Potential Employer Liability For The Disclosure of Employee Information
The maintenance and dissemination of information related to current and former employees have rapidly emerged as areas that are ripe for potential litigation by employees who believe their employment records were improperly used. The rapid increase in the number of such lawsuits makes it essential that employers carefully review their current policies and procedures regarding the maintenance and use of such records to ensure that they are minimizing the risk of a successful lawsuit.
While conducting such a review, it is also important to remember that many potential lawsuits by former employees result from the conduct of other employees acting without guidance from management or even in direct contravention of established policies. As employers will generally be liable for the actions of their employees in employment information dissemination situations, it is also essential to ensure that all employees are properly trained and monitored to minimize potential liability.
POTENTIAL TYPES OF LAWSUITS
Generally, three legal theories have been used by employees to bring lawsuits against their employers for the improper use of their employment records: defamation, invasion of privacy, and negligence. It should be noted that these theories are not mutually exclusive, and the facts of any individual situation could potentially create a lawsuit based upon one, two, or all three theories.
The most common type of lawsuit being filed by former or current employees for the improper use of employment data is defamation. Defamation suits filed by former employees against their former employers now constitute almost one third of all defamation actions .
The essential elements of defamation are: (1) that the communication must be false, (2) must be communicated to someone other than the individual, and (3) must cause harm to the individual's reputation .
Examples of the types of communications that have been considered defamatory, if false, are:
1. Describing an employee as "untrustworthy, untruthful, disruptive, paranoid, hostile. . ." ;
2. Stating that an employee had been terminated for "gross insubordination" ;
3. Stating that an employee was dismissed "for cause" ;
4. Stating that an employee "suddenly resigned" ;
5. Describing employees as "militant" ; and
6. Describing employees as having "emotional problems" .
It should be noted that some of the above statements were in writing and some were oral. Either type of communication can constitute defamation, with written communications being sub-catagorized as libel and oral communications as slander.
The simple fact that a defamatory statement is made does not necessarily subject the employer to liability unless the statement is false and not protected by a recognized legal privilege. Every state recognizes truth as a complete defense to a defamation action, regardless of how disparaging the information is [19, p. 739]. In addition, virtually all states recognize the need for employers to describe and transmit to others the reasons for discharging employees . As such, they have granted employers a limited privilege that will protect such communications if the statements are made in good faith, for a legitimate purpose, and not inappropriately communicated. Practically, the existence of the privilege means that if the employer can establish that the communication was for a proper purpose, such as answering the request from a potential employer about an employee's reason for termination, and is done in good faith, which requires that the employer was not acting out of spite or ill will, and was not improperly disseminated, defamation can not be established .
Some examples of false statements that have subected an employer to a defamation action because they exceeded the protections of the conditional privilege are:
1. Statements made to prospective employers that a former employee was "a good kid that went bad" that were motivated by a desire to keep the employee from ever working in the industry again ;
2. A letter from a company's personnel manager that stated the employee failed "to increase business," which was false and motivated by personal dislike ;
3. A memo posted on a bulletin board visible to all other employees, as well as outsiders, that stated a former employee had altered insurance forms was held not to be privileged because it was too widely disseminated ; and
4. Careless and false statements from a former employer to a prospective employer that the employee had stolen a company car, customer lists, a sales manual, and price lists .
Assuming that a false statement has been made that damages the reputation of the employee and that the statement is not protected by the conditional privilege, it is still not legally actionable unless it has been communicated to someone other than the employee. Traditionally, the element of communication (legally called publication) was only satisfied when the employer communicated the defamatory information to a third party other than the employee or other employees in the business. However, in recent years, many states have expanded the definition of publication to include intra-company communications and communications made by the employee-plaintiff.
Intra-company communications are recognized by most states as publication sufficient to bring a defamation suit. However, these states also apply the conditional privilege to such communications, meaning that the defamation action can only be successful if the false statement was improperly motivated, reckless, or too broadly disseminated .
Two cases addressing this issue of intra-company communications were Luttrell v. United Telephone System, Inc.  and Babb v. Minder . In Luttrell, several management employees communicated between themselves that the plaintiff-employee was illegally recording telephone conversations, which was not true. The Court ruled that this was sufficient publication to satisfy that element of a defamation action, as ". . . damage to one's reputation within a corporate community may be just as devastating as that effected by defamation spread to the outside" . The case was then sent back to the trial court to determine if the conditional privilege was exceeded or not. In Babb, the employee was discharged because of a communication between a corporate manager and a supervisor, in which the employee was accussed of "mooning" another employee at a company function. The Court held that this was sufficient communication to constitute publication, was damaging to the employee's reputation, and was not protected by the conditional privilege as it was a reckless statement because the manager relied upon an unconfirmed rumor and failed to investigate the truth or falsity of the charge.
The second area of expansion of the definition of publication in employment defamation litigation is a concept called "compelled self-publication." The traditional, and still majority, view is that if the defamatory communication is communicated by the plaintiff, there is no defamation action. However, some courts have held that when the employee is put in the position of having to disclose the defamatory information, this is similar to the employer having communicated the information and therefore is actionable as it satisfies the publication requirement of a defamation action.
An excellent example of the application of this concept is the case of Lewis v. Equitable Life Assurance Society of the United States . In Lewis, some employees were fired for "gross insubordination," which, in fact, was not true. The employees were told of this reason in person, and the information was not given to anyone else by the employer. On subsequent job applications, the employees listed their reason for termination from the previous employer as "discharged for gross insubordination." Obviously, they were unable to secure new employment after disclosing this information.
In determining that the publication element of defamation was satisfied by the employee's self-publication, the Court said that since the employer could reasonably forsee that the employees would have to disclose this information in the future, or lie about the actual reasons for termination, it is effectively the same as if the employer had conveyed that information to potential employers. It is worth noting that the plaintiffs in Lewis were ultimately awarded $75,000 each.
As stated, this position is not followed in most jurisdictions in the United States. Currently only Minnesota, Kansas, California, Georgia, Michigan, and Missouri accept the concept of "compelled self-publication." However, the list of states adopting this view is growing despite the arguments that the concept will create many more employee defamation lawsuits, will allow employees to create their own publication by providing the defamatory information to potential employers, may affect an employer's willingness to accurately provide employees with the reason for their terminations, and may eliminate the ability of potential employers to obtain information, good or bad, from prior employers.
The implications of potential defamation suits by former or current employees are significant and require employers to consider implementing policies and procedures to protect themselves from the possibility of such actions. Possibilities include:
1. A method to ensure that only true statements are made about employees in any context, including termination interviews, intra-company communications, and external communications. Such a method should include periodic reviews of the files being maintained to ensure that all the information is accurate.
2. Following a "no comment" policy on the reasons for employee discharge or termination that would not allow any dissemination of the actual reason for discharge to the employee, other employees, or external contracts.
Invasion of Privacy
The second type of lawsuit being utilized by employees and former employees for the improper use of employee information is invasion of privacy. Generally for there to be a successful lawsuit for invasion of privacy, the employee must establish that the employer disclosed facts about the individual that were highly personal or intimate in nature and there was no legitimate business purpose for the disclosure, such as employee supervision or promotion evaluations . It is important to remember that if there was such a disclosure, truth is not a defense, and there generally is no conditional privilege available to protect the employer. It should additionally be noted that intra-business communication is sufficient disclosure to constitute the "invasion," but there is no similar concept of "compelled self-publication" in an invasion of privacy lawsuit.
Examples of the types of disclosures that have been held to be invasions of privacy are:
1. The answers to an intra-corporate questionnaire reviewed by many managerial employees that asked highly intrusive questions about personal habits and lifestyles were considered invasions of privacy with no valid business purpose .
2. The circulation of a memo to numerous management employees that described an employee as "distraught and crying" and that a doctor had considered him "paranoid" was considered potentially an invasion of privacy unless the employer could establish a valid business purpose for the disclosure .
All invasion of privacy cases recognize that employers have a certain degree of freedom to obtain and utilize information relating to their employees. However, as the above situations indicate, there are limitations on employer conduct.
It is essential that employers consider the possibility of potential invasion of privacy suits when deciding what information to obtain and how to manage and disseminate that information.
An area that seems to hold a high potential for invasion of privacy lawsuits is in the collection, maintenance, and use of various employee test results including drug and polygraph tests. As many employers are beginning to extensively use such techniques to select and monitor employees, there will probably be a corresponding increase in the number of lawsuits claiming that the improper dissemination of test results is an invasion of privacy.
It should be noted that twenty-four states prohibit or limit the use of polygraph examinations in the employment context . Employers must ensure that they are in compliance with state law before utilizing polygraph examinations. Failure to do so could subject those employers to criminal and civil actions. Similar limitations have not been imposed on private employer drug testing. Currently, there are virtually no governmental restrictions on a private employer's use of drug testing . Therefore, private employers are generally free to implement drug testing programs, subject only to potential lawsuits alleging invasion of privacy.
The sparse case law addressing a private employer's use of drug testing seems to indicate that if drug testing is done in good faith for a valid business purpose and in a manner designed to minimize the indignity to the employee, the employer is not likely to be liable for invasion of privacy . However, as this is a rapidly developing area, employers using drug testing should ensure that they stay informed on legal changes that may occur.
Employers who are using such techniques to select and monitor employees should also exercise extreme care in the use and dissemination of test results to ensure that anyone within the organization having access to such results has a clear and supportable business need for the data. Also, since the error factor on such tests, particularly drug tests, is relatively high, it would be advisable to not provide test results to anyone outside the organization. Some studies indicate that the most commonly used employee drug tests have a false positive result 28% to 35% of the time .
One of the most common types of all lawsuits is for negligence. Generally, negligence means that the defendant did not use reasonable care under the circumstances, and the failure to use reasonable care injured the plaintiff.
In the employment information context, employers can become liable for negligence if reasonable care was not used in the collection, maintenance, and dissemination of employment data.
Two cases that demonstrate the types of factual situations that can give rise to a negligence action are Bulkin v. Western Kraft East, Inc.  and Quinones v. United States .
In Bulkin, an employee was terminated because of a reduction in the workforce, not for any reason related to his individual performance. Somehow, incorrect material was placed in his employment record that indicated he was terminated because his sales production had been poor. This information was provided to others who inquired as to the reasons for termination. Ultimately, the court concluded that the employer was negligent in the preparation, maintenance, and dissemination of this information.
The facts were similar in Quinones. Quinones was an employee of the Federal Government who had received excellent evaluations, had been promoted numerous times, and had received many commendations. He resigned from the government rather than accept a transfer to another location. Information provided to potential employers indicated that his performance had been substandard, he was incompetent, and he had been the subject of disciplinary action. Obviously, he was unable to find other employment. The negative information was apparently obtained from another employee's records. The Court ultimately determined that this is the type of conduct that will give rise to an action for negligence.
It is obvious from these and similar cases that there is potential for liability when incorrect and damaging information is provided to others about current or former employees. Although negligence requires a showing of the failure to use reasonable care, the fact that incorrect information was provided will normally be sufficient to substantiate the action unless the employer can demonstrate the utilization of procedures designed to ensure that such mistakes will rarely happen. The growing number of negligence lawsuits for the careless storage and dissemination of incorrect information should prompt all employers to review the procedures used to maintain such records in order to ensure that the possibility of incorrect information being maintained or disclosed is minimized. Such procedures should also include a periodic review of records designed to find and correct any incorrect material. If such policies are implemented, they should be adequate to eliminate the possibility of a successful negligence lawsuit, as they should establish that the employer took reasonable care to ensure that incorrect information was not maintained in employee records. If such reasonable care can be established, the plaintiff-employee would not be successful in a negligence action.
The number of lawsuits against employers for the improper preparation, maintenance, use, and dissemination of information is rapidly increasing. Therefore, it is essential that employers take all possible steps to insulate themselves from successful litigation. At a minimum, all employers should review current procedures and policies to ensure:
1. That only accurate factual information is being maintained on employees,
2. That derrogatory information be clearly substantiated before being circulated, either internally or externally,
3. That responses to requests for information are consistently either not honored or great care is taken to ensure that the information provided is accurate and not of a highly intrusive nature,
4. That terminated employees are either given the true reason for termination or given no reason at all, and
5. That the results of various employee testing or monitoring programs are very selectively used, with dissemination only to internal sources that clearly have a valid business purpose for the information.
[1.] Abofreka v. Alston Tobacco Co., 341 S.E. 2d 622 (S.C. 1986).
[2.] Austin v. Torrington Company, 810 F.2d 416 (4th Cir. 1987).
[3.] Babb v. Minder, 806 F.2d 749 (7th Cir. 1986).
[4.] Becker v. Alloy Hardfacing and Engineering Co., 390 N.W. 2d 374 (Minn 1986).
[5.] Bratt v. International Business Machines Corporation, 392 Mass. 508 (1984).
[6.] Brunn, Lisa. "Privacy and the Employment Relationship." Houston Law Review, 25, 2 (March, 1988), 389-418.
[7.] Bulkin v. Western Kraft East, Inc., 422 F. Supp. 437 (E.D. Penn 1976).
[8.] Circus, Circus, Hotels, Inc., v. Witherspoon, 657 P.2d 101 (Nev. 1983).
[9.] Cort v. Bristol-Myers Co., 431 N.E. 2d 908 (1982).
[10.] Dube, Lawrence E. "Employment References and the Law." Personnel Journal, 65, 2 (February, 1986), 87-91.
[11.] Frank B. Hall and Co. v. Buck, 678 S.W. 2d 612 (Tex. App. 1984).
[12.] Frankson v. Design Space International, 394 N.W. 2d 140 (Minn. 1986).
[13.] Gampel, Joanne C., and Kevin B. Zeese. "Are Employers Overdosing on Drug Testing?" Business and Society Review, 55, 3 (Fall, 1985), 34-38.
[14.] Houston Belt and Terminal v. Wherry, 548 S.W. 2d 743 (Tx. 1986).
[15.] Lewis v. Equitable Life Assurance Society of the United States, 389 N.W. 2d 876 (Minn. 1986).
[16.] Luttrell v. United Telephone System, Inc., 633 P.2d 1292 (Kan. 1984).
[17.] Moriarty, Leo. "Should Employers Be Legally Permitted to Require Drug Testing of Employees? A Qualified Affirmative." Western State University Law Review, 14, 2 (Spring, 1987), 603-15.
[18.] Prentice, Robert A., and Brenda J. Winslett. "Employee References: Will A No Comment Policy Protect Employers Against Liability for Defamation?" American Business Law Journal, 25, 2 (Summer, 1987), 208.
[19.] Prosser, William L., and W. Kecton. Handbook of the Law of Torts. St. Paul, Minnesota: West Publishing Co., 1983.
[20.] Quinones v. United States, 492 F.2d 1269 (3rd Cir. 1974).
[21.] Restatement (Second) of Torts, Section 558-559, (1977).
[22.] Stuempges v. Parke, David and Co., 297 N.W. 2d 255 (Minn. 1980).
WAYNER. WELLS is Associate Professor of Business Law at St. Cloud State University.
ROBERT WALTER is Associate Professor of Business Law at St. Cloud State University.
ROBERT J. CALHOUN is Professor of Business Law at St. Could State University.…