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In today’s challenging job market, the stigma to an employee terminated for workplace misconduct can make an already challenging job environment next to impossible. What employer, facing a desk piled high with applications from qualified job seekers, would take a chance on one who professes he was terminated from his last position based on a false claim he stole company property?  To redress this injustice, Minnesota grants certain legal remedies to wrongfully accused employees.  Although this right is limited by common law and statute, it is important for any employer in Minnesota to know and understand the law of workplace defamation. This article is meant to provide employers a concise overview of the law to protect against costly and contentious defamation suits.

The Basics

At the outset, it bears noting that Minnesota is an at-will employment state.  That means an employer may lawfully terminate an employee for acts the employee, in actuality, did not commit.  A claim of “wrongful termination” arises only where a company fires an employee (1) for refusing to violate the law; or (2) to avoid the vesting of a benefit, such as a bonus or commission.  An employee fired for a false reason may, however, sue for defamation under limited circumstances.

Defamation under the common law allows the recovery of damages from one who makes or disseminates untruthful written or verbal statements of fact.  Statements of opinion, no matter how reprehensible, do not fall under the protections of defamation law (although they may support legal claims under another tort theory, such as intentional infliction of emotional distress or interference with business relations). Defamation requires the additional element of “publication.”  That is, the false statement must be conveyed to someone other than, or in addition to, the person defamed. To prevail on a defamation claim, it is usually necessary to prove damages or injury resulting from the false statement.  Exceptions to this requirement, known as defamation “per se,” include false statements relating to a person’s business, trade or profession. Examples might include:

  • “Half of Dr. X’s patient’s develop complications after surgery;”
  • “Restaurant Y uses beef from downer cows in its burgers;”
  • “Employee Z came to work intoxicated.”

For such claims, damages are presumed and need not be proven.  Under the common law, there was no need to prove intent on the part of the defamer; negligence was enough.  In the 1960s and 1970s, the United States Supreme Court held that speech critical of persons of certain status, namely public officials and figures, to be constitutionally protected under the First Amendment, unless made with “actual malice, “ meaning “ill-will and improper motive or wishing wantonly and without cause to injure the plaintiff.”  (As explained below, Minnesota by statute applies a similar standard to employers, if certain conditions are met.)  Finally, it bears noting that truth is a complete defense to a defamation claim.  This applies regardless as to how disparaging the statement may be.  Stuempges v. Parke, Davis & Co. (Minn. 1980).  However, an employer that needs to prove to a jury the truth of an allegedly defamatory statement has already lost, in that it will have spent potentially tens of thousands of dollars in legal fees to address the employee’s claim.

Employee Claims under Common Law

Under the common law, Minnesota recognized a qualified privilege between previous and prospective employers, insulating the former from liability based on statements made to the latter, as long as the statements were made in good faith and for a legitimate purpose.  Lewis v. Equitable Life Assur. Soc’y (Minn. 1986).  Proving bad faith is not a simple matter.  Watson v. Ceridian Corporation (Minn. App. 2003) (employee failed to show bad faith where employer fired her for sleeping at desk on multiple occasions, which employee disputed, despite employer’s failure to ever warn her that it was not permitted).

But what of the situation in which the prior employer is not contacted by the prospective new employer, or the prior employer’s policy is to only divulge job titles and dates of employment? The hypothetical employee in the introductory paragraph (fired based on a false accusation of theft) faces a classic Catch-22: either lie on the application by saying he quit and face possible termination later for having lied on the application, or tell the truth and say “it was all a big misunderstanding.”  Given that most employers do not, as part of the screening process, wire up applicants to lie detectors, and given the realities of today’s labor market, the latter scenario virtually ensures the applicant will not be hired. In response to this problem, Minnesota courts years ago recognized the common law claim of “compelled self-publication defamation,” under which an employee may sue his or her employer for false reasons given for termination.  See Kuechle v. Life’s Companion PCA, Inc. (Minn. App. 2002) (affirming judgment in favor of nurse, who told prospective employer during job interview that her previous employer fired her based on false accusation of patient neglect).  Under this theory, the publication element is satisfied by the presumption that an employee himself or herself must “publish” the false statement by truthfully responding to a prospective employer’s inquiry into separation from prior employment.

Legislative Responses

In response to employer concerns over the cost of defending dubious defamation suits, the Minnesota Legislature in 1987 adopted a statute requiring a terminated employee be given, within five business days of the request, a statement of the “reason for the termination.”  Minn. Stat. § 181.933. Failure to do so subjects an employer to liability in the amount of $25 per day, for a maximum penalty of $750, but only if brought in a suit under the Minnesota Whistleblower Act. Minn. Stat. § 181.935; Brown v. Diversified Distribution Sys., LLC (D. Minn. 2014).  The statute insulates employer from liability for such statement in a subsequent defamation lawsuit.  The statute’s practical effect in limiting litigation is doubtful, however, because few employees make such a request.

In 1989, the legislature went further, immunizing statements in a personnel file from defamation lawsuits. Under the new law, employees were given the right to challenge any statement contained in their personnel record (most commonly, a performance evaluation) by meeting with the employer to request it be revised or deleted, and if no agreement can be reached, by submitting a written statement of up to five pages, to be placed alongside the disputed item in the personnel file.  However, if no such challenge is made by the employee, then the unchallenged statement cannot be the subject of a defamation lawsuit.  In practice, not many employees avail themselves of this right, so this particular employer protection potentially does have teeth.

That same year, the legislature insulated former employers from liability based on information contained in an employee’s personnel file that is communicated to others, unless (1) the employee first disputes the information and requests it be removed from the file; and (2) the employer refuses to do so. Minn. Stat. § 181.962.  A written comment in response to a corrective action plan that expresses confusion and frustration, but does not dispute any information, will not suffice for such purpose. Lehman v. UnitedHealth Grp. (D. Minn. 2010) (dismissing employee defamation claim).

More recently in 2004, the legislature finally took up the subject of communications to prospective employers, enacting a true qualified privilege statute. Minn. Stat. § 181.967. Among other things, the law prohibits suits by employees based upon statements made to prospective employers and employment agencies concerning:

  • the employee’s job descriptions and duties;
  • training provided to the employee; and
  • acts of violence, theft, harassment, or illegal conduct documented in the personnel record that resulted in disciplinary action or resignation and the employee’s written response, if any, contained in the employee’s personnel record.

An exception exists for “false and defamatory” statements by an employer, but only if the employer knew or should have known of the statement’s falsity.  Moreover, the employee must show that the employer made the statement with a “malicious intent to injure.” This raises the interesting scenario in which an employee is fired for an alleged act of serious misconduct that the employer takes no steps to investigate.  For example, Employee A tells employer that Employee B stole from the cash register. Employer takes Employee A’s word, based upon her reputation for truthfulness and diligence, and then fires Employee B, without having added up the money in the register and compared it to the register tape.  A jury under such circumstances could certainly find the employer “should have known” of the statement’s falsity. Proof of “malicious intent,” however, would be challenging.  To date, the Courts of this state have not reconciled the incongruity of a side-by-side “should have known” and “malicious intent” standard.

Litigation Results

Despite the legislature’s efforts to curb perceived excesses in employee litigation, employment defamation remains an actively litigated field.  Employers seeking to avoid facing an employee lawsuit should be mindful of recent cases, including the following. The case Kesanen v. D & H Const. of Eveleth, Inc. (Minn. App. 2006) involved an employee of a building firm who was offered a job with the Federal Aviation Administration (FAA) as an air traffic controller, contingent on passing a background check.  The employee was informed that he failed the background check due in part to the background investigation interviews.  His supervisor provided the only negative review to FAA investigators. The Court of Appeals held that the statements, including “I believe Mr. Kesanen stole company tools and materials, this allegation was never proven” and “I believe Mr. Kesanen has a drinking problem” were defamatory.

In another case, Keuchle v.Life’s Companion P.C.A., Inc. (Minn. App. 2002), an employee sued her employer after being terminated from her position as a nurse in a home health care business.  Keuchle’s supervisor had asked her “if she would be around in a few minutes” and if so, to pass on a message to a colleague.  The employee stayed in the office for another 20 minutes but the colleague did not appear. The employee received a termination letter which stated that she had disobeyed “a direct order” and “neglected” her duties. Because the statement was untrue, the employer was liable for defamation and the employee was awarded over $22,000 in damages and over $100,000 in attorney’s fees.

Best Practices

To ward off prospective legal claims, many large employers in Minnesota have in place policies of providing only dates of employment and job titles of former employees to inquiring prospective new employers.  Smaller employers would be wise to adopt such “name, rank and serial number” polices. Ethical considerations, such as not wishing a terrible employee on a fellow business owner, should be balanced against humanitarian considerations such as allowing an employee a second chance (what person hasn’t made a mistake in judgment?) and from a bottom line perspective, avoiding expensive and contentious litigation.  Which may, depending on the newsworthiness of the case facts, give the company unflattering media attention.

A second, inexpensive step to minimize the risk of litigation is to closely monitor supervisor recommendations, or even prohibit them altogether.  Although recommendations requested and obtained under such circumstances are generally positive, some supervisors do in fact provide prospective new employers information that cause the applicant to not be hired.  By controlling the recommendation process, an employer can control the “message” and minimize the risk of a suit by a disgruntled former employee.

I’m Here to Help

If you own a business who has been sued for defamation by a former employee, or if you would like advice on practical measures to help limit the risk of your company being sued in the first place, I am available to assist you.  Give me a call, and I will be glad to review or help create your employee handbook and sound workplace policies, so that you can focus your attentions on the growth of your business instead of costly, distracting and contentious litigation.