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Published: 2008-03-26

Avoiding Defamation in the Workplace, Giving References and Disciplining Employees While Avoiding Liability



INTRODUCTION

Increasingly, people who are unable to find work are blaming former employers for hindering their job search by giving negative references to prospective employers. This blame often evolves into a lawsuit for defamation, although the theories of intentional infliction of emotional distress, interference with contract, invasion of privacy, and discrimination have all been used in an attempt to make a former employer pay for an ex-employee's misfortune.

As a result, employers are increasingly reluctant to give out references. This reluctance means that prospective employers are not able to make hiring decisions based upon complete information, probably do not hire the person best suited to the position, and face exposure to liability for negligent hiring. Liable employers have recently begun to sue former employers for "negligent referral," alleging that the former employer should have revealed adverse information. In addition, employers that refuse to give references may still be liable for defamation based upon the theory of compelled self-publication.

This chapter explores some of the risks of giving references and disciplining employees, with primary emphasis on defamation. The chapter then discusses ways in which employers can give references while reducing the risk of a lawsuit. Finally, this chapter describes how employers can investigate, confront, and discipline employees without defaming them. It is extremely important to emphasize at this point that the information provided in this article is meant to provide general guidance only. Because the law of defamation can vary from state to state, employers should consult with the employment attorney of their choice with any questions.

  1. The Risks of Giving References and
    Disciplining Employees
  2. Employers that are asked to give references about current or former employees, or who face the need to investigate and discipline suspected violations, are rightfully concerned about the risks of litigation. They may face exposure to claims of defamation, intentional infliction of emotional distress, invasion of privacy, interference with contract, and discrimination, among others.

    1. Defamation.
      1. The Claim.
      2. To establish a claim for defamation, a former employee must demonstrate that the former employer published a defamatory statement about the employee. In other words, an employer may be liable for defamation if the employer communicated a statement about the employee to a third person that could be harmful to the employee's reputation. If the employer cannot demonstrate the truth of the statement, the employer may be liable for defamation. Defamation can be oral (slander) or written (libel).

        1. Defamatory Statement.
        2. To be a defamatory statement, a communication must be capable of defamatory meaning. The communication need not cause actual harm -- it merely must be capable of impugning the employee's good name or reputation. Courts will examine the statement, the context in which it was made, the audience, and the surrounding circumstances.

          An employer may be liable for "defamation by conduct" if a defamatory statement can be inferred by the employer's conduct. For example, in one case an employer was found liable for defamation by conduct when it forced an innocent employee to resign amidst an investigation for theft, along with the actual thieves. The employer's actions inferred that the employee was a thief when, in fact, he was not. Thus, mere conduct can support a claim for defamation if the surrounding circumstances permit.

        3. Publication.

        To be liable for defamation, an employer must publish the defamatory statement. "Publication" does not require a large audience; a statement made to one person other than the employee-plaintiff is publication. Thus, announcing over the loudspeaker that an employee was fired for stealing is a publication, but so is responding to a request for a reference.

        The new theory of "compelled self-publication" holds that an employer may be found liable for defamation of a terminated employee without saying a word. If the employee was terminated based upon evidence that was defamatory, and if the employee is required to disclose the reason for the termination to a prospective employer, the former employer caused compelled self-publication. Liability attaches if it would be foreseeable to the employer that the employee would be compelled to provide the information.

      3. Special Defamation Claims.
        1. Defamation by Neglect.
        2. In addition to the above, an employer may be held liable for defamatory statements made by others if it adopts them either intentionally or by implication. In most instances, this occurs where some writing containing a defamatory statement appears on the employer's property and the employer does little or nothing to see that it is removed.

          1. For example, in Tacket v. General Motors Corp., 836 F.2d 1042 (7th Cir. 1987), Thomas Tacket, a supervisory employee, sued GM for failing to remove a sign that was spray-painted by an unknown individual on a wall located on the production floor. The sign, "Tacket Tacket What a Racket," apparently was in reference to an earlier incident where Tacket was instrumental in assigning a subcontract to a company that was owned, in part, by a subordinate. The union complained about the subcontracting of unit work, and the subordinate was discharged for his role in the incident. However, Tacket received only a transfer since there was insufficient evidence that he knowingly assigned the work in an improper manner.
          2. The sign was first posted in the plant, only to be torn down two or three days later by an unknown individual. Immediately thereafter, it was replaced by the stenciled sign that remained on the wall for seven to eight months. Tacket alleged that, by its failure to act in removing the sign, GM implicitly adopted the defamatory statement and was, therefore, liable for any damages resulting from it. Id.

          3. Reversing a lower court's ruling for GM, the Seventh Circuit Court of Appeals held that the lower court should have allowed the jury to decide whether or not GM had "published" the statement by "adoption." In this regard, the circuit court followed the Restatement (Second) of Torts, §577(2) (1977), which states:
          4. One who intentionally and unreasonably fails to remove defamatory matter that he knows to be exhibited on land or chattels in his possession or under his control is subject to liability for its continued publication.

          5. The circuit court also concluded that the lower court should have permitted the jury to decide the issue of whether or not there existed "avoidable circumstances." Under this doctrine, the employee-plaintiff would not be permitted to recover for defamation where he had the authority and the opportunity to remove the sign and avoid injury but failed to do so.
        3. Defamation by Conduct.
        4. An employer may also be held liable for defamatory "statements" that can be inferred by its conduct rather than through some oral or written communication.

          1. In Berg v. Consolidated Freight Ways, Inc., 421 A.2d 831 (Pa. Super. 1981), the employee-plaintiff was instrumental in discovering a theft conspiracy involving his immediate supervisor and several subordinates. When he denied any involvement in the scheme, plaintiff was given the option of resigning or being discharged. He chose to resign.
          2. After a jury verdict for the plaintiff, the superior court affirmed, noting that, "[the plaintiff] was forced to resign amidst an investigation for theft, along with the actual thieves, and there was also evidence adduced which showed communications from [the employer] reflecting on [the plaintiff's] character and reputation, which were proved to be untrue...." Id. at 833. Therefore, once it was determined that the plaintiff's reputation was injured, it was proper to permit the jury to determine (1)whether the injury was the result of the employer's conduct, and (2)whether the "normal foreseeable harm to an employee that goes with any job termination was exceeded."
          3. The Berg court carefully noted that sufficient evidence to support plaintiff's claim was adduced from the employer's "verbal" and "non-verbal" communication. However, the court went on to say that, in view of its holding, most likely, mere conduct alone could support a claim of defamation.
      4. Defenses.
        1. Absolute Defense of Truth.
        2. A true statement that is not misleading is absolutely protected and may not be the subject of a claim for defamation. This is true even if the statement is made maliciously. If a true statement is made in a context that could cause a reasonable inference that is false, however, the statement may lose its protection.

          Example: Bob resigned from his position at XYZ, Inc. because he wanted to move closer to his family in Arizona. The day he resigned, XYZ, Inc. completed an investigation into a recent theft from the company safe, and discovered that employee Charlie stole $1,000. Charlie was fired. When Bob applied for a job at ABC Co. in Phoenix, the company contacted XYZ, Inc. to check Bob's references. XYZ, Inc. responded with the following statement: "Bob resigned the day we completed our investigation into who stole $1,000 from the company safe." ABC Co. did not hire Bob.

          While the statement is technically true, the implication is that Bob stole the money. Bob therefore has a claim against XYZ, Inc. for defamation, and XYZ, Inc. may not use the truth defense.

        3. Absolute Privilege.
        4. The absolute privilege defense applies when public policy dictates that an employer must have complete immunity to the threat of defamation lawsuits. For example, statements made in a report to be filed in accordance with workers' compensation statutes are absolutely privileged. Statements made in a labor arbitration hearing or a fact-finding conference, however, might not enjoy the absolute privilege.

        5. Conditional Privilege.

A conditional privilege may attach where several persons have a common interest in a matter and have a need to communicate with one another about the matter. In many states, employers enjoy a qualified privilege that permits them to give defamatory references. The privilege attaches if the following conditions are satisfied:

  • The reference is made with a good faith belief in the truth of the statements;
  • The reference serves a legitimate business need;
  • The statements are made only to persons with a legitimate interest in hearing the reference; and
  • The reference is made only on a proper occasion.

Thus, if the reference is not made with malice (knowing or reckless disregard for the truth) and if the reference is limited to legitimate business interests and to a legitimate business audience, the reference may enjoy a qualified privilege.

In some states, former employers have a degree of immunity from lawsuits when providing reference information. See Florida Statute §768.095, which provides that an employer that discloses information about a former employee's job performance is presumed to be acting in good faith. Furthermore, unless lack of good faith can be shown, the employer cannot be sued for the disclosure of information about job performance or the consequences of such disclosure. The former employee can prove a lack of good faith only by showing that the information was "knowingly false or deliberately misleading," given for a malicious purpose, or in violation of the state anti-discrimination laws.

In routine reference checks, employers in states with these statutes can rely on the state statute for protection from litigation in disclosing the reasons for an employee's separation from employment, his or her employment history, and job performance. In cases involving extreme situations, such as an individual who was terminated for strange or dangerous behavior, the statute will protect the employer that discloses any facts that are documented or substantiated through witness accounts. The employer should not disclose gossip, rumors, or subjective opinion that is not based on fact. Likewise, the employer should not engage in "blacklisting" of an individual.

  1. Consent.

Consent is a complete defense to an action for defamation.

  1. Other Possible Claims.
    1. Intentional Infliction of Emotional Distress.
    2. An employee may claim that a former employer was extreme and outrageous in giving a false reference with the intention of inflicting extreme emotional distress. An employer that maintains a professional reference policy and avoids personal attacks or extreme and embarrassing revelations should avoid liability for intentional infliction of emotional distress.

      A claim for intentional infliction of emotional distress is more likely to arise during the course of confrontation or discipline of an employee. Verbally abusing an employee in front of co-workers, conducting a strip search of a suspected thief, and announcing over the loudspeaker that an employee was fired to "make an example" out of the employee may all give rise to a successful claim for intentional infliction of emotional distress. Avoiding extreme and outrageous investigation and disciplinary tactics should prevent such claims from arising.

    3. Invasion of Privacy.
    4. An employee may claim that a false reference or public discipline placed the employee in a false light to the public. An employee might also claim that the employer disclosed a private fact to the public. Both claims state a cause of action for invasion of privacy. Privilege, truth, and consent may all be valid defenses to a false light privacy claim. Consent may be a valid defense to a claim based upon disclosure of private facts.

    5. Interference With Contract.
    6. A former employee may claim that a former employer intentionally interfered with the formation of an employment contract by giving a false or misleading reference. Limiting statements about employees to a proper forum and maintaining a professional reference policy should prevent this claim from succeeding.

    7. Title VII Discrimination.

    If discrimination against a member of a protected class is a motivating factor in the giving of a negative reference or the choice of discipline, the employer is probably in violation of TitleVII of the Civil Rights Act of 1964, regardless of the truth of the statement or the appropriateness of the discipline.

    Note: Because defamation claims are the primary vehicle for employee recovery, this presentation will focus on avoiding such claims in both giving references and disciplining and confronting employees. Adherence to the suggestions below should also minimize the likelihood of a lawsuit for one of the other claims.

  2. Negligent Referral, Misrepresentation, and Fraud.
  3. The emerging theories of negligent referral, misrepresentation, and fraud pose new concerns for employers who refuse to divulge information in a reference check. The theories state that giving an incomplete reference increases the risk that a bad or dangerous former employee may be hired by a company that is unaware of the employee's negative history. The new employer is thus unfairly burdened with a bad employee and increased exposure to lawsuits for negligent hiring. Employers who are found liable for negligent hiring have attempted to recover from the employer who failed to disclose damaging information in a reference check.

  4. Legislative Outlook.

Many states have passed or are considering legislation that would grant civil immunity to employers who provide accurate references for their employees. Typically, this legislation provides that an employer who provides a reference at the request of an employee or a prospective employer is presumed to be acting in good faith. Unless lack of good faith is shown by clear and convincing evidence, the employer is immune from all civil liability that may result. Thus, unless an employer knowingly provides false information, makes a reference maliciously, or violates anti-discrimination laws, liability should not attach. Even if an employer is covered by this type of legislation, however, the following tips should be considered as a way to minimize the risk of liability arising from a negative reference. (See Appendix, Form No.20.)

  1. Giving References with Minimal Exposure
  2. Many companies place strict limits on what may be disclosed in a reference check. Former employers may be unwilling to reveal anything but a candidate's official title, dates of employment, and salary. While this "solution" may reduce exposure in a defamation lawsuit, it has a negative impact on the business community. Employers should consider adopting a reference policy that would enable them to provide a fair and accurate appraisal of a former employee. The best reference policy is clear, is premised on employee consent, promotes objective and accurate statements, maintains the qualified privilege, and is strictly enforced. (See Appendix, Form No.19.)

    1. Formulate a Clear Policy.
    2. If strictly followed, a clear policy can be a valuable defense to an employer in a defamation lawsuit.

      1. Obtain Employee Consent.
      2. It is never too early to begin building a defense to a defamation lawsuit. Require all applicants for a position with your company to sign an authorization and release for you to disseminate information to future employers. Such a release could read:

        I hereby authorize XYZ, Inc. to provide information regarding my employment with XYZ, Inc. to any future potential employer who requests such information as part of a background check. I release XYZ, Inc. and any person acting on behalf of XYZ, Inc. from all claims arising from the release of such information.

        When coupled with the release obtained immediately prior to the reference request (see II.A.5), this authorization should be effective in establishing a consent defense. (See Appendix, Form No.21.)

      3. Maintain an Accurate and Objective Personnel File.
      4. Because references will be based upon what is in an employee's personnel file, the file should be accurate and objective. Negative comments should be verified, and the file should be free from personal attacks and opinions. All personnel files should be kept confidential in a secure area, and information should be released only on a "need-to-know" basis.

      5. One Person/Department in Charge of References.
      6. The best way to ensure consistent reference disclosure is to limit the number of people who are permitted to give references. Require that all reference requests be directed to the human resources or personnel department, and prohibit all other employees from providing references on behalf of the company.

      7. Require That Reference Requests Be in Writing.
      8. It is important to document every step in the reference process, and the best way to accomplish this is to require that all requests be in writing.

      9. Require That Each Request Be Accompanied by an Employee Release.
      10. Do not answer a request for a reference unless the request is accompanied by a signed authorization of the applicant. Such an authorization should release your company, employees, and agents from all claims that may result from the reference. If the release is limited in scope (for example, limited to verification of information provided to the prospective employer by the applicant), your company should not exceed the scope of the authorization in its disclosure. The authorization, coupled with the release signed by the employee upon being hired at your company, should support a consent defense in a defamation case.

      11. Avoid Phone References.

Due to the possibility of a dispute over what was said, a reference given over the telephone is more likely to be the subject of a successful defamation lawsuit than a formal, written reference. If you do decide to give a phone reference, the following procedures will reduce liability:

  • Call the requesting party back. Attorneys and investigators have been known to call former employers pretending to do a reference check. Do not answer any questions until you call the requesting party back and verify the caller's identity.
  • Demand a fax of the applicant's signed release before answering any questions. The mode of giving a reference has no effect on the importance of receiving applicant consent.
  • Limit answers to specific objective statements. Phone references tend to be less formal than written references, and this creates a danger of making comments that would not have been made in a written reference.
  • Keep an accurate record of the phone reference. Take accurate notes during the reference check. Note the name of the person and company seeking the reference, the date and time of the phone call, the questions asked, and the answers given.
  1. Limit Disclosure to Privileged Audience.
  2. An important element of the qualified privilege defense to defamation is that the communication is limited to a legitimate business interest and made only to parties with a legitimate interest in the communication. Thus, any disclosure of defamatory information to a person with no legitimate business interest eliminates the qualified privilege. This includes unnecessary publication within your company.

  3. Limit References to Questions Asked.
  4. Do not volunteer information. Liability can be limited if it is clear that you restricted your comments to answering the questions of the prospective employer. You may appear vengeful and malicious if you voluntarily disclose unrequested, negative information. Remember to limit your answers to the scope of the signed applicant release.

  5. Limit References to Objective and Verifiable Information.
  6. The best defense to a defamation lawsuit is the absolute defense of truth. The key to a truth defense is to limit references to objective, verifiable, and irrefutable statements. The former employee's name, dates of employment, titles and positions held, promotions received, and attendance record should all be undeniable, and are thus proper subjects for discussion.

    Due to the emotion of a termination meeting, there may be a dispute as to whether an employee was fired or resigned. When a person leaves employment with your company, the circumstances of the termination should be clear and in writing. If the circumstances surrounding the termination are subject to reasonable dispute, do not discuss them with a prospective employer.

    Do not make personal comments or character attacks, and avoid repeating gossip. For example, if the human resources director says "He was a drunk" based upon what she heard from other employees, you will probably lose a defamation lawsuit.

    A common problem in a truth defense is that the former employer and the applicant know a different version of the "truth." The best way to avoid this problem is to avoid giving statements that describe the applicant with words subject to different interpretations. Instead, state the objective facts behind your opinions. For example:

    • Do Not Say:

    • Instead, Say:

    • He performed poorly.

    • He achieved the company quota 30 percent of the time. The company average is 92 percent.

    • She is not a team player.

    • On 12 occasions, she was asked to perform an extra task to fill an unexpected need. She refused each time.

    • She is not dedicated.

    • She worked one hour of overtime in two years.

    • He is violent and disrespectful.

    • He punched a supervisor in the nose.

    • He came to work drunk.

    • He arrived at work smelling of alcohol 10 times, and he fell asleep at his desk each time.

    • She was a drug addict.

    • She tested positive for cocaine on two occasions.



    In sum, if it is possible for the former employee to dispute the statement, do not make it. Limit comments to true statements that are objective and verifiable. All statements should be supported by evidence found in the former employee's personnel file. All negative claims should be investigated for accuracy.

    Extreme care should be taken if asked to rate the applicant on a scale of one to ten, below average, average, or above average, or by any other subjective ranking mechanism. These rankings are inherently subjective and subject to reasonable dispute. If asked to provide such a ranking, you should decline.

  7. Keep a Record.
  8. Make a copy of all references provided by your company. There should never be a dispute about what is said in a reference check.

  9. Treat Good References as Objectively as Bad References.
  10. Employers typically desire to give positive references for good former employees. Such references often include subjective statements about dedication, attitude, and ability. If an employer becomes known for giving subjective, glowing references for good former employees, however, a stale and objective reference by the same employer will be inferred to be a negative reference. The safest policy for giving good references, therefore, is to objectively state the positive achievements of the former employee.

    Do not lie in an attempt to assist a former employee in a job search. False "positive" statements can be used by the employee in a wrongful termination lawsuit. For example, assume XYZ, Inc. fired Charlie for theft and then gave the following reference in an effort to help Charlie get back on his feet: "Charlie was a good worker who never got into trouble." Charlie could use the statement in a wrongful termination suit against XYZ, Inc. as evidence that he did not commit theft and that XYZ, Inc. terminated him based upon false and defamatory reasons.

  11. Avoid Compelled Self-Publication.

A claim for defamation based on compelled self-publication arises when an employee is terminated based upon evidence that is itself defamatory. If the terminated individual is then required to disclose the reason for the termination to prospective employers, the person will be compelled to defame himself or herself. Thus, extreme care should be taken when making a determination to terminate an employee.

  1. Strictly Enforce the Policy.

The reference policy will only be successful if it is strictly enforced among all employees. First, employees should be notified of the policy. The policy should be contained in employee handbooks and manuals. All employees, especially supervisors and managers, should be trained in the new policy. Importantly, they should be notified that they are not authorized by the company to speak on its behalf. If they do, they should be disciplined, because they are exposing the company to risk of litigation.

Some employees may desire to give a personal reference based upon their own experience with the applicant. Employees should be instructed that personal references about other employees are discouraged. The policy should indicate that if someone does decide to give a personal reference, it must be preceded by a statement that the person is not speaking on behalf of the company. To reinforce this fact, personal references should never be on company letterhead and telephone references should never be on company time.

  1. Disciplining Without Defamation
  2. Employers have a vested interest in maintaining a productive workplace. Preventing employee misconduct is an essential element of protecting that interest. Employers often need to investigate alleged misconduct and, if a problem is found, confront and discipline wrongdoers. If employers conduct investigations, confrontations, and disciplinary situations in a consistent, professional manner, they should be able to defeat claims of defamation.

    1. Investigation.
    2. If an employer suspects misconduct, the situation must first be investigated. Investigations should be conducted in a manner consistent with professional business standards. A properly conducted investigation may be protected by the qualified privilege. The following guidelines should be followed to prevent charges of defamation.

      1. Carefully Plan Investigations.
      2. Prepare for investigatory interviews in advance. You are less likely to make a defamatory remark if you carefully plan what you will discuss in an interview.

      3. Avoid Accusations.
      4. Explain at the outset of any employee interview that the purpose of the interview is investigatory and that no one is being accused of anything at this time. Ask questions in a general, nonaccusational manner. Do not reveal that you suspect a specific person of doing anything wrong. Do not answer employee questions about the suspect employee.

        Be careful not to accuse the employee of anything when you are still investigating the alleged misconduct.

      5. Limit Publicity.

      Keep all information and conversations on a "need-to-know" basis. Limiting the audience to those who have a legitimate business need to participate is the best way to protect the investigation under the qualified privilege. To limit publicity, do not announce investigations over the loudspeakers or in company newsletters. Do not conduct interviews in front of other employees, and do not confront the suspected wrongdoer in public.

      In general, do not act in such a way as to allow employees to infer that a specific employee has committed misconduct. This rule may be very difficult to follow in practice, but the risk of defamation can be minimized if employers are careful to limit investigations to carefully planned, nonaccusational fact-finding efforts conducted with as much respect for the privacy of the suspect as possible.

    3. Confrontation and Discipline.
    4. When an employer is satisfied that an employee has committed misconduct, confronting and disciplining the employee may be necessary. When a decision to discipline is finally made, be careful to avoid an emotional confrontation filled with accusations and personal attacks. Remember that employers have a right to discipline their employees, but they do not have a right to defame them.

      1. Base Decisions on Reasonable and Objective Grounds.
      2. Do not make quick decisions. Wait until an objective investigation is completed. The investigation should be meticulously conducted, and should support your decision. Do not base a disciplinary measure on any ground that is not supported by the investigation. If you are not able to articulate specific reasons for the discipline, or if the reasons are not supported by objective evidence, you should reconsider your decision.

      3. Advise the Employee.
      4. Establish clear guidelines for advising the accused employee of your decision. The employee should be informed of the decision in private, and no attention should be drawn to the employee before or after the meeting. For example, after conducting a well-rumored investigation about theft in the workplace, do not call the accused to your office over the loudspeaker to fire him.

        In the meeting, articulate the specific reasons for the discipline. Avoid personal attacks or accusations. Your comments should be objective and verifiable. For example, do not call the accused a "thief." Instead, explain that your investigation revealed evidence to support your conclusion that the employee took funds from the safe. The key is to not make any statements impugning the character of the employee. This meeting should be carefully documented, and a witness should be present.

        If an employee is being terminated, the employer may consider having security personnel escort the employee from the premises. This practice is acceptable if the employee is being terminated for dishonesty or has threatened violent or inappropriate conduct. Care should be taken to avoid a public spectacle, however, so do not parade the terminated employee through the workplace surrounded by security.

      5. Limit Publicity.

Employers may desire to inform other employees about the disciplinary measures taken against an employee. Similarly, employees may have an interest in understanding how the employer handles misconduct. Despite this interest, employers must be extremely cautious to limit the disclosure. Explaining disciplinary action to numerous employees might be outside the scope of the qualified privilege if the employees do not have a legitimate business interest in the information. Without the privilege, the employer will be required to prove the truth of every defamatory statement to avoid liability.

In a recent case, an employer announced the reasons for a termination decision to the employee's co-workers. The reasons turned out to be false, and the employer was liable for defamation. While you may have the right to fire an individual based upon false information, you do not have the right to publish the false information to an audience outside the scope of the privilege.

Statements made to an internal personnel report should be protected by the qualified privilege due to the legitimate needs of an employer to document employment decisions.

Remember that conduct can substitute for communication in establishing defamation. For example, escorting a terminated employee from the workplace with security may imply reasons for the termination that are untrue. If an employee is not being terminated for dishonesty and violence or inappropriate behavior is not anticipated, use of a security escort can support a claim for defamation by conduct.