Labor & Employment Law Daily Wrap Up, TORT CLAIMS—Cal. App.: Employee’s defamation claim was wrongful termination claim by another name, (Jan 29, 2025)

By Ronald Miller, J.D.

The employee cannot recover damages for wrongful termination by recasting his claim as one for defamation.

A trial court erred in denying an employer’s motion for JNOV because an employee may not recover for defamation when it arose from the same conduct giving rise to his termination and the only result is the loss of employment, ruled a divided California Court of Appeals, in a 2-1 decision. The employee alleged that the employer made false (defamatory) statements that he misused company time, misstated his work activities, and fraudulently submitted timecards, in various reports and a termination letter. Here, the appeals court concluded that an employee may not sue in tort for the same conduct that forms the basis for that employee’s wrongful termination claim. Justice Tucher filed a separate opinion dissenting in part (Hearn v. Pacific Gas & Electric Co., Nos. A167742 and A167991 (Cal. App. Jan. 24, 2025)).

Performance issues. In 1996, the employee began working for the employer as a meter reader. In 2004, he completed his apprenticeship as a lineman and worked out of the employer’s NAPA facility.

In 2016, the employer became aware of performance issues at the Napa facility, including delays in maintenance and repair projects and rising overtime claims. In 2018, the employer noted “excessive meal costs, suspicions of misconduct, a high number of rest periods, poor attendance, schedule performance, multiple retaliatory compliance and ethics complaints, poor moral and bad attitude” among the senior crew and foreman.

Investigations. By June 2018, the employer had focused its investigation on the eight employees from the Napa facility charging the most overtime and double time. The investigation was subsequently narrowed down to five of those eight—the employee was identified as one of the five based on “potentially false time cards.” In late June 2018, the employee and four other linemen were suspended.

In August 2018, the employee was interviewed and asked about data showing his work vehicle was at home during work hours. He explained he lived a mile away from the Napa yard and went home a lot, as there was an established practice to allow employees “to ‘Cab up.’”

Thereafter, the employer opened a separate investigation into the NAPA facility. That investigation identified issues related to the employee, including that he took multiple trips to his house, claimed overtime when he was not on site, requested unearned meals, and delayed his arrival to work locations. The employer found that the employee violated its Code of Conduct on two bases: (1) his claimed time did not correspond to badge swipe records on nine instances; and (2) he inaccurately reported his time records on 11 occasions that either did not involve stops at his home or involved stops exceeding 30 minutes.

Retaliation investigation. The employee presented evidence that beginning in 2017, he repeatedly expressed safety concerns to management about a device called a “Tripsaver” that the employer began installing on its electrical lines in 2016. The employer’s superintendent responded negatively to the employee and others who raised these safety concerns. The employee and others reported that superiors had retaliated against them.

An investigation was instituted by the employer at about the same time as it was investigating the NAPA facility. In a January 18, 2019, letter the employer informed the employee that his employment was terminated based on findings of an investigation into his conduct. In March 2019, an investigator’s report found no evidence that the employer was investigated and terminated because he spoke out about safety concerns or that his supervisor retaliated against him for filing a grievance.

Defamation claim. The employee sued the employer for retaliation, wrongful termination in violation of public policy, and defamation. In connection with his defamation claim, the employee alleged that the employer made false (defamatory) statements that he misused company time, misstated his work activities, and fraudulently submitted timecards, in various reports and the termination letter.

In January 2022, the employer moved for summary adjudication of the employee’s defamation claim. The trial court denied its motion. The trial court found the employee conceded the allegedly defamatory statements were conditionally privileged but produced evidence to raise a triable issue of material fact as to whether an investigator acted with malice when he published his report.

The employee proceeded to trial on his defamation and retaliation claims, which was tried before a jury. Following deliberations, the jury found the employer not liable for retaliation but liable for defamation. The jury awarded damages totaling $2,160,417, comprised of separate awards as to past and future economic and non-economic damages.

Subsequently, the trial court entered judgment in favor of the employer on the employee’s cause of action for retaliation, and in favor of the employee on his cause of action for defamation. Following entry of judgment, the employer moved for JNOV. The employer argued that the employee 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. The trial court denied the employer’s motion. The employer appealed.

Denial of JNOV. The employer’s sole contention on appeal is that the trial court erred by denying its motion for JNOV. Specifically, the employer contended the employee was precluded from suing in tort for the same harm he claims arose from his termination.

Here, the appeals court determined that the trial court erred in denying the employer’s motion for JNOV because an employee may not recover for defamation when it arose from the same conduct giving rise to his termination and the only result is the loss of employment. In other words, the employee cannot recover damages for wrongful termination by recasting his claim as one for defamation. The trial court erred in its analysis of applicable California Supreme Court authority.

The jury found that the employee’s defamation claim arose solely from an investigative report. At least a year before the employee’s termination, the employer initiated an investigation regarding suspected employee violations of its Code of Conduct. Approximately six months before his termination, the employee and four other employees were placed on “crisis suspension” due to significant evidence of violations.

Any alleged defamatory statements contained in the report were generated within the scope and context of the employee’s disciplinary proceedings and termination, and both the defamation claim, and termination arose from the same conduct. The damages arising from the employer’s defamation were solely related to the employee’s termination.

The employee’s defamation claim was founded on the same conduct—the creation of the investigative 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—loss of employment. If the employee believed he was entitled to damages exclusively caused by his termination, he was required to pursue those damages via a wrongful termination claim.

Accordingly, the appeals court reversed the judgment entered in the employee’s favor on his defamation cause of action.

Partial dissent. In a partial dissent, Justice Tucher would find that the harm caused by defamation is a distinct harm, regardless of whether the tort is committed by an employer. Because defamation is an injury to reputation, a defendant who commits this tort necessarily causes reputational harm distinct from the harm experienced when an employment contract is breached. Here, the jury found that the employee suffered an injury to his reputation, and it was as a consequence of that injury to his reputation that his employment was terminated. According to the dissent, the fact that the employer’s defamatory conduct caused the employee to incur damages equivalent to those that would have flowed from a retaliatory wrongful termination should not insulate the employer from tort liability for the defamation that actually occurred.

The cases are Nos. A167742 and A167991.

Judge: Petrou, I.

Attorneys: Elena Rene Baca (Paul Hastings) for Pacific Gas & Electric Co. Monique Olivier (Oliver & Schreiber) for Todd Hearn.

Companies: Pacific Gas & Electric Co.

Cases: TortClaims Procedure StateLawClaims CaliforniaNews