Erhart v. Botfl Holding, Inc, No. 15 Civ. 02287, 2017 WL. 588390 (SD. Cal. Feb. 14, 2017)
Whistleblowers, like Charles Erhart, often find themselves in a tough spot when it comes to taking documents from their employer. Often these documents are confidential, proprietary, and, clearly, the employer’s property. But they can also be critical to demonstrating the employer’s wrongdoing. A recent decision from California-Erhart v. Bofl Holding, Inc.- addresses this issue.
Erhart worked as an internal auditor for a financial services company. He investigated and alerted the OCC and the SEC to potential illegal conduct by the company. It’s no surprise that this made Erhart unpopular at work. In fact, he alleged that a senior bank official commented that if Erhart continued “to turn over rocks, eventually he is going to find a snake and he’s going to get bit.”
When the company downgraded Erhart’s performance evaluation and reduced his bonus, he knew the retaliation had begun. Erhart became fearful that his employer would delete the documents that would prove the misconduct he was reporting.
This left Erhart in a difficult position. What do you do when you know you can prove that your employer retaliated against you for blowing the whistle, but the proof you need is all in the form of confidential documents at work?
Taking records from work is a double-edged sword. On the one hand, documents can prove that the fraud you investigated is actually happening. It can also demonstrate the retaliatory behavior of your employer. On the other hand, taking documents can hand your employer a legitimate reason for taking disciplinary action against you. It can even give your employer grounds to sue you, which is exactly what happened to Erhart.
Ultimately, the company fired Erhart. Erhart filed a lawsuit alleging that the company had retaliated against him for reporting unlawful activity to the government. Shortly after, the company filed a countersuit against Erhart, saying he had taken confidential information that belonged to the company. Taking this information, they alleged, amounted to theft and a violation of the confidentiality agreement Erhart signed when he started working with the company.
Erhart admitted that he e-mailed files containing confidential company information to his personal gmail address. He also emailed information to his mother “for safekeeping,” and used his girlfriend’s computer at their home to access company information. The court had to decide if Erhart’s actions were, as he saw it, legitimate and necessary to support his whistleblower retaliation claims, or, as his employer saw it, misappropriation and misuse of confidential information. The court weighed the company’s “significant interest” in enforcing its employee confidentiality agreement and protecting its trade secrets against the “strong public policy in favor of whistleblowing and protecting whistleblowers from retaliation.”
The company asked the court to declare Erhart liable without a trial. The court first decide d that the confidentiality agreement could not prevent Erhart from sharing information with the SEC. This was particularly true when, as here, the SEC had specific regulations prohibiting confidentiality agreements that prevent employees from providing information to the SEC. As for emailing the information to his mother and downloading documents on his girlfriend’s computer, the court held that because a jury could decide that Erhart’s actions were “reasonably necessary” to support his allegations of wrongdoing, the public policy protecting him as a whistleblower outweighed the company’s privacy concerns and the case should go to trial. Similarly, the court held that a jury should have the opportunity to determine whether including information Erhart gleaned from the documents in his whistleblower retaliation lawsuit was appropriate because it was reasonably necessary to his suit.
While this opinion was good news for Erhart, whistleblowers should still be cautious when they consider collecting documents for their retaliation claim. The court’s decision was very fact specific and made clear that “wholesale stripping” of confidential information would not be permissible. The information needs to be reasonably tailored toward proving your case and cannot be disseminated for the sake of harming or embarrassing the employer. If, for example, the company could have shown that Erhart shared the information with more people than his lawyer, his mom, and his girlfriend, the outcome could have been different. If you find yourself looking under rocks that belong to your employer, consult with an attorney before you get bitten by a snake.