Are your workers guilty of pillaging and pirating the music industry? (On Law)

Employers could be exposed to liability by employees who use corporate resources to break the law

The music industry launched a war on Sept. 8 on computer users who distribute copyrighted music over the Internet using file-sharing networks like Kazaa and Morpheus. Among the 261 individuals sued by the Recording Industry Association of America were a 12-year-old girl and an elderly grandfather. But it’s not just small children and grandparents who should be concerned.

As the battle for copyright infringement wages on, the music industry is sparing no punches. The effects of this crusade may have implications for the workplace given that many of these “freeloaders” may be employees who use corporate resources to commit their crimes. This means employers could be exposed to liability.

Vicarious liability is a concept which has been used to attempt to hold the employer legally responsible for the acts of its employees. The concept of vicarious liability is underlined by important policy concerns, including providing a just remedy for the victim and deterring future conduct. When employees use corporate resources for illegally downloading copyrighted music, employers may be held responsible for this misconduct. (For a thorough look at the concept of vicarious liability, click on the related articles link below.)

While there haven’t been any lawsuits of this type yet in Canada by the music industry, two recent cases on the illegal downloading of pornography shed some light on how the courts and tribunals may consider the issue of vicarious liability when it comes to employees using the Internet to download music.

In Krain v. Toronto Dominion Bank, the employee was terminated for visiting inappropriate sites during business hours. He downloaded, stored and distributed hard core pornographic information. He also downloaded pirated software, games and movies and copied the software for his personal use.

The bank’s Internet policy maintained that viewing, downloading, possessing or distributing inappropriate or offensive materials from the Internet was subject to disciplinary action up to and including termination for cause. The policy also prohibited the downloading of games, other entertainment software and the copying of copyrighted materials.

In Krain the arbitrator found that while the employee’s actions during business hours were inappropriate and deserving of discipline, they did not necessarily lead to cause for termination given that the bank should have followed its own policy and imposed a progressive disciplinary scheme on him. But the arbitrator found that due to the fact the employee had exposed the bank to liability for copyright infringement by downloading and using unlicensed software for both work and personal use, the balance was tipped in favour of a finding of cause.

In Minaker v. Toronto Dominion Bank, the employee was terminated for the downloading of commercial software and pornographic videos. The employee admitted to downloading the materials but not to using them either for business or personal use, except for a few which he had used during non-work hours.

As in Krain, the bank relied on its Internet policy. Amongst its other arguments the bank argued that the simple act of downloading programs subject to a license was a copyright violation and a breach of its policy and guidelines. The bank relied on the decision in Krain.

But the employee argued that, unlike Krain, once it was certain that the downloaded software was subject to a licence, he deleted it, and therefore did not violate the bank’s policy or copyright laws. The employee also argued there was no evidence that he stored or shared the downloaded software, only that it had been downloaded. And he said he had not been made aware of the policy until after the conduct which led to his termination.

The arbitrator found the employee had committed some serious errors in judgment and had placed the bank at risk for computer viruses, but had not compromised the bank’s systems. But on the issue of pirating, the arbitrator found the evidence only demonstrated that commercial software was found on the employee’s hard drive and was not clear that he had used the material. The few files which the employee had admitted to using or sharing did not constitute unlicenced use.

Regarding the bank’s policy, the arbitrator found that while the bank requires employees to observe copyright laws and obtain any applicable licences, there was some uncertainty as to whether the employee’s actions amounted to a violation. He found that the employee had not been made specifically aware of the document in which the policy was found but expected this to be a matter of common sense.

“In any event, the issue in this instance is not whether a policy exists or to what extent it has been communicated to employees, but whether it clearly covers the complainant’s conduct in the case before me, and I have found that is not clear,” the arbitrator stated.

Accordingly he found the bank did not have cause to terminate Minaker’s employment.

It is interesting to note that in these two very similar cases dealing with employer exposure to illegal use of copyrighted materials there were two very different decisions. The two arbitrators differed as to whether it was the actual downloading or use of the downloaded materials which exposed the employer to liability.

But despite the different findings, both cases make one thing clear. Employers must have a well-defined Internet policy. This policy should be signed and dated by the employee and there should be a statement in which the employee acknowledges that the downloading of material, such as music and pornography, is clearly prohibited. The employee must understand that the consequence of such downloading may be termination. (For a sample computer-use policy, click on the related articles link below.)

Natalie MacDonald is an associate with Grosman, Grosman & Gale, a Toronto-based law firm specializing in employment law. She can be reached at (416) 364-9599 or [email protected]

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