One of the consequences faced by companies that neglect workplace privacy issues is the possibility of a defamation lawsuit. Human resources departments should be careful to limit information about employees and former employees, including the reasons for a termination or leave of absence, to those with a need to know. References and requests for references should be treated carefully lest a provably false statement lead to the loss of a job and result in litigation. Carefully crafted social media policies can also help mitigate the possibility of one employee smearing another on the Internet.
Anecdotal evidence suggests the use of email and social media is increasing the potential for defamation claims arising out of the workplace. Never before has it been so easy to have a career ruined so publicly and so quickly. High unemployment has also raised the stakes for litigation involving one's professional reputation. Many litigants decide to sue after they are unsuccessful finding a new job and feel they have no other choice.
Here is a link to an article I wrote for Bench & Bar magazine about Workplace Defamation Claims in Minnesota. Most of the concepts are applicable in other states as well.