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I've seen some pretty intense contracts employees must sign before starting work for a company. Some have very vague statements like "agree to abide by our code of ethics". My question is when can a company sue or take legal action against an employee, that goes beyond firing them? For example if an employee circumvents the firewall (e.g. with a proxy) and views pornography at work and gets caught, can they be suede for it?

I used to work for a fortune 50 company and they had a list of software that you can install, for example you weren't allowed to install software made by competitors or if the source code is in dispute. If I had accidentally installed something that wasn't on this list on my work computer, could I be sued?

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An employment contract is a contract. In general, they are more heavily regulated than other contracts but they are still a contract.

If an employee unjustifiably breaches a term of their contract then the employer (subject to whatever regulations apply) can terminate the contract; this is colloquially known as firing the employee. If the employer has suffered damage as a result of the breach, they me sue for restitution.

This is the key point - the breach must have caused the employer damage that a court would recognise. If the employee views pornography or installs unapproved software, the employer would need to show that these acts have caused it damage. Circumstances where these could cause actual damage would be extremely rare.

A better example would be a rogue trader in an investment bank (e.g. Bearings); the employer (if they survive) would have a real case there. Of course the employee would probably have insufficient assets to pay any judgement but that's a commercial issue, not a legal one.

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