It is common practice for a company, through its legal counsel, to send letters to former employees upon the employee’s resignation in an effort to remind the employee about his or her post-employment contractual obligations to the company, whether through a non-competition agreement, or non-solicitation / non-disclosure restrictive covenants. A recent court decision affirms that companies and their counsel are shielded from liability for defamation that may arise from the publication of those letters due to the absolute privilege protection.
In Wendy Murphy v. Living Social, Inc., a former employee, Wendy Murphy, voluntarily resigned from her employment as a marketing consultant to work for a competitor. Upon her departure, the company, through its in-house counsel, sent Ms. Murphy a letter reminding her of the terms of her employment agreement, which included obligations under a non-competition, non-solicitation, and non-disclosure agreement. Two weeks later, the company sent another letter to Ms. Murphy and Ms. Murphy’s new employer demanding that Ms. Murphy cease and desist from all solicitation of the company’s employees, customers, or prospective customers. The company specifically stated that it was considering taking legal action to protect its interests if the conduct did not stop.
Within days of receiving the second letter, Ms. Murphy filed suit alleging, among other things, that the cease and desist letter constituted libel per se and named both the company and its in-house counsel as defendants to the claim. In granting the company’s motion to dismiss the libel per se count, the U.S. District Court for the District of Columbia concluded that the former employee could not state a claim for libel because she could not establish the essential element that a false and defamatory statement was published “without privilege” to a third party. Specifically, the Court agreed that the statements made in the letter were protected by an absolute privilege because they were made in anticipation of litigation. Noting that the judicial proceedings privilege did not just protect statements within the course of litigation, the Court stated that it also extends to statements made prior to the commencement of litigation, such as the cease and desist letter at issue. Because the letter was written by the company’s attorney, advising the employee and her new employer of the employee’s contractual rights, and stated that the company was reserving its rights to take all legal action to protect its business interests, the statements were absolutely protected by the judicial proceedings privilege.
This case serves as a good reminder of the importance of the practical steps companies take to protect their trade secrets and customer confidential information. When an employee departs for a competitor, it is essential that during the exit interview process, company representatives remind the departing employee of his or her obligations under company policies, applicable employment agreements, and/or non-competition agreements. If evidence is obtained that makes it appear that an employee is violating the terms of his or her restrictive covenant obligations, sending a cease and desist letter, as LivingSocial did in this case, is important to further protect business interests. Importantly, so long as the letter accurately states the facts and merely points out the obligations of the employee without otherwise making accusations of false or illegal conduct, companies should feel comfortable to take these necessary steps without fear of a retaliatory lawsuit against them and their legal counsel asserting meritless claims of defamation.
Accordingly, if your company is not already using cease and desist letters in its arsenal of proactive measures to protect trade secrets and confidential information, now is the time to initiate this best practice.