Employer Statements Protected by Qualified Privilege

How much may an employer disclose about the reason for an employee's

discipline or discharge without being subject to liability for defamation? A

recent decision held that statements to the local media about a hospital offical's

discharge for billing fraud were protected by the employer's qualified

privilege.

Although an employer may be liable for inaccurate communications that are

damaging to an employee's reputation, otherwise defamatory statements are

protected by a "qualified privilege" when made in good faith to

persons sharing a common interest. To qualify for the privilege, the

communication must be made for a proper purpose and the employer must have

reasonable grounds to believe the statement is true. If the employer's

communication is entitled to the qualified privilege, then the employee cannot

prevail in a defamation suit unless he or she can prove the employer abused the

privilege, either by acting out of ill will or with disregard for the truth of

the statement.

In Palmisano v. Allina Health Systems (8th Cir. 1999), a federal appeals

court upheld the dismissal of a defamation suit brought by a former vice

president of a health care facility. In response to questions by the local

media, the employer confirmed that an investigation determined there were

improprieties in Medicare and Medicaid billing practices, that the matter had

been turned over to federal prosecutors and that the vice president had been

terminated as a result of the investigation. The court found the statements were

protected because the employer needed to provide accurate information about a

federal investigation that could have a wide-ranging impact on thousands of

employees and consumers.

The court rejected Palmisano's contention that the employer exceeded its

privilege by spreading its statement through the local press. The court defended

the employer's communication to the local media because the subject matter is

of public importance and the employer needed to assure that the information

conveyed by the press was accurate.

Further, the court relied on the thoroughness of the employer's

investigation in rejecting Palmisano's charge that the statement was made in

bad faith. In fact, the communications followed a three-month investigation

involving dozens of employee interviews and extensive analysis of billing

records and reports. Palmisano demonstrates the importance of monitoring

communications to assure that they are accurate and supported by a thorough

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