Anthony Leness was an executive at a company called EventMonitor. His contract stated that he couldn’t disclose confidential information and that he would return all such information if he left the company.
After six years, Leness was terminated. Shortly afterward, the company discovered that he had subscribed to an online data storage service and had uploaded a large number of the company’s files to the service, including confidential data.
The company changed the status of his termination to “for cause,” and cut off his severance payments.
Leness sued, and the Massachusetts Supreme Court sided with him. It said Leness couldn’t be fired “for cause” because he didn’t breach his contract in any significant way. It’s true that he didn’t return all the confidential information when he was let go, but the company couldn’t prove that he ever disclosed the information or shared it with anyone else – and therefore, the company wasn’t really harmed by his actions.
Note: Some businesses have been trying to deal with this issue by putting “liquidated damages” clauses in their employment contracts. These clauses acknowledge that it can be difficult to value the harm to a company caused by an employee keeping confidential data, so therefore employees agree that they will pay the company a certain specified amount of money as damages if it’s discovered that they broke the rules.
It’s not clear that these clauses will always be upheld in court – but the mere possibility of having to pay liquidated damages can often discourage employees from taking confidential information with them in the first place, which is the real goal.