Essentially, to overcome the privilege, the plaintiff needs to chal-
lenge the good faith of the defendants by showing that they acted
with malice. A speaker exhibits constitutional malice when he makes
a defamatory statement while knowing that it is false or recklessly dis-
regarding whether it is false. The plaintiff must set forth evidence to
support the conclusion that the defendants entertained serious doubts
as to the truth of the statement.
The court went on to compliment the thoroughness of the investigation, the
direct knowledge of the employees and vendors, the cross-checking and consistency of evidence from the different sources, and the extensive documentation. Based on the good faith shown by defendants, the Supreme Court, Appellate Division, New
York, granted summary judgment to defendants.
In Kelly, the plaintiff was accused of assisting the spouse of another employee to steal merchandise and was terminated.117 After the company dropped the criminal charges and she was awarded unemployment benefits over the objection of the company, the plaintiff sued her employer, manager, and co-workers for defamation. She argued the outcomes in the criminal and administrative proceedings were proof the
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defendants lost any qualified privilege they had to share the allegations against her.
The Court of Appeal of Louisiana affirmed summary judgment for the defendants
except for the alleged statements by one co-worker. It held the manager did not lose his qualified privilege because he communicated in good faith with persons who participated in the investigation, were in the plaintiff’s chain of command, the company’s lawyer, and its unemployment representative. Absent any evidence
other than the plaintiff’s speculative allegation that the employees conspired to
“frame her to divert suspicions [of theft] from themselves,” the court also affirmed the employees who reported the alleged misconduct of plaintiff did not abuse their privilege when they spoke with management, police, and unemployment representative. However, the court did find the alleged comments, if proved, of one
employee to her mother and roommate would fall outside the conditional privilege.
In Layne, the Appellate Court of Illinois affirmed an employer’s statement to the police that an employee had threatened, harassed, and assaulted a co-worker was an absolute privileged communication.118 In Beauchamp, a company terminated all five store managers for “failure to protect company assets” after it conducted a three-month investigation and could not isolate the cause of a $150,000 inventory shortage.119 One manager filed for unemployment benefits. The company contested on the grounds he was “not a prudent manager” and his “failure to protect company assets.” Because the company did not establish the manager was at fault for the losses, he was awarded benefits. He claimed he was defamed in the unemployment hearing and filed suit. The appeals court affirmed the accusations by the company were not defamatory per se (note, the company did not accuse him of theft) and the employee failed to show the statements were false or the company acted
with malice. It noted the company acted under a “qualified business privilege” and: the statements made by [the company] to persons at the Department
of Employment Security were certainly relevant to the determination
of unemployment compensation and made to persons with a legiti-
mate interest therein. The testimony at trial concerning the defendant’s
extensive investigation as to the lost inventory provides the required
element of good faith.
In conclusion, most communications to police, unemployment boards, workers’
compensation, and similarly interested outside parties are privileged communications. In some jurisdictions, statements in judicial and administrative agency proceedings are absolutely privileged communications, whereas, in other jurisdictions, these statements are conditional privileged communications. So long as employers act on a good faith belief of the truth of the matter and not with careless disregard for the facts or reasonably discoverable facts, employers should be protected when sharing information with interested external agencies. Second, employers generally have a conditional internal privilege to share adverse employee information with union stewards, supervisors, managers, and select staff, such as security and
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human resources, if this information is needed by them to perform their duties. In the alternative, employers may defend on the grounds of truth or nonpublication for intracorporate communications. Nonetheless, investigators should be careful to avoid prematurely labeling subjects as having engaged in criminal conduct. Instead, investigators should report the allegations as reported and the facts as documented, and refrain from reaching unsubstantiated conclusions in their oral and written investigative reports.
7.10.1.1 Self-Published Defamation
There is a little-known tort action for self-published defamation. These cases normally involve employees who have been terminated for misconduct and who repeat
the reasons for their discharges to potential employers. In order to prevail, a plaintiff must show a defamatory statement, compelling facts that made it reasonably foreseeable that the plaintiff would republish the derogatory statement, and actual self-publication to a third party.
The majority of states that have reviewed this doctrine have rejected it primarily because it conflicts with the at-will employment doctrine. That is, discharged at-will employees could tell potential employers the stated reasons they were fired and then sue their former employers. There are other concerns, too. Employees might purposely repeat such allegations; statutes of limitations might be extended with each republication; and employers might feel compelled to fire employees without comment rather than use constructive discipline to improve employee performance.
For example, in Sullivan, the plaintiff was a part-time neonatal nurse at defendant’s hospital and at another hospital that was setting up a neonatal unit.120 The plaintiff told a co-worker that she had taken some new angiocaths, used to start infant IVs, from the defendant’s hospital to the other hospital. The co-worker
reported her. She denied the allegations. The hospital terminated her. She applied for positions with two other hospitals and revealed the reason for her discharge. She was not hired. She filed suit for self-published defamation. The trial court granted summary judgment to defendant hospital on the ground the plaintiff failed to prove publication. The appeals court reversed. It held the state would recognize the tort of self-publication defamation in the employment context. The hospital appealed.
The Supreme Court of Tennessee rejected the self-publication doctrine
because it would chill employer–employee communications, negatively impact
grievance procedures, cast an unfair doubt of silence over persons who were dis-criminatorily discharged, create a cause of action of negligent investigation in conflict with at-will employment, and unreasonably stretch the state statute of limitation. The court also concluded the lower standard of proof used in the
self-publication doctrine conflicted with the higher standards in the state statute governing the right of employers to share employee information. Under the
self-defamation doctrine, an employer might be held liable for its negligence in failing to uncover the truth, whereas the state statute shielded employers from
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liability except in circumstances where an employer shares information that is
“Knowingly false, Deliberately misleading, Disclosed for malicious purpose,
Disclosed in a reckless disregard for its falsity … , or Violative of … employment discrimination laws.”
A few states have recognized self-publication defamation.121 Many, perhaps all, of these have retained the qualified/condit
ional privilege of employers to communicate in good faith with their employees. In Theisen, for example, the plaintiff was a security director who was terminated for leaving a sexual harassing phone message on the voice mail of a nurse.122 He claimed self-publication defamation in that he felt compelled to tell his family, friends, and potential employers the alleged reason for his discharge to get their support for his personnel appeal and to obtain future employment. In the words of the state Supreme Court, the trial court granted summary judgment to the defendant hospital on the grounds “an employer is entitled to qualified immunity for statements made to an employee to protect the employer’s interest, and that the privilege extends to situations in which the employee feels compelled to repeat such statements.” The Supreme Court of Iowa affirmed the
hospital had not acted outside its privilege. It found the original communication: was made in good faith, based on the identification of [plaintiff’s] voice
by four persons. [The hospital] had an undisputed interest in the sub-
ject of the statement, which was made as part of a sexual harassment
investigation. And the statement was made during a closed-door meet-
ing with [plaintiff’s] supervisor and the director of employee services, a
proper time and place to discuss such an accusation with limited par-
ties. Thus, [the hospital’s] statement easily falls within the criteria nec-
essary to establish a qualified privilege as a matter of law.
In DeWald, the employee plaintiff put some loose wood in two shopping carts, showed it to the assistant department manager, paid the reduced price he was told to pay by the assistant manager, and loaded it into his truck.123 The store loss prevention manager saw him loading the wood, spoke with an assistant manager,
and then told the plaintiff to pay more for the excess wood he had beyond three bundles, or unload it from his truck. Later, the employee left without unloading or paying for the alleged excess wood. He returned the next morning with the
wood still in his truck. The loss prevention manager and two store assistant managers interviewed the employee. He was terminated. The loss prevention manager
walked him out of the store through the front door even though an employee
exit was closer, unloaded the wood from the truck, and refunded the employee’s
money. At this time, co-workers overheard the loss prevention manager state the plaintiff was fired for taking more wood beyond that which he paid. The assistant managers stated in his personnel file that the plaintiff was discharged for “theft of firewood and a fraudulent act.” About a month later, the loss prevention manager and assistant store manager in an employee meeting stated the plaintiff was
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“terminated for stealing firewood and had to be dealt with in the same fashion
as [the company] dealt with other shoplifters.” The latter comment meant he was escorted out the front door as other shoplifters to make an example of him and
to intimidate fellow employees. In subsequent job interviews, the plaintiff, in response to the question why he had left his former employer, stated he had been fired for theft and fraud.
He filed suit for defamation, including compelled self-publication defamation.
The trial court granted summary judgment for defendant employer and employees.
The plaintiff appealed. The appeals court reversed. It noted that, when job applicants are asked why they left their former employment, there is compulsion to reveal the reasons for failure to do so or lying could be grounds for denial of employment or termination. The court held the plaintiff offered evidence on each element of his defamation claim and the company did not “conclusively establish[ed] that the defamatory statements were either substantially true or that their publication was a privileged communication.” The Court of Appeals of Texas remanded the case for
further proceedings on the issue of self-publication defamation.
Tip: When responding to employee complaints and claims for benefits, employers enjoy a good faith privilege to share investigative information with government agencies, including state unemployment and workers’ compensation commissions, and federal agencies, such as the NLRB and EEOC.
7.10.2 Wrongful Discharge
The vast majority of private sector workers are at-will employees. Under the employment at-will doctrine, which is recognized in all jurisdictions, an employee may accept and leave a position at anytime, and an employer may hire and discharge an employee at anytime for any reason, no reason, or even a bad reason. This doctrine is a major, but sometimes surmountable, barrier for employees who believe they
were unjustly discharged. As discussed here, not all employers serve at-will, and there are several exceptions to the employment at-will relationship.
7.10.2.1 Union and Personal Employment Contracts
Not all employment relationships are at-will. Union members, for example, work
under collective bargaining agreements, and an employer must show cause, just
cause, good cause, or similar evidence to terminate. Failure to satisfy the requisite burden may result in an arbitrator directing the company to reinstate a terminated union employee with or without back pay and benefits. Similarly, some
executives and professionals have personal contracts of employment that restrict the rights of employers to cause discharges. A terminated employee may file an
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arbitration grievance or a breach of contract lawsuit against the employer and force the employer to show cause or pay the full benefits of the contract.
7.10.2.2 Implied Contract of Employment
One exception to the at-will doctrine is an implied contract of employment. In
union and personal contracts of employment, the terms and conditions of employ-
ment have been negotiated and agreed to by all concerned parties. In contrast, an implied contract is one that arises based on facts that would lead a reasonable party to conclude a contract right exists. Many of these cases involve oral statements by managers and the disciplinary procedures and standards set forth in employee handbooks and personnel manuals. Sometimes at-will employees claim these uni-laterally issued publications by employers are binding contracts of employment and they were fired outside the disciplinary provisions. Employers may defeat these claims by inserting appropriate notices in the documents (e.g., the manuals are not contracts of employment and the employment relationship remains at-will).
7.10.2.3 Whistleblower and Similar Statutes
Many states have whistleblower statutes that prohibit retaliatory discharges
against employees who report illegal company acts (e.g., tax fraud and illegal
dumping). The breadth and depth of protection varies by statute. Some protect
only employees who actually report the criminal conduct to the authorities.
Other statutes, as a means of shielding employees from preemptive terminations
by their employers, also protect those employees who were about to report the
criminal conduct. Some statutes protect employees when reporting violations of a specific law, whereas other statutes protect employees for reporting a wide variety of employer criminal conduct under the penal code. These statutes may not apply when employees report criminal acts that are unknown to company executives.
When an employee qualifies for protection under a statute, the burden usually
shifts to the employer to show the termination was for reasons separate from the employee’s protected status.
7.10.2.4 Public Policy
Many states recognize an action for wrongful discharge in violation of public policy (i.e., the discharge is harmful to the larger interests of the public). In order to prevail, employees must often prove a clear and compelling reason the discharge violates the public interest. Usually this interest must be based on the constitution or s
tatutes of the state, although a few states recognize judicial public policy. This doctrine allows the courts to intervene when other remedies may not be available. For example, assume an employee filed a workers’ compensation claim and
was shortly thereafter falsely terminated for theft, the employee might argue the
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discharge violated public policy because it was a pretext to deny him benefits and to deter co-workers from filing for workers’ compensation benefits.
7.10.2.5 Discriminatory Discharges
Terminated at-will employees might claim their discharges were illegally based on race, nationality, color, sex, religion, age, disability, or other protected classification.
Once an employee shows prima facie discrimination (member of a protected class and adverse employment action), the burden shifts to the employer to show a legitimate business reason for the discharge. The burden then shifts back to the employee to prove the proffered reason is a pretext. At-will employees who are members of protected groups may claim their discharges were discriminatory, shifting the burden to the employers to show legitimate business reasons (facts supported by the investigations) for the terminations, thereby shifting it back to the employees to show the investigative findings were pretexts.
7.10.2.6 Covenant of Good Faith and Fair Dealings
The covenant of good faith and fair dealings is a contract law doctrine. It implies all parties to a contract have a duty to act accordingly. A small minority of states have applied this doctrine to wrongful discharge cases to prevent employers from unfairly denying employees benefits they have or are near earning. For example, assume a sales representative made a large sale and was entitled to substantial upfront and continuing commissions and he was shortly thereafter fired for embezzlement. He might file a wrongful discharge suit claiming his discharge was a pretext by the company to avoid paying his commissions in violation of the covenant of good faith and fair dealings.
7.10.2.7 Additional Cases to Consider
In Dewald, an employee was terminated for alleged theft of firewood. He had paid the reduced price for the unbundled firewood (a common practice by the store)
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