Employers should be mindful of how workplace investigations are conducted and documented, as they can have legal consequences beyond termination decisions.
Employees who sue a former employer for wrongful termination following a workplace investigation sometimes bring a defamation claim as well, believing that the investigation’s allegations or conclusions damaged their professional reputation.
However, the California Court of Appeal recently reaffirmed a longstanding legal principle: an employee cannot recover damages for defamation when the claim is based on the same facts underlying a wrongful termination claim—unless they can demonstrate harm beyond the mere loss of employment.
Hearn v. Pacific Gas and Electric Company
The plaintiff Hearn alleged that PG&E defamed him in an investigation report, which accused him of falsifying timecards and misusing company time. He also claimed he was retaliated against for raising safety concerns. The jury, while finding no retaliation by PG&E, ruled in favor of the plaintiff on the defamation claim, determining that the investigation report contained defamatory statements and awarded him $2.16 million in damages.
The appellate court noted that defamation being a separate tort, employers can be held liable for defamatory statements made during employment-related investigations or proceedings, even if those statements relate to the termination decision. However, the court overturned the defamation verdict, agreeing that the defamation claim was essentially a wrongful termination claim in disguise. Defamation damages are not recoverable when the alleged harm is limited to job loss. For a defamation claim to stand on its own, the employee must show that the statements caused distinct reputational harm beyond the termination itself.
Key Takeaways
This decision, while favorable for employers, also highlights the need for careful documentation of workplace investigations and termination decisions. Thorough documentation of policy violations and/or performance issues can serve as a critical defense in a potential litigation. Documenting performance issues will increase an employer’s chance of prevailing at trial on a retaliation claim, as here. The decisions in this matter also highlight the need for discretion and caution in communications, even if those communications are internal. Communications by the employer possibly gave rise to a defamation claim that would have otherwise survived appeal, if not for a failure to show additional damages beyond job loss. For guidance on best practices in investigations, terminations, and handling related claims, contact the experienced employment law counsel at MNK Law APC.
