Workplace investigations have become a critical function of human resource managers. If an employee is accused of wrongdoing and you don’t conduct a prompt and thorough inquiry, you run the risk of being sued and hit with big damages for claims ranging from sexual harassment to wrongful termination. But as several recent cases show, conducting (or failing to conduct) internal investigations can also raise some tricky issues, including defamation problems. We’ll look at some of the dangers you face when an employee is accused of breaking the rules-and how you can avoid getting sued.
Co-Worker Accusations
In one recent case, Illinois-based Philip Morris employee Randy Gibson was accused by several co-workers of selling company promotional items at a garage sale in violation of company policy. The workers gave written statements to Gibson’s supervisor, who passed the allegations on to other corporate officials. He was then terminated.
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The supervisor, however, never attempted to verify the charges, nor did he give Gibson an opportunity to explain. In fact, Gibson had been in a sales meeting the day of the alleged improper yard sale, and it turned out no one had actually seen him sell the items in question.
Gibson sued Philip Morris, his boss and the co-workers for defamation and won more than $1 million in damages. The company appealed, arguing that interoffice statements, such as those made in the course of an investigation, could not be the basis for a defamation claim.
But the court disagreed. Because the company failed to get both sides of the story and didn’t conduct an adequate investigation, the statements about Gibson were nothing more than “gratuitous gossip”-and therefore defamatory.
Manager Blamed
In another case, the general manager of a New York Life Insurance office, also in Illinois, sued for defamation after he was blamed for failing to prevent another employee’s misconduct.
An insurance agent in the office had fraudulently increased the value of a customer’s life insurance policy, and the company was forced to pay out $15 million. The agent who committed the fraud implicated his supervisor, Ronald Dawson, by claiming management was aware of and encouraged fraudulent practices in the office.
New York Life fired Dawson because of the controversy and indirectly made derogatory comments about him during company meetings and in a videotape that was sent to employees around the country. Then, in forms the company was required to file with the National Association of Securities Dealers, it wrote that Dawson “allegedly condoned forgery” and failed to follow rules.
Dawson sued for defamation, arguing New York Life’s statements about him were false, and a jury awarded him more than $6 million. The insurer tried to have the award thrown out. It claimed that it could not be liable for defamation because it was required by law to submit forms stating the reason for an agent’s termination.
The Court of Appeal reversed the verdict on technical grounds and ordered a new trial. It also ruled that the jury in the new trial could find that New York Life’s statements were defamatory if they were made without a full investigation into their truthfulness and with a “reckless disregard” for Dawson’s rights.
When Are Statements Defamatory?
Although these two recent out-of-state cases are not binding on California courts, they illustrate the problems that can arise when you say something negative about an employee accused of misconduct.
California courts have held that you can be liable if the comments are made without a good faith belief that they are true or if you were motivated by malice, which is defined as hatred or ill will toward the employee. What’s more, if you haven’t conducted a proper investigation, it can be used against you as evidence that you did not have a good-faith reason to believe your statements were true.
Defensive Strategies
Here are some suggestions for avoiding defamation problems:
- Stick to the truth. It seems obvious, but the best defense to any defamation claim is that what you said was true. It’s important not to exaggerate or embellish the reasons for discipline or termination.
- Get both sides of the story. Be sure to get the accused person’s version of the event and talk to all witnesses the employee thinks might have relevant information. Conduct the investigation discreetly and ask witnesses not to discuss what was said in the interview with anyone else.
- Discourage gossip. What seems like innocent water-cooler gossip can quickly form the basis for an expensive lawsuit if it’s allowed to spread. If someone has been terminated or disciplined, the reasons are usually no one else’s business. Make sure your supervisors know that in some cases they can be person-ally liable for repeating defamatory statements.
- Limit references. Periodically remind all employees who might be contacted for a reference to stick to the dates of employment, position and salary and only with the employee’s written permission.