The Norwich Union case arose out of the spreading of rumours by Norwich Union employees through its internal e-mail system that its competitor, Western Provident, was in financial difficulties and was being investigated by the Department of Trade and Industry. Along with the settlement payment of £450,000, Norwich Union also had to make a statement in court saying that it "now accepts that this was wrong - that there was no truth in any of the allegations".
This bulletin sets out the legal issues for companies using an e-mail system and the positive action they need to take in minimising the legal risks to which they are exposed.
WHAT'S THE ISSUE WITH E-MAIL?
Electronic mail or "e-mail" has become a well established means of communication for businesses worldwide. Indeed, the greatest use of the internet is e-mail although messages by e-mail can also be distributed through a private communications network. The ease and speed of e-mail results in less formality than a fax or letter and is more akin to speaking on the telephone. However, unlike routine telephone calls, e-mail messages are recorded, can be stored indefinitely and a hard copy made of them. This gives rise to a number of legal risks for companies with an e-mail system.
WHAT ARE THE LEGAL RISKS?
Libellous Statements.
One of the largest risks for companies is libellous statements circulated by employees using the company's e-mail system. The risk of libel action is exacerbated by the global nature of e-mail and the ease with which messages can be circulated. Different jurisdictions have different libel laws. In the UK, it is possible for an employer to be vicariously liable for its employees' e-mails if the wrongful act was committed in the course of the employee's employment (even if the act was done in an unauthorised way). If the wrongful act was an act which the employee was not employed to carry out, the employer, as a general rule, will not be liable. The question of whether an act is or is not within the course of an employee's employment is essentially a question of fact. Under the Defamation Act 1996 a company may have a defence to an action for libel if it can show that it was not the author, editor or publisher of the e-mail; that it took reasonable care in relation to its publication; and it did not know, and had no reason to believe that it caused or contributed to the 'publication' of the e-mail. (In the Norwich Union case the Defamation Act 1996 did not apply because the facts of the case had arisen in 1995, before the Act had come into force.)
Racial Or Sexual Harassment.
Statements that amount to racial or sexual harassment under the Race Relations Act 1976 or Sex Discrimination Act 1975 made by a person in the course of their employment may be treated as made by the employer as well as the individual whether or not it is done with the employer's knowledge or approval. To avoid liability the employer will need to show that it has taken all reasonably practicable steps to prevent the employee from doing the discriminatory act.
Protection From Harassment Act 1997.
Under this Act it is an offence for a person to pursue a course of conduct which amounts to harassment of another. Harassment by an employee using its employer's e-mail system may expose his employer to liability under the Act.
Breach Of Confidentiality.
The unauthorised disclosure of confidential information that has been sent through on-line e-mail systems by an employee may give rise to an employer being liable for breach of confidentiality and damages. The insecure nature of on-line e-mail systems may endanger confidential information that is not encrypted.
Entering Into Contracts.
Due to the informal nature and the ease of using e-mail, an employee may agree to enter into contractual commitments with third parties by using the company's e-mail system which lack the necessary clarity and detail. The obligations entered into by the employee may bind its employer even if the employee is not actually authorised to do so.
Copyright Infringement.
An e-mail message may contain or attach a copyright work owned by a third party. It is an infringement of copyright to make an electronic copy of such work even if it is only transient. Copying by an employee in the course of his employment may expose companies to liability for such infringement. Remedies for infringement include an injunction (or an interdict) or damages.
Court Disclosure.
E-mail messages, unless protected by privilege, must be disclosed to the other side in a Court action if relevant to the issues in the case.
Minimise The Risks
The Norwich Union case underlines the importance of having an e-mail policy in place in companies using an e-mail system. Companies wishing to minimise the legal risks in using an e-mail system should:
Further Information
- Establish a clear policy for e-mail use. This will include setting out the rules of use by employees, specifying the types of statements that must not be included in e-mail (sexist, racist, abusive, defamatory etc) and security issues;
- Ensure that the policy is well-publicised within the company and that the staff are educated as to its importance, meaning and effect. This will be particularly important for contract managers and sales staff who negotiate and enter into binding contracts by e-mail.
- Publicise a warning to staff to the effect that breaking the policy is a serious matter which may amount to a disciplinary offence. The reasons for the policy and the risks to the company of non-compliance with the policy should be made clear.
For further information or advice on any of the legal or internal policy issues involved in e-mail use, please contact us.
This bulletin is correct to the best of our knowledge and belief. It is, however, written as a general guide; it is essential that relevant professional advice is sought before any specific action is taken. Garretts is a member of the international network of law firms associated with Arthur Andersen and is regulated by the Law Society in the conduct of investment business.
Garretts associate firm Dundas & Wilson acted for Shetland News in this significant piece of internet litigation. If you would like further information please contact us.
