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Another Downside of Downsizing Layoffs May Spark Defamation Suits

June 11, 2009
Related Topics: Downsizing, Miscellaneous Legal Issues, Termination, Latest News
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Laid-off workers seeking financial relief are likely to increase the number of defamation claims filed against employers, employment law attorneys say.

Attorneys say defamation claims, among other employment-related claims, will rise as unemployment increases. The litigators say defamation claims often are associated with negative job references.

Other factors that could increase these claims are e-mail, online social networking sites such as Facebook and Twitter, and other media through which defamatory information could be sent out without the required forethought, observers say.

A defamation claim was at the heart of a recent ruling by the 1st U.S. Circuit Court of Appeals in Alan S. Noonan v. Staples Inc. The Boston court held in February that a private individual can recover damages for defamation if the plaintiff can prove the defendant acted with actual malice. The court later refused an en banc rehearing of its decision, which overturned a lower court’s dismissal of the claim.

There are about a dozen U.S. states with laws similar to Massachusetts’.

The case involved an executive of the Framingham, Massachusetts-based office supply company who sent an e-mail to 1,500 employees saying Noonan was fired for failing to comply with company travel and expense policies.

More claims can be expected if only because of rising unemployment and workers’ difficulties in finding other work, observers say.

Douglas R. Christensen, who represents only employers as a partner at Dorsey & Whitney in Minneapolis, said he has received several calls recently from workers mistakenly seeking his representation in defamation cases. He said he anticipates more laid-off workers who are having difficulty finding other work to file suit.

“I think, in part, it’s desperation really” and reflects ex-employees’ hope that they will either prevail in litigation or be offered more severance pay, Christensen said.

The caution about being careful with what you say always applies, but it’s particularly appropriate in a bad climate where options are fewer” for laid-off employees, said Jonathan A. Segal, a partner with Duane Morris in Philadelphia.

Anthony J. Oncidi, an employer attorney and partner with Proskauer Rose in Los Angeles, said defamation claims are included in at least one-third of all employment litigation he sees and could increase in coming months.

Job recommendations are a major source of defamation claims, observers say. Many experts say the safest course is for employers to confine their statements to basic facts, such as job title and dates of employment.

But some observers say employers too often do not restrain themselves and say more than they should.

“Many employers do make the mistake of saying negative things, or at least non-neutral things, about former employees and it mystifies me why they do that if they’re thinking clearly, because there’s really nothing to be gained from it,” Oncidi said. “They have already secured the termination of the employee, presumably. But a lot of times, there’s some bad blood between the employer and the employee.”

Employers should “curb their enthusiasm for retaliating against employees by saying negative things,” he added. If a suit is filed, “nobody wins in that situation.”

Any satisfaction gained from being negative about an employee “is going to seem pretty stale when you’re locked into a defamation lawsuit that’s going to cost you $150,000 to defend,” said Joseph G. Schmitt, a shareholder with Halleland Lewis Nilan & Johnson in Minneapolis.

Oncidi said the only exception would be cases in which a worker is terminated for violence, in which case the employer has a duty to disclose this information.

Consistency is important, said Jonathan T. Hyman, an employer attorney and partner with Kohrman Jackson & Krantz in Cleveland.

If it is your company’s policy to give only dates of employment, “don’t vary the depth of information you give” because that could become a litigation issue, he said.

Schmitt recommends that only higher-level human resources officials be permitted to speak to potential employers of ex-workers. Otherwise, “sometimes people who are trying to do the right thing can create problems,” he said.

In one case where he represented the employer, Schmitt said a former employee gave his supervisor’s name as a personal reference.

“The former supervisor said something to the effect [that] this person overcame struggles with attendance as a result of his medical condition,” multiple sclerosis, and did a good job.

Even though the supervisor was listed only as a personal reference, the employer was sued for defamation because of the remark about attendance as well as violating the Americans with Disabilities Act for revealing the MS. The case eventually was settled, Schmitt said.

The number of people who know the reasons for the termination also should be kept to a minimum, experts say.

“Information should be on a need-to-know basis,” Hyman said. “You shouldn’t be out there babbling to the world about what a horrible employee someone was,” he said.

“The information you give out should be in response to specific request, and you shouldn’t be looking to smear or trash someone on their way out the door,” Hyman said. “In general, if you’re truthful and not discriminatory in how you give this information out,” you will be protected by law.

“Get in-house counsel or qualified outside employment counsel directly involved from the beginning of the (layoff) process, so all the deliberations and decisions as to who goes and who stays can be sufficiently cloaked in the attorney-client privilege,” recommended Brian T. Ashe, a partner with Seyfarth Shaw in San Francisco.

This means management “can talk honestly ... and not fear those comments will come out and be used against them later. It’s a much safer way to approach termination decisions generally and [reductions in force] in particular,” Ashe said.

Care also should be taken to identify callers, Segal said. If someone calls out of the blue for a reference, get the main number and then return the call to be sure it is not someone acting on the ex-employee’s behalf, he said.

Observers say electronic communications also could spark more defamation suits.

“People tend to be sloppier in electronic communications” than in more formal communications and “slip up and say things in those kinds of media that they wouldn’t otherwise say,” Christensen said.

“I often joke that when people hit ‘reply all,’ there should be a special notice that comes up that says, ‘Are you really sure?’ ” Schmitt said.

“Everything you write in this world can be found by somebody in a few minutes,” and there is even the argument that putting something negative in a personnel file could be considered defamation in certain jurisdictions, said Richard I. Greenberg, a partner with Jackson Lewis in New York.

“Now, because many people write so many things down, e-mail is a happy hunting ground for both plaintiffs and defense lawyers,” Oncidi said.


Filed by Judy Greenwald of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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