Can Defamation Be Alleged Against Employer Based on Employee’s Termination?
In the recent case of Hern v. Pacific Gas & Electric Company, Todd Hearn sued his former employer, Pacific Gas & Electric Company (PG&E) for retaliation and defamation.
The jury found PG&E liable for defamation but rejected Hearn’s retaliation claim.
On appeal, PG&E contended the trial court erred by denying its motion for judgment notwithstanding the verdict (JNOV) because Hearn’s defamation claim was not separately actionable—i.e., the defamation claim was premised on the same conduct that gave rise to his termination and the damages sought were solely related to his loss of employment.
Tort claims, including defamation, may be brought by former employees against their employers.
However, as Hearn’s claim for defamation is a claim for wrongful termination by another name, the appellate court reversed the trial court’s order denying PG&E’s JNOV.
In 1996, Hearn began working for PG&E as a meter reader. A few years later, he began training as a lineman and completed his apprenticeship in 2004. During the relevant time period, Hearn worked out of PG&E’s facility in Napa (the Napa yard).
In or around 2016, PG&E became aware of performance issues at the Napa yard, including delays in maintenance and repair projects and rising overtime claims.
By 2018, PG&E had focused its investigation on the eight employees from the Napa yard charging the most overtime and double time. The investigation was subsequently narrowed down to five of those eight— Hearn was identified as one of the five based on “potentially false time cards.”
In late June 2018, Hearn and four other linemen were suspended. Hearn was informed he was being placed on “crisis leave” due to an “alarming amount of discrepancies” in Hearn’s timecards.
On December 12, 2018, Mar submitted a memorandum to PG&E management regarding allegations that Hearn falsified timecards and misused company time. And Mar reported that although Hearn claimed to have a medical condition, he had not applied for or received formal accommodations. Mar omitted any mention in his report that Hearn received supervisor approval to go home.
In a January 18, 2019 letter, PG&E informed Hearn his employment was terminated based on findings of an investigation into his conduct. Hearn was told: “Specifically, it has been determined that you violated the Employee Code of Conduct by misusing company time, misstating work activities, and fraudulent submissions of timecards for overtime compensation resulting in all day rest periods, and delayed service time to customers in violation of the Labor Contract.”
Hearn filed the underlying action against PG&E, alleging four causes of action: (1) retaliation for disclosing the company’s safety violations (Lab. Code, § 1102.5); (2) retaliation for lodging a bona fide complaint about unsafe working conditions (Lab. Code, § 6310); (3) wrongful termination in violation of public policy; and (4) defamation.
Hearn’s first three claims were based on allegations that he reported various safety concerns (e.g., Tripsavers were unsafe; PG&E had downgraded dangerous issues with its power lines to save money on overtime labor; and PG&E did not have an adequate safety plan to address known and expected dangerous fire conditions), and was retaliated against for expressing such concerns by being suspended and ultimately fired.
In connection with his defamation claim, Hearn alleged various PG&E employees made false (defamatory) statements—that he misused company time, misstated his work activities, and fraudulently submitted timecards— in the CSD and Mar reports, Ledbetter’s January 2019 email, and the January 2019 employment termination letter.
Hearn alleged PG&E terminated his employment due to these false statements, and he was forced to repeat these defamatory statements to prospective employers who asked why he no longer worked for PG&E. Hearn alleged that publication of these statements caused him harm, including harm to his reputation, trade, profession, and occupation.
Hearn proceeded to trial on his claims for retaliation in violation of Labor Code section 1102.5 (section 1102.5) and defamation.
Hearn’s defamation and retaliation claims were tried to a jury over multiple days.
Following deliberations, the jury found PG&E not liable for retaliation but liable for defamation.
As to Hearn’s claim that PG&E retaliated against him in violation of section 1102.5, the jury found Hearn (1) disclosed certain events or occurrences to a superior or person with investigative authority, and (2) Hearn had reasonable cause to believe that the information he disclosed constituted a violation of state or federal safety regulations.
However, the jury found PG&E did not take “adverse employment action(s)” against Hearn because of these disclosures.
In connection with Hearn’s defamation claim, the jury declined to find liability for three of the four documents at issue (the CSD report, Ledbetter’s email, and the employment termination letter). In connection with these three documents, the jury found the actionable statements substantially true.
However, the jury found Hearn proved his defamation claim as to the Mar report. Specifically, the jury found (1) the actionable statements not substantially true, and (2) Mar acted with malice. By making these findings, the jury rejected PG&E’s common interest privilege defense and found that Hearn had established the defamatory statements were made with malice. (Civ. Code, § 47, subd. (c).)
The jury awarded damages totaling $2,160,417, comprised of separate awards as to past and future economic and non-economic damages. The verdict form did not ask the jury to consider or award any assumed reputational harm damages. The jury declined to award punitive damages.
The trial court subsequently entered judgment in favor of PG&E on Hearn’s cause of action for retaliation in violation of section 1102.5, and in favor of Hearn on his cause of action for defamation. The judgment provides that Hearn shall recover from PG&E damages totaling $2,160,417, with interest from the date of entry of judgment.
Following entry of judgment, PG&E moved for JNOV on the ground that Hearn waived his defamation claim before the matter was submitted to the jury by conceding his damages from loss of employment were the same as his defamation damages.
PG&E argued Hearn could not pursue a tort claim that was based on the same conduct which formed the basis for his wrongful termination claim and alleged no injury apart from his termination.
Hearn opposed the motion. He asserted employers are not immune from tort damages, the jury properly followed the damages instructions agreed upon by the parties, and lost earnings are a proper measure of damages for defamation.
The trial court denied PG&E’s motion.
A motion for judgment notwithstanding the verdict may be granted only if it appears from the evidence, viewed in the light most favorable to the party securing the verdict, that there is no substantial evidence in support.
The trial court properly identified the question as whether an employee may sue in tort for the same conduct that forms the basis for that employee’s wrongful termination claim.
The California Supreme Court has delineated the ability of a terminated employee to recover tort damages in three key cases: Foley v. Interactive Data Corp., Hunter v. Up-Right, Inc., and Lazar v. Superior Court
In Foley, the court considered in part whether a terminated employee could bring a cause of action for tortious breach of the implied covenant of good faith and fair dealing. In considering whether to extend tort remedies for a contractual breach, the court noted the duty of good faith and fair dealing is imposed by contract and compensation for its breach has almost always been limited to contract rather than tort remedies. The court ultimately declined to expand available remedies for wrongful discharge to include tortious breach of the implied covenant of good faith and fair dealing.
In Hunter, the California Supreme Court applied Foley to consider whether a former employee was precluded from recovering tort damages for fraud and deceit predicated on a misrepresentation made to effect termination of employment. The court concluded Foley precluded such relief.
In Lazar, the California Supreme Court distinguished Hunter. It noted Hunter expressly left open the possibility that a misrepresentation not aimed at effecting termination of employment, but instead designed to induce the employee to alter detrimentally his or her position in some other respect, might form a basis for a valid fraud claim even in the context of a wrongful termination.
The Lazar court thus found the misrepresentations Lazar alleges were not aimed at effecting his termination, but, rather, at inducing him to accept the defendant’s offer of employment. Specifically, it noted Lazar’s fraud claim arose from the company’s misrepresentation to induce Lazar to leave his prior employment, and thus was not made in the course of Lazar’s termination.
Together, Foley, Hunter, and Lazar provide guidance for when a terminated employee may recover tort damages from his or her former employer. As a fundamental matter, these cases recognize employees may generally assert tort claims against their employer, even in the context of their termination.
But Foley, Hunter, and Lazar set forth parameters that may limit an employee’s ability to obtain damages from such torts within an employment termination context.
Specifically, the California Supreme Court has specified two hurdles employees must overcome: (1) such tort claims must be based on conduct other than that giving rise to the employee’s termination, and (2) the damages sought cannot exclusively result from the termination itself.
The record indicates PG&E’s conduct following Hearn’s suspension was primarily aimed at documenting and substantiating the findings that led to Hearn’s suspension. That process resulted in the Mar report, and Hearn was terminated based on Code of Conduct violations outlined in that report.
The defamatory statements contained in the Mar report were generated within the scope and context of Hearn’s disciplinary proceedings and termination, and both the defamation claim and Hearn’s termination arose from the same conduct—i.e., issuance of the Mar report. Simply put, the Mar report was the vehicle by which PG&E effectuated Hearn’s termination.
Moreover, the damages arising from PG&E’s defamation were solely related to Hearn’s termination. The record indicates Hearn declined to seek damages relating to any reputational injury distinct from his loss of employment.
While defamation may generally give rise to an assumption of reputational harm, Hearn did not request that the jury award assumed damages.
Likewise, Hearn did not seek any damages separate from his loss of employment, such as damages arising from republication to third parties.
Accordingly, the only damages alleged resulted from the termination itself.
Here the fact pattern is analogous to those cases in which courts have found tort claims barred because they arise from the same conduct underlying the employees’ terminations and only seek damages related to loss of employment.
The record indicated the defamatory statements were not separately actionable.
Hearn’s defamation claim was founded on the same conduct—i.e., the creation of the Mar report and its use in his termination—that would form the basis for an ordinary wrongful termination claim based on Code of Conduct issues, and sought the same damages—i.e., loss of employment.
Where the jury’s special verdict for the plaintiff is based on conduct that does not constitute an actionable tort, that verdict cannot stand.
LESSONS:
1. A motion for judgment notwithstanding the verdict may be granted only if it appears from the evidence, viewed in the light most favorable to the party securing the verdict, that there is no substantial evidence in support.
2. Tort claims barred because they arise from the same conduct underlying the employees’ terminations and only seek damages related to loss of employment.
3. Together, Foley, Hunter, and Lazar provide guidance for when a terminated employee may recover tort damages from his or her former employer. As a fundamental matter, these cases recognize employees may generally assert tort claims against their employer, even in the context of their termination.
4. The decisions in Foley, Hunter, and Lazar set forth parameters that may limit an employee’s ability to obtain damages from such torts within an employment termination context.
5. Specifically, the California Supreme Court has specified two hurdles employees must overcome: (1) such tort claims must be based on conduct other than that giving rise to the employee’s termination, and (2) the damages sought cannot exclusively result from the termination itself.