on the order of $1 million. One customer of our Employee Internet Management software implemented our solution in her business because she suspected employees were wasting too much time on the Web and sending an inordinate amount of personal e-mail. Not only did her instincts prove correct, she also found one employee who was starting her own Internet adult Web site – while at work! While on the company dime, this employee was developing her web site including downloading porn to post on her website and creating lurid sex stories for her potential customers. Talk about a productivity hit combined with a potential hostile workplace claim – yes, men filed 14% of the charges of sexual harassment in 2005. The offending woman was summarily dismissed from the customer’s business before the situation worsened.

Public image and how customers perceive your company is crucial to any business’s success Goodwill is an intangible asset that adds significant value to the equity in your company. One need only think of Enron to realize the host of issues beyond the Internet that can negatively affect a company’s image forcing the company to fold or spend an inordinate amount of money to rebuild the way people perceive it. But the Internet brings a new dimension to potential PR nightmares. Nadine Hoabsh, an associate editor for Ladies Home Journal, decided to publish work details in her then anonymous and very popular Web Log (Blog), Jolie in NYC. She wrote about lavish perks given only to executives, detailed a "beauty hierarchy" within the organization and named names of favored employees. When Hoabash was outed as the author of the blog, her criticism of her employer was an embarrassment to Ladies Home Journal with its customers, agents and competitors. One of our company’s service industry customers is incisively concerned that his customer billable hours are correct and verifiable. Our customer feels that his credibility would be destroyed if a disgruntled employee were to lead customers to believe they were being charged for time his employees are spending on personal Internet use. Whether you’re a small or large organization, if you’re a company that spends time or money building an image, nothing can tarnish that image and erase the value of those advertising dollars quicker than being associated with child porn. One of our multinational manufacturing customers quickly dismissed an employee for intentionally downloading child porn and reported the individual to authorities. Our customer not only realized that they had to circle the wagons to protect their image but had a legal and moral responsibility to the community in which the offender resides.

In addition to image problems, lawmakers have piled on a host of laws and regulations that require the safeguarding of personally identifiable information. Violations of laws like HIPAA, SOX and GLB all contain stiff fines and even jail time for violations of their regulations. Regardless of these mandates, issues abound protecting privacy on the ‘Net. In 2005, Bank of America and Wachovia notified over 100,000 customers that their accounts and personal identity information were at risk because of a scheme by bank employees who allegedly sold the data to a middleman who then brokered it to collection agencies. In February of the same year, a Florida statistician working for the Palm Beach Health Department inadvertently sent a broadcast email containing a highly confidential list of the names and addresses of 4,500 Palm Beach County residents with AIDS and 2,000 others who were HIV positive. The email was sent to more than 800 county health department employees. In 2001, Eli Lilly sent an email to all registrants of its time-to-take-your-Prozac reminder service. But instead of sending an email individually to each customer, Eli Lilly broadcast the email to all recipients by placing all subscribers’ addresses in the “To:” field of the e-mail thereby unintentionally disclosing to each individual subscriber the e-mail addresses of all subscribers. Not exactly a cure for depression. Lilly received a slew of bad press and a slap on the wrist by the FTC requiring Lilly to strengthen and monitor their data security procedures.

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