Wrongful Termination & Defamation
Appellate Court Sets Clear Parameters On Suits Alleging Both Causes Of Action
The recent appellate decision of Hearn v. Pacific Gas & Electric Company (PG&E) provides employers with some clear guidance in a litigation setting involving suits for wrongful termination coupled with a defamation cause of action.
Trial Proceedings: Plaintiff Todd Hearn sued his former employer PG&E for retaliation and defamation as follows: (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.
The jury found PG&E liable for defamation but rejected Hearn’s retaliation claim. 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. Hearn was awarded a hefty sum of damages totaling $2,160,417, with interest from the date of entry of judgment.
Appeal: 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. So the ultimate question the appellate court was asked to address was: “In a wrongful termination case, can a plaintiff recover in tort based on the same underlying harm as caused by the discharge?” The appellate court found that the trial court erred in its analysis of applicable California Supreme Court authority.
Analysis: The appellate court’s evaluation found that three earlier Supreme Court cases together, Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654 (Foley), Hunter v. Up-Right, Inc. (1993) 6 Cal.4th 1174 (Hunter), and Lazar v. Superior Court (1996) 12 Cal.4th 631 (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. (Lazar, supra, 12 Cal.4th at p. 640 [“ ‘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.’ ”]; Hunter, supra, 6 Cal.4th at p. 1185 [same].) 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 (e.g., Lazar, 12 Cal.4th at p. 643 [holding in Hunter was “to preclude fraud recovery only where ‘the result of [the employer]’s misrepresentation is indistinguishable from an ordinary constructive wrongful termination.’ ”]); and
(2) the damages sought cannot exclusively “‘result from [the] termination itself.’” (Lazar, at p. 643; see also Hunter, supra, 6 Cal. 4th at p. 1178 [same]; accord Rattagan v. Uber Technologies, Inc. (2024) 17 Cal.5th 1, 21 [“defendant’s conduct must have caused injury to persons or property that was not reasonably contemplated by the parties when the contract was formed.”].) This second factor does not require a plaintiff to allege damages uniquely specific to defamation; it merely requires that the damages resulting from any alleged defamation cannot arise exclusively from his or her termination.
Based on these principles, the appellate court found that the trial court erred in denying PG&E’s JNOV because Hearn could not recover for defamation when it arose from the same conduct giving rise to his termination and the only result was the loss of his employment. In other words, Hearn cannot recover damages for wrongful termination by recasting his claim as one for defamation.
Lessons learned: Employers may take some comfort from the Hearn decision with its employer-friendly outcome, however, the case also highlights the importance of thorough attention to and documentation of any issues that may arise in the workplace, including workplace investigations and termination decisions.
Don’t let your workplace encounter trouble after termination; be one step ahead of the game. Please contact Rosasco Law Group for expert legal advice on avoiding pitfalls throughout the employment cycle.
