EMPLOYER CLIENT ALERT:      06/08/2009

Workplace Defamation Suits Are on the Rise:
How to Reduce Your Potential Liability

The poor economy has forced many employers to cut costs by reducing their workforce. Such employers are vulnerable not only to wrongful termination suits, but to defamation suits as well. In fact, defamation suits against employers are on the rise most likely due to the historic unemployment rate and advances in technology. Employers are struggling with how to treat departing employees, explain the departure without hurting their reputations, and protect the company's interests at the same time. Understanding defamation and the pitfalls of advances in technology that can unknowingly increase the employer’s potential liability for defamation will help employers develop policies that can protect them from these kinds of claims.

DEFAMATION is the publication of a false statement which causes injury to a person’s reputation. Statements by an employer that an employee has a criminal arrest or conviction record, a venereal disease, or was guilty of gross misconduct, theft, embezzlement, falsification of records, abuse of drugs, or professional incompetence, could lead to potential defamation claims because they damage the employee’s reputation.

Defamatory statements can be oral or written statements communicated to individuals outside, or inside the company. Employers have a qualified privilege to communicate derogatory statements about employees to others who share a common interest in the information. Employers have an absolute privilege to make derogatory statements in judicial or quasi-judicial proceedings such as depositions, trials, and hearings. In addition, truth is a defense to defamation. Employers have a right to make truthful statements about employees even if they are derogatory. Finally, claims brought more than a year after the publication of the statement are barred by the statute of limitations in New Jersey.

Employers should adopt a policy that prohibits disclosure of personal information current or former employees. This policy should also prohibit the discussion of such information in mass emails or on websites such as Twitter, Face book, blogs, or chat rooms. These advances in technology increase the likelihood of publication, a key component in a defamation lawsuit. In Noonan v. Staples, 539 F.3d 1 (1st Cir. 2008), the Court of Appeals recently upheld a Staples manager's lawsuit in which he claimed he was humiliated after the company sent a mass e-mail to roughly 1,500 employees, explaining that he had been fired for violating the company's travel and expense policy. Even though this was true, the court ruled that the e-mail was meant to single him out and humiliate him, and the company should not have identified him by name. Policies that restrict the disclosure of this type of information will dramatically decrease the employer’s vulnerability to defamation suits.

Employees have also brought defamation by conduct actions alleging that the employer's actions, rather than its words, created an impression that the former employee was involved in some kind of wrongdoing. A policy with a legitimate business reason to lock all departing employees out of their computers and escort them out of the building— measures often taken to protect proprietary information, prevent violence or a scene, can avoid creating the impression that a specific employee has done something criminal.

Other proactive measures the employer can and should take are limiting remarks about a past employee to dates of service and job description. The only exception to this rule should be when a departed employee poses a danger to the public. In this instance, the employer should balance the risk for liability for negligence by third parties who could be injured because of the employer’s failure to disclose the danger posed by a departed employee. Under no circumstances should the employer disclose anything that is not true or that the employer does know as for a fact as doing so will forfeit the employer’s complete defense: truth.

The Employment and Labor Practice Group

Thomas N. Ryan, Esq.	Michael S. Garofalo, Esq.	Ursula H. Leo, Esq.	Linda Day, Esq.