Federal law now protects whistleblowers in many instances from retaliation and encourages them, through financial incentives, to bring qui tam lawsuits and report possible wrongdoing to the SEC and IRS. In this fashion, the law turns company employees into potential confidential informants. As informants, employees have a powerful incentive to provide federal authorities secretly with business-related information (including documents) that a company would ordinarily consider confidential and strictly for internal use. The regime of whistleblower law expects and even promotes such conduct – though at least one recent state case demonstrates that taking an employer’s confidential information, when it is done for private purposes, still violates the law.

For a New Jersey whistleblower, who took highly confidential educational records that primarily supported a private cause of action rather than evidenced misconduct by the organization, the consequences of going too far have been severe.  A former employee of the North Bergen Board of Education, Yvonne Saavedra, set out to prosecute employment discrimination claims (alleging gender, ethnic and sex discrimination) and whistleblower retaliation claims (alleging that the Board terminated her son because Saavedra complained about pay irregularities, violations of child study team regulation, unsafe conditions and other workplace problems). Instead, she now faces criminal charges of official misconduct and theft by unlawful taking of public documents. On June 23, 2015, the New Jersey Supreme Court upheld the trial court’s denial of a motion to dismiss the charges – a stark reminder that employees who engage in “self-help” discovery by taking company documents may risk criminal prosecution.

Saavedra was employed by the Board as a payroll clerk for 10 years until she was reassigned in 2009 to support a child study team. Saavedra had access to confidential student records that were protected from disclosure by federal and state laws as well as the Board’s privacy policy and Code of Ethics. While assigned to the child study team, without the Board’s permission, Saavedra removed from the files 367 highly confidential original and photocopied student educational and medical records, including a bank statement of a parent submitted to the Board to prove residency, documents that included the names of children being treated by a psychiatrist and letters concerning special education services provided to children. The indictment alleged that in 69 instances Saavedra removed the original document or the Board’s only copy.

Saavedra filed a civil action against her employer, her supervisor and others, in 2010, seeking compensatory and punitive damages for retaliation that she allegedly suffered for complaining about certain of the Board’s employment practices and for discrimination that she allegedly suffered because of her race, ethnicity, national origin and gender. Her claims were premised, in part, on the Conscientious Employee Protection Act, New Jersey’s whistleblower protection statute. A year and a half after Saavedra filed the discrimination case, her counsel produced the confidential documents in response to a discovery request by the Board for documents possessed by Saavedra that “may include confidential and/or privileged information.” After receiving the documents, the Board reported Saavedra to the county prosecutor’s office; she was later indicted.

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Saavedra dismissed her civil action (reportedly because her attorney did not wish to proceed with the case) and moved to dismiss the indictment, arguing in part that the New Jersey Supreme Court’s Quinlan v. Curtiss-Wright Corp. decision established “an absolute right for employees with employment discrimination lawsuits to take potentially incriminating documents from their employers.” The trial and intermediate appellate courts rejected this argument.

The New Jersey Supreme Court affirmed the denials of her motion, rejecting Saavedra’s arguments that the indictment violated public policy; that dismissal was required because the State had failed to disclose exculpatory evidence (i.e., her reason for taking the documents); and that Quinlan protected her from criminal prosecution. The Court wrote that its “decision in Quinlan did not endorse self-help as an alternative to the legal process in employment discrimination litigation. Nor didQuinlan bar prosecutions arising from an employee’s removal of documents from an employer’s files for use in a discrimination case, or otherwise address any issue of criminal law.” The Court explained that the Quinlan balancing test applies not to criminal cases but is “an important measure” in retaliation cases “when the employee’s conduct in taking or using confidential documents allegedly provoked the employer to take retaliatory action.” The Court acknowledged that Saavedra could raise “claim of right” or another justification as a defense at trial.

While noteworthy, the Saavedra decision may have limited impact. In a typical federal whistleblower context, an employee claims that an employer is defrauding the government, violating the securities laws and the like. The confidential information taken by the employee is generally not intended to support a strictly private cause of action. Nonetheless, the Saavedra decision highlights that the taking of an employer’s confidential information, even when claimed to be in support of whistleblowing, is not risk-free.

From The Insider Blog: White Collar Defense & Securities Enforcement.