"Defamation by Conduct" Decision by Massachusetts High Court Creates Potential Employer Liability for Security Precautions Taken When Investigating Misconduct or Terminating Employees

By Wilfred J. Benoit, Jr., Robert M. Hale, James W. Nagle, Joseph A. Piacquad and Bradford J. Smith

Employers investigating employee misconduct occasionally find it necessary to have security personnel present while employees are being questioned. Also, some employers take the precaution of having security guards accompany terminated employees to their offices or cubicles to retrieve personal belongings and escort them from the premises. A recent decision by the Massachusetts Supreme Judicial Court indicates that employers must exercise caution in taking such security measures. In some circumstances, these practices may expose employers to potential defamation claims, even though the employer has not made any defamatory written or spoken statement concerning the employee.

The plaintiff in Phelan v. May Department Stores, Michael Phelan, was employed as an assistant director of accounts payable for Filene’s stores (owned by May). Evidence at trial indicated that, in the course of investigating certain accounting irregularities, a Filene’s security officer was instructed to guard Mr. Phelan while his subordinates were being questioned. This action was taken to prevent Mr. Phelan from influencing or intimidating his subordinates. Throughout the day, the security officer relocated Mr. Phelan to various available offices, would not allow him to use the telephone, escorted him to the restroom, and accompanied him to the cafeteria. The security officer did not wear a badge or other insignia identifying him as a security guard and did not carry a weapon or handcuffs. He did wear dark trousers, a shirt, a tie, and a blazer that Filene’s had issued to him that was similar to the clothing worn by other security guards at the store. At the end of the day, Mr. Phelan was suspended and escorted out of the building by a Filene’s executive. His employment was subsequently terminated.

Mr. Phelan sued the company for false imprisonment and defamation. The jury found in his favor on both claims, awarding him $1500 on the false imprisonment claim and $75,000 on the defamation claim. The company moved for judgment notwithstanding the verdict on Mr. Phelan’s defamation claim. The trial court granted the company’s motion and reversed the jury’s defamation verdict, on the ground that the company’s actions were reasonably necessary to serve its legitimate interest and therefore privileged. The trial court also expressed doubt that the security activities about which Mr. Phelan complained "would cause any employee to think less well of [him]," but did not find it necessary to decide that issue in light of its privilege ruling. Mr. Phelan appealed from the trial court’s decision and the Appeals Court reversed, concluding that the trial judge erred by substituting her judgment for that of the jury. In the Appeals Court’s view, Mr. Phelan’s testimony regarding the manner in which he was treated in front of his co-workers was sufficient to enable the jury to conclude that the company’s actions were "of defamatory significance to others." The Appeals Court then held that the company lost its privilege because it did not exercise "sound judgment," and its actions were not "necessary to protect the store’s interests."

The company appealed the Appeals Court’s reversal to the Supreme Judicial Court, arguing that: (a) there was insufficient evidence for the jury to find that the security precautions taken were construed by Mr. Phelan’s co-workers as holding him up to scorn, ridicule or contempt; and (b) its actions were privileged. The SJC agreed with the company’s first argument, reasoning that the conduct on which Mr. Phelan’s defamation claim was predicated "did not convey a clear and unambiguous false statement" about him and that he had not presented any evidence that an "observer interpreted [May’s] conduct as conveying such a meaning."

Although the decision was a positive one for May, its implications are troubling for employers. The Supreme Judicial Court, for the first time, "conclude[d] that defamatory publication may result from the physical actions of a defendant, in the absence of written or spoken communication."

The SJC first explained the legal standard of defamation: To prove defamation, a plaintiff must show that a defendant "published" a false statement about him to a third party that either caused him economic loss or is per se defamatory (actionable without proof of economic loss). An accusation that an individual has committed a crime is a type of defamation that is actionable without proving economic loss. The SJC accepted May’s argument that, unless the message communicated by physical conduct is unambiguous, proof of publication must include direct evidence that a defamatory message was understood by onlookers. The SJC suggested that if there was "chasing, grabbing, restraining, or searching," this would have conveyed the impression of criminal wrongdoing, and therefore been unambiguously defamatory (without the need for testimony from a third party). In the Phelan case, however, the SJC concluded that the actions of defendants "did not have a specific, obvious meaning and did not necessarily convey that [Mr.] Phelan had engaged in criminal wrongdoing." Therefore, Mr. Phelan had the burden of proving that a reasonable person observing the security officer’s conduct understood it to be defamatory. Mr. Phelan failed to offer testimony from any observer, and therefore did not meet this burden. However, the SJC’s reasoning suggests that if one of Mr. Phelan’s coworkers had testified that he observed the security officer’s conduct and concluded, as a result, that Mr. Phelan was accused of a crime, that alone would appear to have been sufficient for a jury to find that May had defamed him.¹

The Phelan decision has implications for a broad range of employment situations in which security precautions are deemed necessary by the employer. For example, in reaching its conclusion that physical conduct alone can trigger a defamation claim, the SJC cited with apparent approval a federal court decision suggesting that inappropriate conduct of non-security personnel in escorting an employee from the employer’s premises (e.g., a "supervisor rais[ing his] voice to [an] employee while escorting her from the building after suspension") could "possibly" communicate a defamatory meaning about the employee to her co-workers. The SJC appears to have opened the door for defamation claims against employers for a relatively common practice – escorting employees from the workplace at the time of suspension or termination from employment.

The SJC did not address the alternative argument made by May – that even if there was a sufficient evidentiary basis for the jury to conclude that the company’s actions conveyed a defamatory message about Mr. Phelan, its conduct was privileged. In any action for defamation, an employer has a defense that its supervisors, executives, and corporate officers are conditionally privileged to disclose defamatory material that is "reasonably related to the employer’s legitimate business interest." This privilege may be lost if an employer acts with "actual malice" or by "recklessly" publishing such defamatory statements. The Appeals Court found that May lost this privilege because of the extent to which Mr. Phelan was guarded.

The Appeals Court explained that "its decision" should not be read to hold that any publication of an employer’s suspicion of employee wrongdoing would amount to actionable defamation, but only that the reckless overpublication here may properly be deemed by the jury to be defamatory and not privileged." The Appeals Court held that "[t]he jury were warranted in finding that [May] here recklessly overpublished the[] defamatory statements about [Mr.] Phelan by holding him under guard for more than six hours and repeatedly escorting him through the office in view of his coworkers," and the fact that May "permitted [Mr.] Phelan’s coworkers to witness th[is] prolonged conduct … certainly permits a finding that . . . [it was] reckless in excessively and unnecessarily imputing to him a crime." In the Appeals Court’s view, Filene’s conduct "went recklessly beyond anything that was necessary to protect the store’s legitimate interest."

In its appeal to the SJC, the company argued that it had reason to believe that Mr. Phelan might attempt to impede the investigation and that it acted in good faith to prevent this risk. While one might argue that the company could have avoided any damage to Mr. Phelan’s reputation and still accomplished its objective of preventing him from interfering with its investigation simply by sending him home for the day, the company apparently was concerned that this would not have prevented him from contacting his subordinates by phone. The SJC avoided an opportunity to clarify the application of the conditional privilege in these circumstances and to reassure Massachusetts employers that their security decisions will not be second-guessed by the courts, and that they will be protected from defamation claims if their security actions are reasonable and taken in good faith. Since the SJC did not address the "privilege" argument, the Appeals Court’s holding on the privilege issue is left intact as precedent for future cases.

May did not appeal the false imprisonment verdict and, therefore, the SJC did not address that issue. Employers should be mindful of the potential for this type of claim whenever they physically restrict the movement of employees under suspicion of wrongdoing. False imprisonment is the intentional, unjustified confinement of a person, directly or indirectly, by force or threat, of which that person is conscious and which results in his harm (usually emotional harm). The SJC undertook its most detailed analysis of false imprisonment in the employment context in the 1987 case of Foley v. Polaroid Corporation. In Foley, the employer was investigating a sexual harassment complaint against Mr. Foley. Mr. Foley was called into a meeting with a company security officer for questioning, and the security officer positioned his chair between Mr. Foley and a closed office door. During a two-hour interrogation, Mr. Foley stood up a few times, and on each occasion the security officer told him to sit back down. When Mr. Foley asked to leave the room, the security officer told him that if he did so he would lose his job. The SJC held that a threat of discharge was not sufficient, in the at-will employment context, to create "false imprisonment." Since an at-will employee is not entitled to continued employment, an employer’s threat to fire an at-will employee cannot form the basis for a false imprisonment claim. The Court also explained that an employer has a right to confine an employee for a reasonable time and in a reasonable manner in order to inquire about any allegations of wrongdoing. However, the SJC remanded the case for trial, suggesting that in these circumstances a jury could still find that Mr. Foley had been falsely imprisoned if it concluded that the security officer created a threat of physical coercion to keep him in the room.

Employers should exercise care when taking security precautions directed toward employees during investigations concerning potential wrongdoing or during the process of terminating employment. They should carefully evaluate whether or not there is good reason to impose security constraints and should consult counsel before taking such action. Managers and security personnel should avoid grabbing, restraining or searching employees unless there is a compelling reason for such actions. If an employer elects to implement security safeguards or constraints during an investigation or termination of employment, it should strive to do so in as inconspicuous a manner as possible. For example, the investigatory interview or termination meeting might be conducted after normal business hours. Additionally, employers should consider having a security representative in the general vicinity, but not directly guarding an employee unless the employee poses a serious threat of violent behavior. In most circumstances, employers would be better off sending an employee home during an internal investigation rather than imposing constraints on his or her movement in the workplace.

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