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Ninth Circuit Schools Employers How To Handle Disgruntled Employees

Employers take note:  when you're faced with a disgruntled employee who you place on administrative leave, but still allow the employee to maintain possession of one of your computers or laptops, the Ninth Circuit just gave you a road map on how to handle it.

First, send a letter to the employee instructing the employee to maintain the integrity of the hard drive and not to erase anything.

Then (if you anticipate a big blowup), before you fire the employee, file a declaratory relief action with the Court and explain your reasons for wanting to fire the employee.  That way, you can fire the employee with the court's endorsement and you won't have to worry about a backlash.

In the actual case, Leon v. IDX Systems, the employee (a medical doctor) deleted some 2,200 files from the company's laptop and then filed a wage and hour claim with the Department of Labor and another one against the company.  The employee had threatened to take whistle-blower actions against the company, including actions for violation of the False Claims Act, Sarbanes-Oxley and the Americans with Disabilities Act.  As you can guess, these claims were a time bomb for the company, which is likely why it decided to take a preemptive strike and file suit against the employee.  The company won, and won big.

The Ninth Circuit upheld the trial court's two decisions to slap the employee with a $65,000 monetary sanction for evidence spoliation and dismiss the employee's wage and hour claim against the company.  The appeals court also reversed the trial court's refusal to likewise dismiss the employee's claim with the US Department of Labor

The strategy worked:  the company can now terminate the employee, the employee is barred from his claims against the company (including wages) and the employee now owes the company money.  A triple play.

Posted by J. Craig Williams on Thursday, September 21, 2006

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