Some Words of Caution on Dealing with the E-World

The spectacular failure of so many “” businesses in recent months has garnered headlines and pushed stock market indexes precipitously lower. But e-business technologies and innovations are here to stay and continue to transform the way traditional brick-and-mortar companies do business.

Companies in almost all manufacturing sectors have adopted Internet technologies to maximize efficiency, manage supply chains, improve customer relations, and quickly communicate with employees, suppliers, and customers around the world. But electronic technologies create some new legal concerns that require action, attention, and training.

E-mail and Internet access have created new human relations issues. Employees have been disciplined (including termination) for circulating e-mail jokes and image files that other employees found offensive. Those activities, even when not condoned or known about by management, have led to allegations they contributed to a “hostile environment.”

Apart from these traditional employee concerns, employers have been forced to take action after learning that employees were engaged in the illicit sale of software or other criminal activity of a much more unsavory character using their electronic systems. Several years ago, for example, a high-ranking Disney employee was terminated when he was discovered using a company database to locate and meet young girls on-line.

Most large employers now have added sections to employee handbooks stating that e-mail and Internet access are provided for the convenience of the employer and are intended solely for business purposes. These handbooks also specify that the employer will monitor system usage to assure technical integrity; verify compliance with policies and procedures; investigate complaints; and/or cooperate in any legal investigation.

Some existing privacy laws may be relevant to certain types of employee surveillance; careful disclosures of monitoring and judicious collection and use of information usually will suffice to avoid noncompliance issues in the US. However, labor groups have proposed legislation in the past to expand employee privacy rights, and Canadian, EU, and national privacy laws should be considered for companies dealing with international employees.

Some businesses are moving to eliminate paper files completely. E-mail and other electronic records are sought increasingly in litigation. The casual nature of e-mail not only has led to increased claims of sexual or racial harassment but to some comments that can come back to haunt a company in the event of any lawsuit. Even tech-savvy Bill Gates, who stated that he was not trying to force his competitors out of business during the Microsoft antitrust suit, found that his e-mails were used to impeach his testimony and credibility.

E-transactions create other issues related to authorizations or approvals, warranties, and more. While e-signature technology exists, it still has not been adopted widely, and many small companies are not prepared to deal with e-signatures at present. It also remains important to establish the full array of warranties, risk of loss, and other traditional contract terms in e-transactions. That readily can be done by “click to agree” contracts.

Confidentiality is also a concern. With the click of a mouse or inadvertent link to the wrong e-mail address list, materials intended for limited distribution — such as information on possible acquisition targets, formulas, or sensitive employee issues — may be sent to a wider and wholly inappropriate audience. Employees should be told not to send certain types of communications electronically, and senders should always double-check the accuracy of an e-mail address before sending any message.

Electronic communication helps expand business opportunities, improve communications, and streamline operations. Some precautions will assure these benefits always outweigh the possible legal risks.

Sheila A. Millar, a partner with Keller and Heckman LLP, counsels both corporate and association clients. Contact her at 202/434-4143; e-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.; web site:

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