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Recording Phone Calls Leads to Employer Liability

One of the more significant decisions of 2006 was handed down by the California Supreme Court regarding the recordation of phone calls. In Kearney v. Solomon Smith Barney, the court held that all phone calls with California residents must comport with California’s Privacy Act, which prohibits any person from monitoring or recording a telephone conversation without the consent of all parties to the communication. This is commonly referred to as the two-consent requirement and eleven other states have similar statutes. While the general holding is not surprising, the key issue is California applied its own law even though the party who recorded the call was not in California.

In Kearney, two California residents were granted options on their employer’s stock that could be exercised only through Smith Barney. The residents made numerous phone calls to Smith Barney’s Atlanta office regarding their options. These phone calls were recorded, but the residents were never informed that the conversations were being taped. The plaintiff’s sued under the state’s Privacy Act. Smith Barney claimed that Georgia law regulated the company’s conduct since the calls emanated from Georgia, but the court disagreed. Instead, the court held that the California two-consent law applied over Georgia’s one-consent requirement and entered a verdict for the Plaintiffs.

While the decision only holds legal authority in California, it could have a substantial effect on employers across the country. Eleven other states have two-consent requirements, including Florida, Illinois, Michigan, Pennsylvania, Connecticut, Maryland, Massachusetts, Montana, Nevada, New Hampshire and Washington State. It is likely that these states will follow the California Supreme Court’s lead when interpreting their own privacy laws. Thus, employers in the other 39 states with one-consent requirements that secretly record their phone conversations with residents of states with two-consent requirements risk being held liable for violating the two-consent state privacy laws. This could be significant because like California’s law, most two-consent requirements provide for statutory damages and attorney’s fees without proof of actual damages.

If your business records any customer or client phone calls, you need to carefully review all the state laws that may apply. To be safe, consider obtaining the consent of all parties to recorded conversations regardless of whether the parties to the call are located in a two-consent state or a one-consent state. A reminder that a call may be monitored for quality assurance purposes may not be sufficient to establish consent. Therefore, consider new alternatives that will avoid your being found liable for violating one of these privacy acts.

Brody and Associates regularly provides counsel on federal and state employment law issues. If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.965.0560.