Privacy breach by your rogue employee: Are you liable?

Collecting, storing, and using personal information is often the key to developing and delivering individualized products and services in our current economy. As consumers, businesses, and service providers alike become increasingly comfortable using electronic platforms to exchange or store personal information, reports of privacy breaches seem to be on the rise.  It is not only the outside hackers that are contributing to these increasing reports, but also employees who have clearly gone rogue.

So what happens if your organization or business gets hacked, or worse yet your employee goes rogue and breaches privacy while in your employ? Can you get sued for breach of privacy where the breach occurs as a result of the unauthorized acts by your employee?  How would the Office of the Information and Privacy Commissioner (“OIPC”) respond to such an unfortunate situation, and what are the potential ramifications for your business or organization?

Consequences that the Court and the Privacy Commissioner Can Impose for Breach of Privacy

In British Columbia, the Privacy Act, RSBC 1996, c. 373, establishes a statutory cause of action for a breach of privacy. The British Columbia Court of Appeal has confirmed that there is no co-existing common law tort of breach of privacy in British Columbia.[i]

What this means is that a person whose privacy is breached in British Columbia, either by someone they know or by a stranger, has a right to sue only if the breach meets the elements of the statutory tort set out in the Privacy Act. While persons will not have to prove that they have suffered harm as a result of the breach, they will have to prove that the breach was wilful, without claim or right, and violated their reasonable privacy expectations.

This limited statutory cause of action differs from what may be available in other provinces. Some other provinces have introduced the common law tort of intrusion upon seclusion, which was recognized by the Ontario Court of Appeal in Jones v. Tsige, 2012 ONCA 32. This common law cause of action for breach of privacy is more inclusive as it covers acts that are not only intentional, but acts that are reckless.

In addition to the risk of being sued for breach of privacy in the courts, there is the risk of being subjected to investigation by the OIPC.  The OIPC is responsible for providing independent oversight and enforcement of BC’s privacy laws, including the Personal Information Protection Act, SBC 2003 c. 63 (“PIPA”), which protects and governs personal information in the private sector. When PIPA was introduced in British Columbia, the legislature recognized that individuals have a right to protect their information; however, many organizations have a simultaneous need to collect, use, and disclose information in the normal course of business. PIPA is designed to balance those interests and to reassure the public that their information will be protected by those to whom it is given.

The OIPC is also responsible for overseeing and enforcing BC’s Freedom of Information and Protection of Privacy Act (“FIPPA”), which performs a similar function as PIPA but in the public sector.

Section 30 of FIPPA requires public bodies in British Columbia to protect personal information that is in their custody or control by making reasonable security arrangements against risks such as unauthorized access, collection, use, disclosure, or disposal. Public bodies are required to report unauthorized disclosures, which include situations where a person, known or unknown, accesses personal information that is stored electronically without authorization.  PIPA has similar provisions. In enforcing these requirements, the OIPC may conduct a full inquiry and impose remedial orders if it finds that an organization or business has failed to take appropriate measures to protect the personal information it holds.

While an adverse OIPC decision will typically not impose serious fines, adverse decisions often result in valuable time having to be invested, and significant expert expenses being incurred, to comply with insisting that your organization impose additional security safeguards.  OIPC findings that your organization did not adequately safeguard personal information will also result in significant reputational harm, particularly where the decision attracts media attention.

Can your business or organization be held accountable for your rogue employee’s breach of privacy?

Of increasing concern is the potential risk of wide scale privacy breaches, including by rogue employees, resulting in court certified class actions.

As discussed above, thanks to the Privacy Act, liability for breach of privacy in British Columbia will only be found against someone who acted wilfully.  Further, if you are governed by FIPPA, there is jurisprudence protecting your organization from being sued for failing to keep its information secure in compliance with section 30 of your governing privacy legislation.

In Ari v. Insurance Corporation of British Columbia, 2015 BCCA 468 an ICBC employee accessed the personal information of Ufuk Ari and 65 other ICBC clients without an apparent business purpose. Ufak Ari commenced a class action against ICBC as representative plaintiff (Plaintiff) of the 65 other clients. The Plaintiff attempted to rely on the common law tort of breach of privacy, but this was rejected due to British Columbia not recognizing such a common law tort.  The argument was also raised, unsuccessfully, that ICBC was negligent in the implementation and supervision of its statutory mandate under section 30 of FIPPA to keep its personal information secure.  The BC Court of Appeal agreed with ICBC that a failure to meet the obligations set out in section 30 does not on its own give rise to a claim in negligence.

The Court then went on to consider whether ICBC could be vicariously liable for the rogue employee’s breach of the personal privacy of Ufuk Ari and the 65 other ICBC clients.  Although the Court recognized that the statutory breach of privacy under the Privacy Act requires wilful conduct, the Court recognized that the intentional aspect of the tort was not necessarily incompatible with the imposition of vicarious liability.  The Court ultimately found that it was necessary for it to receive evidence in order to fairly address whether ICBC could be vicariously liable.  The Court, as a result, declined to strike the vicarious liability claim, without trial, and the appellate Court upheld this finding.

The long established principle of vicarious liability holds that an employer can be held vicariously liable for the tort of an employee where the act was either authorized, or unauthorized but so connected with the authorized acts of the employee that they may be regarded as modes, albeit improper modes, of doing an unauthorized act.  Vicarious liability has been relied upon to impose liability on an employer for the intentional acts of its employees, including grave acts such as sexual assault.

Ari is the only Canadian decision which has considered the issue of whether an employer can be vicariously liable for a breach of the Privacy Act.  Ari has not proceeded to trial, although the case is apparently still pending.

Current UK case of concern – Morrisons Supermarket

If you are an employer concerned about being held vicariously liable for the privacy breach of your employee, the below decision from the United Kingdom will sound like your worst nightmare.  This UK decision is under appeal, with the appeal to be heard in the fall of 2018.

In December of 2017, a court in the United Kingdom issued a decision, namely Various Claimants v WM Morrisons Supermarket Plc, (Rev 1) [2017] EWHC 3113 (QB) (“Morrisons”), in which it found an employer vicariously liable for the intentional acts of its employee who blatantly violated UK’s Data Protection Act.

Morrisons is a supermarket chain in the UK. One of its employees, clearly disgruntled and technically savvy, posted a file containing highly personal and sensitive information of 99,998 of Morrisons’ employees on a website which then went viral.  In particular, the leaked data contained the names, addresses, gender, dates of birth, phone numbers (home and/or mobile), national insurance numbers (akin to our SINs), bank codes, bank account numbers and the salaries of the 99,998 employees. The data came from a secure internal database that only a limited number of employees could access. Morrisons was quick to respond, taking down the website within hours and alerting the authorities.  The employee ended up being sentenced to 8 years imprisonment.

Obviously upset, the various employees whose very personal and sensitive information had been published on the internet sued Morrisons.  The Court found that there was a sufficient connection between the position in which the rogue employee was employed and the wrongful conduct. The rogue employee was put into the position of handling and disclosing highly sensitive data to Morrisons’ external auditor (albeit the data was to be  disclosed to the external auditor alone).  The employee had been appointed to that position on the basis of being trustworthy to deal with personal information safely; Morrisons took the risk that it might be wrong in placing its trust in  the employee

The Court held that in the circumstances that it was just, fair, and reasonable for Morrisons to be held vicariously liable. The Court gave regard to, among other things, the following:

  • the commission of the tort was entirely dependent upon the activities assigned to the employee by that employer;
  • vicarious liability is appropriate in cases where an employee misused  the position in a way which injured the claimant; the employer who selected the employee and put the employee in a position that could be misused, should be held responsible;
  • Morrisons is more likely to have the means to compensate the victims than the rogue employee, and can be expected to have insured against that liability.

The above findings were reached notwithstanding that Morrisons key arguments included highlighting the fact that:

  • the rogue employee’s act of posting the personal information on the internet was temporally and physically disconnected from any employment responsibilities. .   The  privacy breach was committed from the employee’s  home and on the weekend;
  • the rogue employee’s conduct was designed to harm Morrisons, and therefore if the Court held Morrisons vicariously liable it would essentially be helping the rogue employee achieve what the employee set out to do – harm Morrisons financially.

These arguments did not satisfy the Queen’s Bench.  We shall see if the Court of Appeal holds otherwise.

The UK’s jurisprudence on vicarious liability is consistent with Canada’s, and Canada draws upon UK precedents.  

Manage your risks

What risk management steps can your organization take while the aforementioned risks are on the forefront of your mind? In brief, consider the following:

  • Review your security safeguards with an IT expert;
  • Be careful in choosing the employee to whom you entrust with your organizations personal information;
  • Ensure that only certain trusted employees have access to the personal information;
  • Ensure that you do not expose your organization to other causes of actions.  For instance, do not impose upon your organization unnecessary and additional obligations by way of policies, contracts or service agreements in which you undertake to keep personal information secure. You do not want to expose your organization to a breach of contract claim or duties of care if it can be avoided.  You may be faced after all with a claim in which a Plaintiff’s counsel is seeking to find creative ways to bring a multifaceted class action for not only breach of privacy, but breach of contract and negligence.  Consider whether you can get away with terms that your organization will abide by the applicable privacy legislation and be accountable to the OIPC for any resulting breach;
  • Ensure that you have an adequate breach response plan in place so that if a breach occurs you are able to mitigate and contain the breach to the greatest extent possible.

[i] Mohl v. University of British Columbia, 2009 BCCA 249; Ari v. Insurance Corporation of British Columbia, 2015 BCCA 468.

Karen Zimmer practices at Alexander Holburn Beaudin + Lang LLP in Vancouver and leads its Defamation and Publication Risk Management group and is a member of its Information and Privacy group.