Defamation in the Workplace Kathy Carlson, J.D.

M. LEE SMITH PUBLISHERS LLC B r e n t w o o d , Te n n e s s e e

This special report provides practical information concerning the subject matters covered. It is sold with the understanding that neither the publisher nor the writer is rendering legal advice or other professional service. Some of the information provided in this special report contains a broad overview of federal law. The law changes regularly, and the law may vary from state to state and from one locality to another.You should consult a competent attorney in your state if you are in need of specific legal advice concerning any of the subjects addressed in this special report.

© 2006 M. Lee Smith Publishers LLC 5201 Virginia Way P.O. Box 5094 Brentwood,Tennessee 37024-5094 ISBN 1-60029-004-3

All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means without permission in writing from the publisher.

Printed in the United States of America

Contents INTRODUCTION ........ 1 1 — DEFAMATION BASICS ........ 3 What Is Defamation? ........ 3 False Statements vs. Unflattering Opinions ........ 4 False Statement Must Be About the Employee ........ 7 Loose Lips Sink Ships ........ 8 Injury to Reputation ........ 10 2 — PRIVILEGES AND OTHER DEFAMATION DEFENSES ........ 13 The Privilege Defense ........ 13 Who Needs to Know? ........ 14 Specific Privileges ........ 17 Signed Releases and Other Defenses ........ 18 3 — JOB REFERENCE REQUESTS ........ 21 The Reference Dilemma ........ 21 Handling Requests for References ........ 22 When You Must Speak Up ........ 25 Obtaining References ........ 27

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4 — BACKGROUND CHECKS ........ 29 When FCRA Applies ........ 29 What FACTs Must Be Disclosed? ........ 31 Dispose of Problems ........ 31 5 — PERFORMANCE APPRAISALS, DISCIPLINE, AND FIRING ........ 33 Performance Appraisals and Discipline ........ 33 Termination and Defamation ........ 35 6 — INTERNAL INVESTIGATIONS AND DEFAMATION ........ 39 Before the Investigation Begins ........ 40 How to Investigate ........ 42 Post-Investigation Issues ........ 45 Additional Recommendations ........ 47 7 — DEFAMATION AND THE INTERNET ........ 49 General Policies on Electronic Communication ........ 49 Blogs and Defamation ........ 50 What About E-Mail? ........ 52 8 — SPECIAL SITUATIONS: UNIONS, PUBLIC EMPLOYERS ........ 55 Preemption ........ 55 Protected Concerted Activity ........ 56

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Bottom Line ........ 57

9 — INFORMATION SECURITY, PRIVACY, AND RELATED ISSUES ........ 59 Invasion of Privacy ........ 59 Sensitive Information ........ 60 Applicable Laws ........ 61 Good Practices on Information Security ........ 63 NOTES ........ 65 APPENDIX ........ 67 Defamation Crash Course ........ 67 Sample Policy on Pre-Employment Drug Screens ........ 69 Sample Policy on Obtaining Background and Reference Checks ........ 70 Sample Policy on Employment Records ........ 71 Sample Policy on Telephone Monitoring ........ 72 Sample Policy on Use of E-Mail and Voice Mail ........ 73 Sample Policy on References ........ 74 Second Sample Policy on Providing References ........ 75 Sample Employee Consent to Publication of Performance Appraisal ........ 76 Sample Release for Drug and Alcohol Testing ........ 77 Sample Release for Performing Reference Checks on Job Applicants ........ 78

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Introduction

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e said, she said.Who said what? And can you be liable for it? With all the talk that goes on in the workplace, you may wonder just what that certain comment about that certain someone means, legally speaking. You might think that since this is the United States — home of talking trash and dishing dirt — the First Amendment’s protection of freedom of speech means you can say anything you want. Right? Well, kind of.And if you do, you have to be willing to pay the price, as this recent case illustrates: Three former stockbrokers recently won an arbitration award of nearly $15 million for defamation when they were fired. They said their employer, Merrill Lynch, publicly disparaged them over activities that Merrill earlier had accepted, even praised. Merrill has since paid $1.6 million of the award and changed the employees’ records to show they were not fired for cause.1 Basically, defamation refers to a false statement about another person. It’s called slander if spoken and libel if written. A good grasp of defamation issues can help your organization in a host of ways beyond preventing nasty lawsuits.What people say (and how they say it) affects every aspect of an organization, from negotiating formal agreements to resolving everyday workplace hassles.Taking care with language can only strengthen your organization. And returning to the topic of lawsuits, defamation claims often accompany other claims, such as discrimination, wrongful termination, retaliation, intentional infliction of emotional distress, invasion of privacy, and breach of contract. Sometimes ill-chosen words are the last straw for employees, pushing them into lawsuits. By addressing and improving workplace language, you may well be able to lower the pace of litigation involving your organization. There are recurring situations in which defamation claims are likely to arise, including the following: • employment references; • background checks and employment testing; • workplace investigations;

What people say (and how they say it) affects every aspect of an organization.

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D e f a m a t i o n i n t h e Wo r k p l a c e

• disciplinary actions; • performance appraisals; and • termination of employment. We’ll cover defamation within these situations and offer specific strategies for prevention. A big part of prevention involves keeping information secure, and Section 9 covers this topic.Your employees also may defame you as well as their co-workers by the comments they make on their Internet websites or blogs.We’ll cover the cyber side of defamation in Section 7 of this report. We’ve structured the report to cover general defamation issues first and then go on to specific situations. If you’d like to skip straight to specifics, we offer a section called Defamation Crash Course in the Appendix, which also contains sample forms and company policies. The law of libel and slander reflects fundamental principles of behavior — telling the truth, most notably. Compared with other areas of the law, basic defamation principles aren’t tough to understand and effectively teach because they are rooted in the activities of everyday life. Educating employees in this area should greatly benefit your entire organization.We hope this report helps you build understanding and awareness in your organization.

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Notes 1 2

3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

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25 26 27 28 29 30 31 32 33 34 35

The Wall Street Journal, March 27, 2006, page 1. This definition comes from the Restatement (2d),Torts § 558.The Restatement summarizes general principles in the law of torts or injuries. Defamation is the tort of injury to the reputation. Fuste v. Riverside Healthcare Assn., Inc., 265 Va. 127, 575 S.E.2d 858 (Va. 2003). Jensen v. Hewlett-Packard Co., 14 Cal.App.4th 948, 18 Cal.Reptr. 2d 83 (Calif. 1993). Lapkoff v.Wilks, 969 F.2d 78 (C.A.4 1992). Milkovich v. Lorain Journal Co., 497 U.S. 1 (U.S. S.Ct. 1990). Based on Hunt v. University of Minnesota, 465 N.W.2d 88 (Minn. Ct. App. 1991). Phelan v. May Department Stores Co., 443 Mass. 52, 819 N.E.2d 550 (Mass. 2004). Kiesau v. Bantz et al., 686 N.W.2d 164 (Iowa 2004). Restatement (2d),Torts § 564; see particularly comment (b). McClesky v. Home Depot, Inc., 227 Ga.App. 469 (2005). Popko v. Continental Casualty Co., 355 Ill.App.3d 257, 823 N.E.2d 184 (Ill. App. 2005). Austin v. Inet Technologies, Inc., 118 S.W.3d 491(Tex. App.-Dallas 2003). Oliphint v. Richards and Jacobs Engineering, 167 S.W.3d 513 (Tex. App.-Houston 2005). Tacket v. Delco Remy Division of General Motors Corp., 937 F.2d 1201 (C.A.7 1991). State Farm Mutual Automobile Insurance Company v. Campbell, 538 U.S. 408 (U.S. S.Ct. 2003), citing the three-factor test found in BMW of North America Inc. v. Gore, 517 U.S. 559 (U.S. S.Ct 1996). Gray v. AT&T Corp., 357 F.3d 763 (C.A.8 2004). Olson v. Ballantine et al., 695 N.W.2d 43 (Ia. Ct. App. 2004). Fontani v.Wells Fargo Investments, LLC, 129 Cal.App.4th 719, 28 Cal. Reptr.3d 833 (Cal.App. 1 Div. 2005). Olaes v. Nationwide Mutual Insurance Co., 135 Cal.App.4th 1501, 38 Cal.Reptr.3d 467(Calif. 2006). Overall v. University of Pennsylvania, 393 F.Supp2d 341 (E.D. Pa. 2005). Kellums v. Freight Sales Centers, 467 So. 2d 816 (Fla. Ct. App. 1985). Hillig v. Rumsfeld, Secretary of Department of Defense, 381 F.3d 1028 (C.A.10 2004).This unlawful retaliation case involved a government clerk whose supervisor gave a negative reference for another government job in retaliation for the clerk’s past, successful racial discrimination claim. Even though the negative reference didn’t cause her to lose out on the job the clerk sought, the appeals court upheld a jury’s award of money damages, saying that an employee doesn’t have to prove actual job loss to prove the adverse employment effect that’s needed to prove retaliation. Andrus v. State Department of Transportation and City of Olympia, 117 P.3d 1152, 128 Wash.App. 895 (Wash. 2005). In this case, a job candidate unsuccessfully claimed that a negative job reference caused the City of Olympia to breach an alleged employment contract.The court rejected the candidate’s claim because even if he received an offer, it was to be an employee at will with the city. Singer v. Beach Trading Co., 876 A.2d 885, 395 N.J.Super 63 (N.J. 2005). The reasonable-measure standard is intended to be flexible.Thus, the FTC’s examples are only for illustrative purposes and aren’t exclusive or exhaustive methods for complying with the rule. Stewart v. Courtyard Management Corp., unreported case, 2005 WL 3114914 (C.A.5 2005); lower court decisions also unreported, 2004 WL 2988488 and 2003 WL 22883629. Stringer v.Wal-Mart Stores, Inc., 151 S.W.3d 781 (Ky. 2004). Caouette v. OfficeMax Inc., 352 F.Supp 2d 134 (D. N.H. 2005). Lomanno v. Black, 285 F.Supp.2d 367 (E.D. Pa. 2003). Varian Medical Systems, Inc. v. Delfino, 35 Cal.4th 180, 106 P.3d 958 (Cal. App. 2003). Kofoed v. Shiprack, unreported case, 2004 WL 2473304 (D.Or. 2004). Dennis Delaney et al. v. United Auto Workers Local 94 and Daniel White, 675 N.W.2d 832 (Iowa 2004). Jacobs v. Budak, 805 N.E.2d 111, 156 Oh.App.3d 160 (Ohio 2004). Konop v. Hawaiian Airlines Inc., 302 F.3d 868 (C.A.9 2002), certiorari denied, 537 U.S. 1193 (U.S. S.Ct. 2003).

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About the Author

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usiness journalist Kathy Carlson uses her past stints as an in-house attorney, communications professional, and newspaper reporter to dig into law-related topics and boil them down for business managers. She holds law and business degrees from Vanderbilt University in Nashville, and obtained her undergraduate degree in history from the University of Pennsylvania. Before joining M. Lee Smith, she was a reporter for The Tennessean in Nashville, where she covered workplace issues among a variety of business topics. As a business attorney, she handled employment law issues.

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