Defamation by conduct lawsuits.

The surge in employment lawsuits over the last decade has caused many employers to lose sleep both before and after firing an employee. Discharges invariably give rise to worries about a variety of possible lawsuits including actions for discrimination, wrongful termination, retaliation, breach of contract, and more.

All that litigation has provided employers with insight into ways to prevent and defend against lawsuits. For example, investigations should be swift, employees who engage in misconduct should be properly and consistently disciplined, and all efforts should be made to protect the company and its employees from the destructive actions of a disgruntled former employee. Failure to do these things can provide fodder for a later employment lawsuit. But the very actions that may help insulate employers from some forms of lawsuits may give rise to another cause of action that is gaining increasing popularity: defamation by conduct.

Speak No Evil

Former employees are bringing defamation actions with growing frequency. Defamation generally is the intentional communication of a false statement to a third party that tends to injure the reputation of an individual. For example, if your club fires an employee for mishandling funds, then tells the employee's prospective employer that the individual was a thief, that statement--unless proven true--could expose the club to a defamation action.

While defamation actions in the employment context are nothing new, increasingly they are taking on a new form. Some federal and state courts have allowed former employees to bring defamation lawsuits to a jury even when the employer did not make any negative statements about the individual. These courts have allowed employees to proceed based on the theory that the employer's actions, not their words, created the impression that an employee was engaged in wrongdoing. When an employer's actions create the impression that an employee engaged in criminal behavior, committed an act of misconduct, or was not fit to perform his or her job, a defamation by conduct action may arise.

(Court) Actions Speak Louder Than Words

The number of such defamation by conduct actions is on the rise, and former employees have scored a handful of victories over the last decade these type of lawsuits. For example, in 1998 the District of Columbia Court of Appeals held that locking an employee out of her office after termination may represent to her co-workers that the employee had done something disgraceful; the court allowed the former employee to proceed with her defamation lawsuit.

Similarly, a Pennsylvania federal court reasoned that changing the locks on an employee's office doors after termination could communicate to others that the employee was a thief, and the court allowed the employee to proceed with his lawsuit against his former employer. Additionally, at least two state courts have held that the mere act of terminating an employee alone can be defamatory.

A recent opinion from the Massachusetts Supreme Court made waves when it suggested that chasing, restraining, or searching an employee may create an unambiguous, defamatory statement about that individual. The opinion also indicated that testimony from a plaintiff's co-worker that the employer's actions created the impression that the terminated individual had engaged in wrongdoing can make otherwise ambiguous actions defamatory.

The case arose as an appeal from a jury's award of damages in a defamation by conduct lawsuit. The employer in the case was conducting an investigation and one day had a security guard escort the plaintiff throughout the facility while the employer conducted interviews to ensure he did not confer with his subordinates. Later, the employer terminated the individual and had security escort him to the door. In its opinion, the Massachusetts court found that the employer's actions were open to interpretation by third parties and therefore not defamatory.

But the court indicated that it may have allowed the jury's award of damages for defamation to stand if the same plaintiff had merely presented testimony from co-workers that they understood the employer's actions to mean their co-worker had engaged in misconduct. The opinion has opened the door to former employees bringing defamation lawsuits when they can present testimony from co-workers that they saw the employer's actions and inferred from them that their coworker had done something wrong or illegal.

In a similar case in Maryland, a judge upheld a jury's finding that an employer defamed an employee. The employer's security officers approached the employee at the stair landing where guards inspected him for stolen items, interrogated him in the security office, and a co-worker of the employee testified that he saw what happened and believed his friend was being labeled a thief. The consequence was a successful defamation by conduct lawsuit against the employer.

On The Other Hand...

While these cases are concerning and you should keep them in mind when disciplining employees, many courts are taking a more conservative approach to defamation by conduct actions arising from the termination of an employee. Many judges have recognized that if they allow these cases to proceed with some regularity, employers will be unable to adequately investigate and terminate problem employees without having to brace for a defamation lawsuit.

In light of the practical and pragmatic problems posed by these lawsuits, most courts have held that a former employee may not proceed with a defamation by conduct action unless the employer's actions created a false and unmistakable imputation of wrongdoing, and were carried out in an unusual or extraordinary manner. For example, most courts will not impose liability on employers for escorting a terminated employee out of the facility absent extreme measures such as having a police officer handcuff the individual in plain site and lead them out the door.

Defamation by conduct actions should not keep managers awake at night, but employers must be aware of their existence and take steps to prevent defamation by conduct lawsuits. Here are some tips for preventing former employees from bringing successful defamation by conduct actions:

Plan Ahead

Before taking any disciplinary action against an employee, plan on how you and your staff will proceed. Identify who will need to be involved, when the action will be taken, and how it will be performed. Having a plan helps prevent imprudent or hasty decisions that can later form the basis for a defamation by conduct lawsuit.

Be Consistent

Develop consistent policies and procedures for handing disciplinary issues, including terminations. Individuals bringing defamation by conduct actions frequently state that the circumstances surrounding their termination were unusual, and thus communicated to their co-workers an impression that they did something especially wrong. Having a set procedure and policy will prevent former employees from claiming their termination stood out or was unique in the eyes of their co-workers.

Limit discussions to a need to know basis. Statements about an investigation and termination of an employee should always be respectful and made only to those who legitimately have a need to know the basis, status, or ultimate outcome of any action.

Be Discreet

To the extent possible, don't take any actions in the view of other employees. When a search of an employee's workspace is necessary, conduct it behind closed doors or during non-work hours; conduct any interrogations or meetings after hours or in private areas; if cutting off an employee's access to the facility or equipment, avoid having co-workers watch this. Also, only escort an employee out of the building during normal working hours when there is a legitimate security reason for doing so, and never have any physical contact with an employee unless it is necessary to do so to protect the safety of that employee, yourself, or others.

Document

Document in detail every step of your investigation and termination of an employee. Be sure to include who was involved, what time the action was taken, what statements were made to whom, and any other information necessary.

As with any other policy, periodically review your property's policies and procedures for disciplining and terminating employees to ensure they are consistent, effective, and comply with the latest developments in defamation law.

By Karen Gieselman, Fisher & Phillips

Karen Gieselman is a lawyer with Fisher & Phillips LLP, a nationally recognized firm representing management in labor and employment matters. She can be reached at 803-255-0000 or [e-mail]. This information provided is general and educational and not legal advice. For additional information go to www.hospitalitylawyer.com.