Manage Your Defamation Risks

Let’s now move on to a topic that’s related to firing. But it’s also a broader issue, and that’s defamation. And we’ll look first at the law of defamation and then we’ll look at managing the defamation risk. So here’s a scenario I’d like you to think about. Let’s say that you’re a manager and you fired Larry. And Larry’s trying to find another job. And so he goes to a potential employer, and this employer calls you and said hey, why did you fire Larry? And you say, Larry was irrational, he was ruthless, he was disliked by our office personnel. Larry is a classical sociopath, he’s a zero. He’s a Jekyll and Hyde person who has no scruples.

Okay, now what legal light bulb should go off when you make statements like that? There should be a huge legal concern when you talk to potential employers like the one who is thinking about hiring Larry, and light bulb is called defamation. Defamation, a simple definition is a communication that harms somebody’s reputation. And defamation is divided into oral defamation, which is called slander, and written defamation, which is called libel. And in this particular case, Larry filed suit against his former employer. Larry, by the way, he couldn’t find a job after he was fired, and he wondered why. So he hired a detective and the detective called the former employer and this is what the former employer said about Larry.

So Larry filed suit and he won $1.9 million.

So the question is, what can you, as an employer, do to avoid this liability? Now, I work with senior executives around the world. And when I ask this question, I always receive a standard answer, and that is, we don’t talk about our former employees. We just give the name, their rank and their serial number, basically. We’ll tell people when they worked for the company but we’re not going to say anything more because of the risk of defamation. Now this causes some problems, this type of business policy. Number one problem is, if you want to hire somebody and you contact former employers, it’s going to be very difficult for you to find out information about their job performance.

But number two, and this is what companies often don’t realize, they are still open to the risk of liability. Because this policy only talk about name, rank and serial number, typically applies when they’re talking to outsiders, when they’re talking to companies that are considering hiring former employees. And they forget that defamation can also apply to communications to people inside the company and even to communications directly to the employee. So here’s an example involving a communication to insiders. We’ve got an employee who works for a company for 41 years. He’s fired after the company accuses him of stealing a phone, which the employee claimed belong to him. In internal communications, the company accused the person of theft.

The person sued the company for defamation and wins $15 million. And like many of these cases, again, the case was settled for a lesser amount later.

And so the bottom line is, you should think about the risk of defamation even in internal communications, including performance reviews. Believe it or not, these are quotes from actual performance evaluations. This person works well when under constant supervision and cornered like a rat in a trap. This person would be out of his depth in a parking lot puddle. Or, when she opens her mouth, it seems this is only to change whichever foot was previously in there. Or, this person sets low personal standards and then consistently fails to achieve them. Well, these are sort of humorous, however, they are also grounds for defamation. So you have to be very careful in communication, even within a company.

In other words, defamation liability does not only apply to communication to outsiders. Bottom line here, what you’re giving the employee is a chance to recover damages, even where the company can show that the discharge was legal. Even though the firing was legal, there’s an additional grounds of liability. I saw a quote recently from a prominent employment lawyer, and he said that in about 60 to 70% of wrongful discharge cases, the plaintiff, the discharged employee, also alleges defamation and also alleges discrimination. So defamation and discrimination are add ons to a wrongful discharge lawsuit. Now, this risk of defamation can even apply, surprisingly enough, when the company doesn’t say anything. Here’s an example.

This is a little bit on the borderline, a little bit extreme, but you should be aware of the risk. We’ve got a trader who works for a brokerage firm for 12 years. Three of the firms officials suddenly show up in his office and in plain view of the other employees, grill him about his expense report. They then escort him out of the office without allowing him to speak to his staff or without allowing him to take his belongings. The employee sued for defamation. He said, in effect, this is defamation by conduct. Through their conduct, they were implying that I cheated on my expense reports.

And the company asked the court to dismiss the case, and the court said no we’re going to allow this to go to trial. And I’m not sure what eventually happened. But this case illustrates the risk of defamation by conduct. Now, what about communications directly to the employee? Can these be grounds for defamation? For example, let’s say that you are Larry’s boss, and you decide to fire Larry. And Larry says, why are you firing me? And you say Larry, you’re irrational, you’re ruthless, you’re disliked by office personnel. Larry, you’re a classical sociopath, you’re a zero. A Jekyll and Hyde person who has no scruples. So you say that to Larry, okay?

Now normall, defamation relates to comments made to other people, not to the individual whom you are defaming.

But, here’s the risk. Larry leaves your office and he applies for a job.

The company calls you and says, why did you fire Larry? Well, under you new company policy you say, I can just give you his name and his rank and when he worked here and I’m not going to say anything else. So, the new company then says Larry, your old company won’t talk. Why did they say they fired you? And Larry says well, they said I was irrational, I was ruthless, I was disliked by office personnel. They said I was a classical sociopath, a zero. A Jekyll and Hyde person who has no scruples. Well at that point, the new company is going to say well Larry, I don’t think we can hire you. Or maybe they’ll say you’re great CEO material.

No, kidding. But now, at this point, Larry might file suit against his old company, claiming defamation. But you say, wait a minute, this doesn’t make sense. He just defamed himself by providing this information. Well some courts have come up with a theory of compelled self-defamation. Larry had to provide this information in order to be honest, because the old company wouldn’t provide the information. So there’s a risk even when you communicate directly with the employee. So these are the basic communication risks. Now, how can you manage these risks? Well, you could say, we’re not going to talk to anyone, inside or outside the company. The problem is this can lead to rumors. It can lead to mistrust of the company.

So other approaches are first of all, manage by fact. This is an old principle of quality management. If you stick to the facts, then you are not legally liable. If Larry is in fact a classical sociopath, then you can say that. It’s only when you exaggerate and misstate the facts that you run into defamation risks. Or you should not be talking to other people at all, you should leave this to the experts, your human resources people. Or what I have discovered in working with executives in some countries and in some companies, they deliberately provide letters of reference to discharged employees. That way the employee can’t say, well, my old company won’t talk and I have to defame myself.

They’ve got letters. Here’s some language you can use if you’re writing a letter for an employee and you can’t think of anything good to say. Here’s, for somebody who’s been involved in criminal activity, you could say well, this is a person of many convictions. Or for somebody who’s not trustworthy, you can say, her true ability is deceiving. For somebody who’s unqualified, I most enthusiastically recommend this person with no qualifications whatsoever. Or for somebody who is lazy, you’ll be very fortunate to get this person to work for you. Of course, these are provided in a humorous vein but the bottom line is try to be honest in your communications. So that concludes this segment.