Picture a typical Monday at your business. Your employees are working hard on their first day back from the weekend. The phone rings. On the other end is the manager of another business in town seeking a reference for an employee you terminated the previous month for poor performance. However, you also suspect that the employee was stealing money from your business. What do you say? How much information should you reveal, and what if it gets back to the individual in question?

Whenever an employer discusses the discharge or performance of an employee, he or she must be cautious not to expose their business to potential liability for anything they say to someone else or put in writing. Although employers may believe they are doing the requesting party a favor by providing their own opinion of the terminated employee, there is a high possibility that any statement made, whether spoken or in writing, can get back to the person and lead to a potential defamation lawsuit. Therefore, it is imperative that employers be aware of the repercussions of defamatory communications in the workplace, and that they know the best practices for monitoring and, hopefully, preventing it.[1]

Overview of Defamation Law

A lawsuit for defamation allows a current or former employee to recover for injury to his or her reputation that is the result of false communications the employer made about them to other individuals.[2] Defamation can take one of two forms: libel or slander. Libel is a written defamatory statement; slander is a spoken defamatory communication. In the employment context, slander may appear in a job reference phone call, while libel may be found in a written performance evaluation or an email by a manager to employees stating a false reason for the termination of an employee.

To prevail on a defamation claim, the employee must show first that the employer made a false and defamatory statement to a third party that was not privileged. Additionally, the employee must show that the employer was at fault for the publication of the defamatory statement and that the publication resulted in special harm or “actionability of the statement irrespective of special harm.”[3] Should the employee prevail on his or her defamation claim, he or she may recover general damages (injury to his or her reputation, hurt feelings or mental suffering); special damages (injury to plaintiff’s business, occupation or profession); and punitive damages.

Potential Scenarios for Workplace Defamation

Potential claims for defamation in the workplace can arise out of numerous situations. This article will discuss four common scenarios. However, employers should always monitor their workplace for potential defamatory communications and be aware of other instances and occurrences that may amount to defamation liability.

1. Job Reference Phone Call

Whether an employee leaves on good or bad terms, he or she will likely list their most recent employer on their resume as a job reference. If the person left under unfavorable circumstances, the employer should be cautious regarding communications to the prospective employer if they are called to provide a job reference. Make sure to distinguish between facts and opinions. For example, telling the prospective employer that someone was terminated for poor performance will likely not be defamatory if the performance is fairly documented in the most recent evaluation that led to the discharge. However, volunteering unsubstantiated personal opinions about the employee – for example, that the supervisor believed he or she was stealing money from the cash register – will probably be defamatory.

Notably, employers in South Carolina are granted statutory immunity from liability for disclosure of certain information concerning a current or former employee to a prospective employer. According to Section 41-1-65 of the South Carolina Code of Laws, an employer is immune from civil liability “for the disclosure of an employee’s or former employee’s dates of employment, pay level, and wage history to a prospective employer.” S.C. Code Ann. 41-1-65 (B). Likewise, when an employer receives a written request regarding a current or former employee from a prospective employer, he or she “shall be immune from civil liability” under S.C. Code Ann. §41-1-65(C) for the disclosure of the following information:

(1) written employee evaluations;

(2) official personnel notices that formally record the reasons for separation;

(3) whether the employee was voluntarily or involuntarily released from service and the reason for the separation; and

(4) information about job performance.

However, this immunity does not apply if the employer “knowingly or recklessly releases or discloses false information.”

2. Employee’s Performance Evaluation

When completing an employee’s evaluation at any point during the year, or writing any other document that describes the employee’s performance and can be used for promotion or increased compensation, an employer should fairly and accurately describe the individual’s performance. Managers and supervisors should be instructed to only provide truthful statements on evaluations that are based on objective data. Also, managers and supervisors should not discuss the evaluation with non-managerial employees.

3. Termination or Discharge of an Employee

Any discussions following the termination or discharge of an employee should only be with individuals who have a need for the information. When someone is terminated, there can be a surge of interest among current employees about the reason. Supervisors and managers should be advised on how to handle questions that might surface. In most cases, it may be wise to prohibit supervisors and managers from making any statements on the matter to current employees.

To avoid gossip or to possibly make an example of the terminated employee, an employer may decide to inform its workers regarding the reason for letting him or her go. Employers should be extremely cautious if they decide to follow this route, and should consult an employment attorney for assistance in drafting a statement before issuing one to all employees.

4. Statements Made During an Investigation, in Litigation, or to an Administrative Agency

South Carolina law recognizes an absolute privilege for “any utterance arising out of the judicial proceeding and having any reasonable relation to it, including preliminary steps leading to judicial action of any official nature provided those steps bear reasonable relation to it.”[4] Put simply, any statement made by an employer during an internal investigation of an employee would likely not be actionable in a defamation lawsuit. Similarly, statements made during a judicial proceeding – for example, in pleadings, affidavits or open court – are covered by absolute privilege and cannot be the subject of a defamation claim.[5]

Beyond that, statements made to administrative agencies, such as the S.C. Human Affairs Commission or the Equal Employment Opportunity Commission, during an investigation of a former or current employee are also protected by absolute privilege from a defamation lawsuit.[6] Likewise, the S.C. Department of Employment and Workforce (SCDEW) specifically says that any statements made to the department during a claim investigation and hearing cannot be subject to defamation. According to agency statute, neither the employer nor employee can bring a lawsuit in South Carolina for libel or slander for any communication made in connection with filing a claim for benefits. The relevant statute states:

A report, communication, or other similar matter, either oral or written from an employee or employer to the other or to the department or its agents, representatives, or employees that has been written, sent, delivered, or made in connection with the requirements and the administration of Chapters 27 through 41 of this title must not be made the subject matter or basis of a suit for slander or libel in a court of this State.

S.C. Code Ann. § 41-27-560 (emphasis added).

Best Practices

The truth is the most widely used and asserted defense in a defamation case. Employers, therefore, should be cautious of intermingling facts and opinions when discussing employees – be it after termination, on a job reference phone call or during an evaluation. Employers should always make sure to document any performance issues with an employee and maintain the documentation in the employee’s personnel file. Without proper documentation, it will be difficult for an employer to argue that alleged defamatory statements were true and not defamatory.

To best monitor communications during job reference inquiries, employers should designate one person – or more than one, depending on the size of the business – to answer and respond to all job reference inquiries. By doing so, an employer can be better equipped to monitor the communication.

Employers should also consider adopting a strict policy for anyone calling for a reference on a former employee. Regardless of whether the employee was terminated for cause or voluntarily resigned, the policy can state that all reference inquiries must be limited to the dates of employment. While a “no comment” policy may appear to provide a blanket and consistent approach for all inquiries, it does not indicate that the employee worked for the employer and may be viewed as a defamatory action if the employee is not hired for the job as a result of the former employer’s “no comment” reference.

Conclusion

Defamation lawsuits against employers are common, and they do not seem to be going away anytime soon. Being able to monitor workplace communications to third parties may be difficult, but it can be an employer’s first line of defense against potential defamation claims. Having policies in place for specific situations such as job reference inquiries and how supervisors should respond to questions regarding termination are preemptive steps to avoid future defamation lawsuits.