Defamation in the Workplace – An Increasing Trend

Business personnel matters often are touchy, if not contentious. As demonstrated by recent media reports involving the City of San Antonio and its recently fired director of Public Health, different stories might emerge about why an employee is let go. These situations are a prime risk for employers given an increasing trend in employment litigation: defamation claims.

Defamation suits involving employers aren’t new, but according to the Federal Bar Association, post-employment defamation claims are on the rise. The reasons are unknown, but defamation may be a more accessible cause of action because – unlike other employment claims – the number of employees a company has is irrelevant. As such, employers need to ensure that documented justification for personnel actions are rooted in fact.

If not, the result can be a defamation lawsuit with a hefty price tag, as Kemper Independence Insurance Co. recently learned. In a California case, Kemper was ordered to pay an ex-employee $5.6 million for spreading unsubstantiated claims to other employees that a 28-year full-time employee – Robert Sallustio – was working just 15-20 hours per week.

Kemper’s “investigation” was conducted without reviewing Sallustio’s key card logs, computer logins, or phone records, all of which proved he worked 50-60 hours per week for several years. The true motivation for terminating Sallustio stemmed from his efforts to get management to back off of a plan to fire his wife, who previously worked in the company’s marketing department. The suit claimed that management wasn’t happy about Sallustio’s wife’s lengthy medical leave, and that defamatory statements were published within the company to discredit Sallustio. Despite losing several other employment claims, Sallustio prevailed on his defamation claim.

The Kemper lawsuit was complex, but it demonstrates the lengths to which management sometimes goes to hide true motivations for terminating an employee (a frequent issue in avoiding unemployment claims in Texas). An employer may be liable for defamation if – as in Kemper – the employer communicates a statement that could be harmful to an employee’s reputation to a third party. Defamation can be oral (slander) or written (libel). If the employer cannot prove the truth of the statement, the employer may be liable for defamation.

Defamation may seem straightforward, but it can have less clear-cut implications in the workplace where the context of the statement is important (as Kemper illustrates). Further, the “publication” to a third party can occur within the company itself. In other instances, when an outside employer conducts a reference check on a terminated employee, a company could cross the line if the person responding provides undocumented details. Defamation can also occur if false information about employees is shared through email, social media or bulletin boards. The risk is higher where the information is insensitive or possibly damaging to the employee’s reputation.

While defamation can arise in the preparation of a company’s investigative report, the law does provide some protection. In Writt v. Shell Oil Company, the Texas Supreme Court recently clarified that internal investigative reports conducted while the company itself is under a criminal investigation are protected against defamation claims. In that case, Shell Oil claimed a privilege against being sued over the contents of a report, which alleged in part that Shell employee Robert Writt had engaged in bribery. Because the internal document was prepared while Shell was under Department of Justice scrutiny, the Texas Supreme Court agreed that Shell was protected against a defamation claim.

The Texas Anti-SLAPP law, (designed to target claims that infringe free speech), is another defense employers can use to possibly dismiss an employee’s defamation claim. The Anti-SLAPP law allows you to counter a SLAPP (Strategic Lawsuit Against Public Participation) suit, and if you are successful in proving your case, the court will award you attorney and court fees and possibly punitive damages.

As commonplace as it sounds, employers should caution supervisors and managers against embellishing investigations and the reasons for terminating an employee. Instead, disciplinary action should focus on facts, such as how an employee performed on work tasks. Personnel matters should be kept confidential and shared only on a need-to-know basis.

As any lawyer who has handled a defamation case can tell you, they are notoriously difficult to prove. Many companies will have insurance coverage to defend in these cases, and while most settle – the time and resources required to defend these cases is worth avoiding them in the first place.

If you need legal advice, schedule a meeting with Tiwari + Bell PLLC through our website or by calling (210) 417-4167.