If you start to notice something more than before, does that mean it’s a real trend, or that you are just seeing what you are looking for?
There’s little empirical evidence of a large increase in the number of lawsuits filed over “workplace defamation,” but there is more being written on the topic.
“Workplace defamation” refers to allegations of employment-related misconduct, generally committed in the course of disciplining or terminating an employee. The term also refers to allegedly unfair and/or untrue comments made about a former employee in response to a reference check.
In April 2009, the National Law Journal published an article entitled “Workplace Defamation Suits on the Rise.”
That article’s lead sentence reads: “Defamation lawsuits are on the rise in the workplace as employees take on employers over the right to reputation, suing over being labeled as damaged goods after losing their jobs.”
Similarly, The Practical Guide to Employment Law, a standard reference for human resources professionals, states that “negative job references have become an expanding source of defamation suits.”
Given the distressed condition of the job market, it is easy to see the great stakes involved in erasing “black marks” on one’s employment record if they are unwarranted.
It’s therefore plausible to suggest that there could be a significant increase in workplace defamation suits, but the evidence is spotty and anecdotal.
“We know of no statistics that respond to this question,” says John Jacoby, a labor law expert with the Chicago law firm Vedder Price. “Recessions tend to prompt workplace claims generally, so it’s possible that the number of workplace defamation claims has increased during this recession.”
According to Jacoby, workplace defamation claims have several features that make them an attractive alternative or complement to employment practices claims:
- Workplace defamation claims are typically tried in state courts before state juries, which are generally more favorable forums for plaintiffs than federal courts.
- Punitive damages are available under workplace defamation cases.
- In both types of cases, defendants have difficulty obtaining summary judgment (and, thus, have more incentive to settle) because of the fact-oriented nature of key issues.
Whatever the exact nature of trends today, the rapidly growing use of online technology in employment screening will almost certainly increase the number and scope of workplace defamation claims.
Whereas critical comments were once uttered to one person at a time and usually forgotten over the years, modern employment databases can disseminate negative information across the globe and preserve it indefinitely.
ChoicePoint, Inc., a major developer of databases with information on individuals, has been involved in at least two workplace defamation cases. Both cases alleged that incorrect information provided to an employment database damaged individuals in their attempts to find new employment.
Workplace defamation extends to employers’ liability for critical comments posted online or otherwise circulated by employees about co-workers, says Charles
Kingdollar, vice president of the emerging issues unit for General Reinsurance, Stamford, Conn.
“Just recently a court handed down a $7.8 million award against nine companies for defamation from Internet postings,” Kingdollar says. “Awards of this size will get the attention of the plaintiffs’ bar.”
Workplace defamation is a form of personal injury distinct from employment injuries such as wrongful termination, unfair discrimination, and sexual harassment.
Given that, liability for workplace defamation may, under certain circumstances, be covered under standard general liability policies or the general liability provisions of small business package policies.
“Plaintiffs’ attorney will certainly try to get to the employers’ CGL limits,” says Kingdollar at Gen Re. “To date they have not been successful, but there are still many jurisdictions that need to weigh in on this topic.”
However, liability insurance specialist David Rojek, of Munich Re America, believes the workplace defamation exposure to standard commercial carriers is remote.
First, says Rojek, general liability provisions generally exclude all coverage for any type of claim (bodily injury or personal injury) by current employees, effectively protecting general liability writers from defamation claims by current employees.
As for claims by former employees, the relevant provisions in standard forms tend not to be standardized themselves, but Rojek believes most forms make it difficult for claimants to secure recovery.
Under AAIS Commercial Liability and Businessowners forms, “defamation” is an explicitly excluded cause of loss. The AAIS Businessowners base forms state that “this exclusion applies where the insured is liable either as an employer or in any other capacity (emphasis added) . . . “
The AAIS endorsement for adding personal injury coverage to a commercial policy states that “this insurance does not apply to personal injury . . . to a person which results from an offense directly or indirectly related to the person’s employment . . . “
Other personal injury coverage forms, including AAIS personal lines forms, require a “publication” of information for an act to be covered. Rojek interprets “publication” to mean a conscious decision to release information.
“If the reason for a firing just ‘gets out,’ as commonly happens in office environments, there should be no grounds for coverage,” Rojek says.
However, he adds, “the odds are that the mysterious release of confidential employment records will invoke at least coverage to defend
against allegations that the release came from officials of the former employer.”
As it is, claimants have a high hurdle to clear in establishing that a workplace defamation injury has occurred.
Employers generally enjoy the right of “qualified privilege” in discussing the performance of present and past employees. Conversely, plaintiffs typically bear the burden of proving the impropriety of communications regarding employment between individuals with legitimate interests in the matter.
Generally speaking, to prevail, a workplace defamation claimant must not only establish that a communication is false, but that it was made with malice, ill will, knowledge of its falsity, and/or reckless disregard for its accuracy.
“The law regarding qualified privilege is settled,” says attorney Jacoby. “However, the existence of privilege is a question of fact, and judges sometimes seem to be looking hard to find evidence of bad faith.”
Given that, Jacoby cautions employers to impose strict limits on discussion of individual employee performance.
“To avoid workplace defamation claims, employers should strictly enforce a policy of providing only neutral references to people outside the company,” he says.
“Regarding internal communication, the publication of the reason for an employee’s discharge should be limited to the smallest group of persons as possible,” he continues.
“Get control over loose-lipped managers and supervisors,” Jacoby says. “Remind them that they face the risk of claims made against them personally.”
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Workplace Defamation: 
