Drawing Line on Boss Digging Into Private Life : Security: Corporate spying to curb drug use or in-house theft is widespread in business. Some contend that a right to privacy is violated.

Lewis Hubble thought he had found a friend but says he was deceived--the guy was a spy.

So Hubble and 42 other Kmart Corp. warehouse workers have challenged the big retailer with a privacy lawsuit that argues the right to snoop on employees ends at the employer’s gate.

The case has aroused debate among security experts, libertarians and business ethicists. It poses a question as old as labor history: How deeply into your life can your boss dig in the interest of protecting the store?

“You’re damned if you do and damned if you don’t,” said William Cunningham, president of Hallcrest Systems Inc., a security consulting firm in McLean, Va.

“If you provide overzealous security, you’re going to get sued. If you provide inadequate security, you’re going to get sued by your customers and patrons. It’s like walking on eggshells.”

Hubble said he wandered innocently into the issue when he accepted an offer of an after-work beer from Albert Posego, a fellow employee at Kmart’s warehouse in Manteno, 45 miles south of Chicago.

Posego visited Hubble’s apartment and even offered to help move his family into a new house, said Hubble, who was transferred from Fort Wayne, Ind., in October, 1992.

“If you asked me if I had made one friend since coming to Illinois, I would have said Al,” he said.

But Posego was an undercover investigator hired by Kmart Corp. to spy on its employees, according to the lawsuit in Cook County Circuit Court filed by Hubble and 42 others in September.

Kmart has said it used the investigators to break up a theft ring at the warehouse. It has sought to dismiss the case.

The lawsuit contends Posego and at least one other spy worked in the warehouse from sometime in 1992 to April, 1993, when their activity was exposed.

Manteno became Kmart’s first unionized site in July after an organizing drive by the Teamsters. Kmart said the investigation ended months before the union election process began.

The lawsuit contends Kmart and Confidential Investigative Consultants Inc., the Chicago firm that supplied the spies, violated Illinois’ privacy law by gathering information on employees’ opinions about unions as well as such seemingly unrelated details as where a worker shopped, an employee’s off-duty fishing plans, and a female worker’s living arrangements.

“This lawsuit goes to the issue of what was being investigated and how it was done,” said Phillip Snelling, a Chicago lawyer retained by the Teamsters to represent the plaintiffs.

Kmart spokeswoman Mary Lorencz said the company periodically uses undercover investigators “if we believe there’s something going on that we need to look into.”

The use of such spies is widespread in American business and especially common among retailers, whose razor-thin profit margins can be destroyed by theft rings, said Pete Sawyers, a spokesman for Pinkerton Security Services in Van Nuys, the country’s largest security company.

Employee theft accounted for an estimated $11 billion of the $27 billion in shortages reported by U.S. retailers in 1992, says the National Retail Federation, a trade group.

Drug abuse is the other major reason for covert investigations, security consultants said. A six-month undercover operation led to the November arrest of nearly two dozen General Motors Corp. employees on drug trafficking charges.

“When it’s done correctly it’s a tremendous tool, but it also has its potential for abuse,” said Charles Carroll, president of ASET Corp., a Dayton, Ohio, vendor of drug investigation and education services.

“Oftentimes a corporation will call us and there’s a hidden agenda: They want to look at union efforts or troublemakers,” he said. Carroll said he refuses those jobs. Investigating union activities is forbidden by federal law.

Carroll said he would report employees’ off-duty drug use because it could affect their work, even though the employer could not use the information to discipline the worker.

A good investigator is almost certain to learn things of interest to the employer that fall outside the intended scope of the investigation, said Wally McPheters, president of Workplace Solutions in Boise, Idaho.

At Boise Cascade Corp., where McPheters was security director until October, “we typically would tell our vendor, who then told the operative, we don’t want non-job-related issues they observe in the personal lives of employees. We don’t want to know what is happening behind the scenes of a union’s affairs and its members,” he said.

McPheters said Boise Cascade did “less than a half-dozen” undercover investigations during his 3 1/2 years in security there. He said he considered the covert probe one tool in a kit that also includes background checks of prospective employees, training programs, surveillance cameras and interviews.

David Hempen, chairman of the investigations committee of the American Society for Industrial Security, said he would use undercover agents reluctantly, as a last resort. Teaching employees about the importance of teamwork and offering assistance for those with drug or emotional problems can go far in preventing theft and substance abuse, he said.

Then there’s the cost. ASET clients pay about $6,000 per month per operative and must sign on for at least 90 days. An investigation by Winfield Security Corp. of New York costs at least $1,000 per week per operative, said President Eugene R. Fink.

Hempen said it usually takes three to four months for an investigation to yield results, and clients sometimes must pay the operative’s moving and living costs.

Spying on workers also carries an unmeasurable cost, said Lew Maltby, director of the American Civil Liberties Union’s project on employee privacy issues: loss of trust in the employer.

“The spy isn’t just watching the guilty employee, the spy is spying on everybody and it’s a massive deceit,” he said.

“Every company has problems, that’s why God invented managers,” Maltby said. “But any manager who can’t find out what’s going on in the company without hiring spies ought to be fired.”

David Messick, a professor of business ethics at Northwestern University’s Kellogg Graduate School of Management, said reporting on employees’ personal habits and private lives “is going far beyond what is legitimate in protecting the interests of the company.”

He said employers could cover themselves ethically by announcing to employees that undercover agents will be coming in to investigate theft or drug problems. “Just informing them . . . may be sufficient to solve the problem,” he said.

But Kmart’s Lorencz said Messick’s idea wouldn’t work.

“Obviously we’re not going to tip off potential shoplifters or potential employees for theft what our methods are,” she said. “That wouldn’t make sense.”