Joey “Lucky” Fingers, a long-time employee, is fired by the Lardinato Limousine Co. for stealing fares. Although he denies any wrongdoing, when Lucky later goes on a job interview with the Corleone Cab Co. and is asked the circumstances surrounding his leaving Lardinato, Lucky states he was fired for allegedly stealing. Lucky is promptly rejected for a position at CCC as well as everywhere else he applies for work.
Thereafter, Lucky sues his former employer Lardinato for self-publication defamation, arguing he was compelled to repeat, or publish, the defamatory reason given by Lardinato for his discharge. Lucky, of course, was given his nickname for a reason, and he recovers a huge seven-figure verdict, including an award for damages to his reputation and punitive damages.
Is Lucky’s situation far-fetched? Not really. Compelled defamation is a tort that is gaining recognition as a viable cause of action by an increasing number of states. The claim usually arises in employee termination cases, where the plaintiff is compelled to repeat the defamatory reason given by the employer for the termination decision in the process of applying for a job. See Van-Go Transport Co., Inc. v. New York City Bd. of Educ., 971 F.Supp.90 (E.D.N.Y. 1997); Lewis v. Equitable Life Assurance Soc’y of the U.S., 389 N.W.2d 876 (Minn. 1986).
If successfully prosecuted, a compelled defamation claim could lead to a significant damage award, including damages for loss of reputation as well as punitive damages. These types of damages are obviously difficult to quantify or predict and may far exceed damages awarded for a breach of contract. Consequently, before terminating an employee for misconduct, employers should take certain precautionary measures to protect themselves from potential claims of compelled defamation.
The Communication Element
In New Jersey, a garden-variety defamation claim generally can be established by satisfying the following six elements: (1) a defamatory statement of fact, (2) concerning the plaintiff, (3) which was false, (4) which was communicated by the defendant to a person other than the plaintiff, (5) with actual knowledge that the statement was false or with reckless disregard of the statement’s truth or falsity or with negligence in failing to ascertain the truth or falsity, and (6) which caused damage. See Feggans v. Billington, 291 N.J. Super. 382 (App. Div. 1996).
In the usual defamation claim, it is the defendant who communicates the alleged defamatory statement to a third party. By contrast, in a compelled defamation claim, it is the plaintiff who is compelled to communicate the allegedly defamatory statement about himself or herself to a third party.
In other words, in jurisdictions where compelled defamation is a viable cause of action, courts recognize an exception to the usual rule requiring communication of the defamatory statement by the defendant where it is reasonable to anticipate that the defamed party will be compelled to disclose the content of the defamatory statement to a third party. Hence, the full moniker of the claim is compelled self-publication defamation. (See, e.g., McKinney v. County of Santa Clara, 110 Cal. App.3d 787 (1980); Van-Go Transport Co., Inc.; J.Crew Group, Inc. v. Griffin, No. 90 Civ. 2663, 1990 WL 193918 at 2 (S.D.N.Y Nov.27, 1990)).
In New Jersey
New Jersey state courts have not yet addressed the issue of whether compelled defamation is a viable cause of action. Although the United States District Court for the District of New Jersey has touched on this issue, it has not provided any real guidance concerning how state courts will rule. In Bishop v. Inacom, Inc., 1999 WL 1416919 (D.N.J. 1999), the District Court acknowledged that the state courts of New Jersey have not yet ruled on the viability of a compelled defamation claim and it failed to decide whether such a claim should be recognized in New Jersey. Instead, it dismissed the plaintiff’s compelled defamation claim, opting not to determine the viability of such a claim until the New Jersey courts consider the issue.
Nevertheless, the court noted that the plaintiff had failed to provide any cogent policy reasons demonstrating why the adoption of a cause of action for compelled defamation in New Jersey would be beneficial. New Jersey employers, however, cannot take much comfort in the Bishop decision to dismiss the compelled defamation claim because that decision is not binding on New Jersey state courts.
Other jurisdictions have recognized that if a defamed person is compelled to repeat a defamatory statement to a third person, and if it was foreseeable that the defamed person would be so compelled, then the defendant can be held liable. (See, e.g., Lewis, 389 N.W2d at 886 (holding that the trend of modern authority recognizes the compelled defamation tort); McKinney v. County of Santa Clara, 110 Cal. App.3d 787 (1980); Colonial Stores, Inc. v. Barrett, 73 Ga. App. 839 (1946); Belcher v. Little, 315 N.W.2d 734 (Iowa 1982); Grist v. Upjohn Co., 16 Mich. App. 452 (1969); Bretz v. Mayer, 1 Ohio Misc. 59 (1963); and First State Bank of Corpus Christi v. Ake, 606 S.W.2d 696 (Tex. Civ. App. 1980).
In Lewis for example, the plaintiffs were former at-will employees who were discharged for the stated reason of “gross insubordination” by the defendant Equitable Life. In seeking new jobs, the plaintiffs were asked by potential employers to explain their terminations. The plaintiffs each stated that they were let go for “gross insubordination.” Only one of the plaintiffs was able to find employment while being honest about her termination. In other words, the plaintiffs contended that they were compelled to repeat, or publish, to potential employers the defamatory statement made by Equitable Life, and this caused them to be unable to obtain new employment.
In opposition to the plaintiffs’ compelled defamation claim, Equitable Life argued that the recognition of this tort would amount to “creating tort liability for wrongful discharge,” and would “discourage plaintiffs from mitigating damages.” The court rejected Equitable Life’s arguments and upheld the viability of plaintiffs’ claim.
Addressing the plaintiffs’ first argument, the court held that: “If plaintiffs here can establish a cause of action for defamation, the fact that the defamation occurred in the context of employment discharge should not defeat recovery.” As to the plaintiffs’ second argument, the court held that the plaintiffs would not be discouraged from mitigating damages if liability for compelled defamation “is imposed only where the plaintiff was in some significant way compelled to repeat the defamatory statement and such compulsion was, or should have been, foreseeable to the defendant.” The court further held that:
In such circumstances, there would be no voluntary act on the part of a plaintiff that would constitute a failure to mitigate. This point is clearly illustrated by the present action. The company points to no reasonable course of conduct that plaintiffs could have taken to mitigate their damages.
Thus, the court held that the plaintiffs were compelled to repeat the allegedly defamatory statement to prospective employers and that Equitable Life knew that they would be so compelled. The court further noted that, on being asked the foreseeable question of why they were discharged, the plaintiffs’ “only choice would be to tell them ‘gross insubordination’ or to lie. Fabrication, however, is an unacceptable alternative.”
Adoption of the compelled self-publication defamation tort in New Jersey would undoubtedly be problematic for employers. In fact, one court has declared that recognition of such a cause of action might impose liability for defamation on each occasion that a job applicant is rejected. See De Leon v. St. Joseph Hosp., Inc., 871 F.2d 1229 (4th Cir. 1989). Many courts have also expressed a concern that the potential for defamation liability every time an employee is terminated would chill communications in the workplace, preventing employers from disclosing reasons for their business decisions, and would negatively affect grievance procedures intended to benefit the discharged employee. See, e.g., Sullivan v. Baptist Memorial Hosp. 995 S.W2d 569 (Tenn. 1999).
Other courts unsympathetic to the doctrine of compelled defamation anticipate that adoption of such a cause of action, as argued by the defendant in Lewis, would discourage plaintiffs from mitigating damages. These courts are of the opinion that employees could increase recovery simply by repeating the statement when publication was not necessary or by failing to make good faith efforts to explain the true nature of the defamatory statement to prospective employers. See, e.g., Layne v. Builders Plumbing Supply Co., 569 N.E.2d 1104 (Ill. App. Ct. 1991).
While the tort of compelled defamation has not yet gained widespread acceptance in the United States, employers must be wary of the possibility that New Jersey might one day recognize such a claim. To minimize potential plaintiffs’ likelihood of successfully prosecuting a garden-variety or a compelled defamation claim, it is suggested that employers take certain precautionary measures when terminating employees for misconduct or poor performance.
Truth is always a defense to a defamation claim, including a compelled defamation claim. See McLaughlin v. Rosanio, Bailets & Talamo, Inc., 331 N.J. Super. 303 (App. Div. 2000). Employers are, therefore, urged to take whatever steps they can to memorialize an employee’s wrongdoing. For example, when an employee is charged with misconduct, contemporaneous notes should be made and kept in the employee’s personnel file.
Similarly, an employee’s misconduct and poor performance should be referenced in an employee’s annual performance review. Even without a formal progressive discipline policy, written warnings should be given to employees when serious problems develop. In this regard, prior to termination, discussions should be held with employees concerning any problems, and these discussions should be memorialized in writing. These measures will both dissuade potential plaintiffs from asserting claims of compelled defamation against employers and enable defending employers to defeat any such claims.
Employers should also be wary when responding to inquiries from prospective employers concerning a terminated employee. In this regard, employers may be faced with a dilemma in deciding what to disclose about the employee’s termination. If the employer discusses the circumstances of the termination in detail, it may be faced with a defamation claim, although what is disclosed to a potential employer in good faith is covered by a qualified privilege. See Erickson v. Marsh & McLennan Co., 117 N.J. 539 (1990).
On the other hand, if the former employer fails to reveal, for example, that the terminated employee is dangerous, and something foreseeable happens at the new place of employment, the former employer may be subject to liability. And the new employer may also have exposure for negligent hiring.
One solution to this potential dilemma is to have a company policy to disclose only beginning and ending dates of employment and job titles held in response to inquiries from potential employers, unless the former employer is aware of some serious issue that might cause harm at the new place of employment, in which case that fact should also be disclosed.
This article is reprinted with permission from the June 4, 2001 issue of the New Jersey Law Journal. ©2001 NLP IP Company.
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