Two Recent Federal Rulings on Workplace Defamation Provide Guidance for Employers

The subject of workplace defamation is a hot topic in legal circles these days.  In a pair of recent decisions, local federal courts have helped define when negative statements about employees can create legal liability for employers.  The answer varies depending on whether an employer has investigated alleged employee misconduct, and to whom the statements are made.

In the first case, Bates v. Strawbridge Studios, a Virginia federal court allowed two former employees to pursue a defamation lawsuit against their former employer that they claimed had falsely disparaged them to a customer.  In the second case, Shaheen v. Wellpoint Companies, Inc., the Fourth Circuit Court of Appeals affirmed dismissal of the former employee’s defamation claim based on management findings that she had lied about a workplace dispute.

In Bates, two photographers sued their former employer, a school photography business, for defamation based on a prior dispute resolved by settlement between them and the business.  Approximately six months after the settlement was reached, a customer called the employer’s toll free number to locate a photograph, and spoke to a customer service representative.  When the customer mentioned the plaintiffs’ names, the representative called plaintiffs “not reputable,” said that “they could not be trusted,” and stated that “things got so bad [the employer] had to get involved in a lawsuit.”  The plaintiffs brought suit based on these comments, asserting, among other things, that the employer and its representative defamed plaintiffs.

The plaintiffs alleged that the employer was liable for the comments because the representative was acting within the scope of employment.  The employer argued that even if the statements were made, they should be protected from liability by the “qualified privilege” defense.  Virginia recognizes a qualified privilege for communications relating to employment matters between persons on a subject in which the persons have an interest or duty.  For the privilege to apply, however, both parties to the communication must have such an interest for either one to claim the privilege.  The court found that, while the customer service rep may have had a legitimate interest in explaining his views about plaintiffs to a customer, the customer did not have any corresponding interest in learning about the parties’ failed business relationship.  Thus, the court denied the employer’s motion for summary judgment based on the customer’s lack of an interest in hearing the employer’s criticism.

In Shaheen, in contrast, a former call center supervisor had her defamation lawsuit dismissed because the employer’s alleged statements were kept in her personnel file and related to her discharge for “misconduct.”  The dispute arose out of a verbal altercation between the plaintiff and one of her subordinates, whom the plaintiff accused of using obscenities in the workplace.  After an investigation, the employer concluded that the supervisor’s accusations about her subordinate could not be verified, and terminated her employment for her apparent fabrications concerning the incident.

The supervisor proceeded to file a lawsuit against her former employer, asserting that the allegations of misconduct were defamatory.  The employer cited the qualified privilege as its defense.  In response, the plaintiff tried to defeat the privilege by arguing that statements were made with malice, causing the privilege to be lost.  Under the law, a qualified privilege will not apply when defamatory words are spoken with malice.

In Shaheen, the plaintiff sought to prove that the existence of malice was at least a disputed issue by focusing on perceived deficiencies in the employer’s investigation.  The Fourth Circuit rejected this argument.  The court noted that this was not an instance in which the employer made the statement without conducting any investigation; rather, the dispute centered on the employer’s investigative methodology.  The plaintiff claimed that the investigation was “grossly inadequate” and that the investigator did not ask “the right questions” in verifying her version of events.  However, even if these assertions were true, the court held that it was not sufficient proof of malice and would not cause the employer to lose its qualified privilege.  In employment cases, courts generally do not “second guess” employers when they investigate misconduct.

These decisions emphasize how important it is for companies to carefully investigate employee conduct before administering discipline, and limiting any communication of employee criticism or counseling to people with a “reason to know” within the organization.  By taking reasonable steps to verify information before finding employee misconduct and controlling the use of that information, an employer can help defuse the potential for later defamation claims.