Clear message of Labor Court to employees: Steal and Laundered Money!

Clear message of Labor Court to employees: Steal and Laundered Money!

Doron Afik, Esq.
July 24, 2021

In a bizarre, to say the least, verdict of the Tel Aviv Labor Court of June 2021, the Court made an innovative ruling: an employee who steals an employer's database and tries to sell it to a competitor is exempt from liability if he manages to hide the consideration received for the sale. i.e., the Court encourages employees to steal databases as long as they manage to hide the consideration!

The said verdict deals with a senior manager who worked for a marketing company and was summoned for a pre-dismissal hearing. After the hearing, he logged into an office computer with his senior manager password and sent himself the company's database - an optimized and segmented database in which the employer invested huge sums in creating and formulating it. Our office, which represented the employer, managed in a complex move to obtain a civil search and seizure warrant so that the police arrived at the employee’s home and a computer and cell phone were taken, as well as a search was made in the employee’s private Gmail inbox. Among other things, the private Gmail box contained correspondence with a senior manager in a competing company, to which the employee moved after the termination of his employment, in which the employee clarified that he had tens of thousands of records for sale. After five years of legal proceedings, the Court held that the employee did steal the database and breached his fiduciary duties, but because the size of damage form the theft of the database was not clear (which usually cannot be proven as long as the employer did not collapse), it was not proven that the database was actually given to the new employer (which cannot be proven unless the employee received separate payment form the new employer on which it was stupidly written that it is for sale of the stolen database) and because the employee had access to the database and therefore is not confidential (innovative and fascinating "new" rule of law that once a senior employee gains access to a database required for his work the database loses value), the employee will pay only ILS 15,000 in compensation. The employer, five years after the incident, did not want to appeal the verdict and preferred to so end the affair. In other words, under the protective wings of the Labor Court, crime pays.

In a long line of verdicts, a 'customer list' has been recognized as a trade secret, provided that special effort is made to obtain it and the information in it confers a commercial advantage on its owners. When the employer can show that it is confidential information and it has taken measures to protect it, including protection with passwords and limited access, it is possible in some cases, as our office was able to obtain in this case, to obtain orders that allow seizure of employee assets. Sometimes, the make taking of the procedure correctly and swiftly may end the legal case with the desired results for the employer, as has happened in other cases handled by our firm.

Beyond taking immediate action, it is important to ensure that the employee uses only the business mailbox provided to him when it comes to work matters and that the business mailbox that the employer provides to the employee is used only for work purposes and the employee has signed consent to full access to the employer's mailbox - consent without which even access to the mailbox at the employer may require complex procedures. Furthermore, it is very important to ensure that the employment agreements protect the employer and facilitate proceedings in case of breach of confidentiality or non-compete obligations. An employer who holds sensitive information in the database should conduct a labor law risk survey, as we have done for quite a few clients of ours. Otherwise, as can be learned from the puzzling, to say the least, verdict described above, it could be that after 5 years of legal proceedings compensation will be obtained that does not cover even a small portion of the costs of the proceedings.