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He sensed trouble ahead at work...

employment contract breach

... So, the employee tried to take matters into his own hands and protect himself. Unfortunately, in doing so, he breached his employment contract. His employer sued him, and eight years of employment litigation later....

Let's start by affirming that eight years of litigation is generally not an optimal experience for anyone.

What happened eight years before EventMonitor, Inc. vs. Leness, 473 Mass. 540 (2016) was decided by Massachusetts' highest court? The employee -- one Mr. Leness, the vice president for business affairs for the plaintiff company for approximately six years -- was terminated from his position when the company president came to believe his actions were suspect.

Mr. Leness had an employment contract that specified the terms and conditions of his work, including the length of the contract, job duties, remuneration, and terms of separation from employment.

At the time of termination, the company deemed his separation, for purposes of the employee-defendant's employment contract, "without cause." But after Mr. Leness returned his laptop and left his job, the company had it scrubbed. The search showed that Mr. Leness had copied the employer's proprietary information to a third-party data storage site before returning the laptop. His company, concerned about theft of their confidential information, sued him for breach of contract for copying the files, not disclosing he had copied them, and not returning all copies of proprietary files to the employer. It also retroactively changed his termination classification to "for cause" -- a meaningful distinction.

Under the terms of Mr. Leness's employment contract, if he separated employment without cause, he was entitled to one year's salary and benefits. And, indeed, initially when the company classified the separation as without cause, they were paying him.

But after finding the evidence that he copied the proprietary information, the company cut him off under the theory that he "defalcated" the company's assets, an offense justifying for-cause termination under his employment contract. (As the judge reviewed, to "defalcate" is to misuse funds or embezzle.)

In response to the employer's suit, Mr. Leness counter-sued for breach of contract. Among other things, he argued the termination was without cause, as it was initially classified. He wanted his full year's worth of salary and benefits.

OK, so he messed up. What now? What are the legal questions?

Did the employee breach his contract when he copied the employer's information, failed to disclose his action to his employer, and failed to return all the employer's files upon his separation from employment? And if so, was that breach material?

To put it in a real world way, should Mr. Leness get his full year's salary and benefits?

The Supreme Judicial Court concluded that, although he did breach his employment agreement, the breach was not material because Mr. Leness did not knowingly disclose, or knowingly use, any of the employer's information and did not endanger the confidentiality of it. He just copied it to the third-party site where it remained untouched.

Further, the Court concluded that the "the employee's activities did not constitute defalcation within the meaning of the agreement, in that the employee's secure storage of the information, in the absence of any disclosure or use by anyone other than the employer, did not undermine the employer's exclusive use of its information."

Employment contract cases, as this one, turn on the wording of the contract as well as the circumstances. Because Mr. Leness never actually endangered the confidentiality of the employer's information, even though he did breach the agreement by copying the files, the breach was deemed not material. Mr. Leness was thus awarded his full year's salary and benefits.

What were the doorways? How could this have been done differently?

As I try to do in each blog post, I show what were the points in each case in which the employee or the company were passing through a doorway -- where things could have been different had they made a different decision and gone through a different door.

Here, the employee-defendant copied the files to the third-party site right around the time when things started to get tense at work. He clearly sensed a bumpy road. By copying the files, he decided to take some action presumably to help him find new work or to just help him in a later position. He was trying to protect himself, a very human response. But from an employment law perspective, that was also a doorway that put at risk a year's worth of pay and benefits. While in this case he did not show the employer's information to anyone, one could see, however, a situation in which a different person may have used it to gain some leverage in negotiating a new job for himself at a competitor.

Mr. Leness "won" -- the court ordered that the employer pay him for the year. But that was more than eight years after the action occurred. (He was terminated on December 5, 2007; the Court decided his case on February 4, 2016.)

Litigation is slow. That there is an old adage about this -- "the wheels of justice grind slowly" -- confirms it. It also can be incredibly all-consuming and expensive.

Employment questions can be tough, and from a legal perspective, small facts can change the result. If you sense you're heading for a doorway and want to take steps to protect yourself, contact me for advice on how to get you through in a way that is most beneficial to you.

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