Opposing a New Theory of Tort Liability for Employers

Unlike the Connecticut Supreme Court in Smedley, the Massachusetts Supreme Judicial Court decided this case in line with NELF’s position, holding that Massachusetts does not recognize the tort of “compelled self-defamation.” Roy Albert White was an employee of Blue Cross. White alleges that his supervisor told him that a client hospital had informed Blue Cross that White had divulged the details of a confidential financial settlement between the hospital and Blue Cross. Blue Cross then terminated White’s employment for this reason. White claims that the hospital’s statement was false, and that he has been compelled to repeat the false and defamatory reason for his discharge to potential employers, resulting, he alleges, in a failure to find new employment.  Blue Cross successfully argued below that no Massachusetts court has recognized the claim of self-defamation, because defamation cannot exist in the absence of publication to a third party. White appealed, and the Supreme Judicial Court took the case for direct appellate review.  

NELF filed a brief in support of Blue Cross, arguing that compelled self-defamation is a questionable and much-criticized expansion of law in a minority of states. Expanding defamation law, NELF argued, would expose employers to potentially widespread liability for exercising their prerogative to terminate an at-will employee, and undermines the public interest in open communication between employer and employee. White, noting that other jurisdictions have recognized the tort of compelled self-defamation in the employment context, argued that it provides a necessary remedy to an employee who must repeat allegedly false statements in order to explain why he is in the job market. White notes other jurisdictions have recognized the tort. NELF argued that the appropriate remedy for am employee in White’s alleged situation is to sue the client hospital for defamation and/or for tortious interference with contractual or advantageous business relationships. NELF pointed out that Blue Cross could have terminated White for any reason, including the fact that a significant customer was unhappy with his services, without having to investigate the factual basis of the customer’s unhappiness. If allowed to proceed with his strained theory of recovery, NELF argued, White will have effectively converted an at-will relationship into one of termination for cause only. 

In its decision, the Supreme Judicial Court took seriously each of NELF’s concerns.  Noting that what White was really complaining about was his termination, not the communication, the court called the proposed tort of compelled self-defamation a “dramatic departure from the principles governing employment at will.”  Observing that the White could have negotiated an employment contract with Blue Cross, but did not do so, the court held that the law would not permit him to secure indirectly, through the proposed extension of tort law, what he failed to negotiate directly.  The court also noted that recognition of the doctrine of self-publication would be counter to another important aspect of employer-employee relations, an employer’s privilege to disclose defamatory information concerning an employee when the publication is reasonably necessary to serve the employer’s legitimate interest.  The court recognized that this privilege and the additional privilege protecting communications between a former and prospective employer concerning an employee serve the important public purpose of promoting the free flow of information in the workplace.  In this connection, the court found that recognition of the proposed tort could potentially stifle communication in the workplace and the resulting harm to employees could be significant, as employers, concerned about potential defamation liability, would be unlikely to provide employees with any reason for employment decisions, at the least depriving employees of any opportunity to contest these decisions. The Court agreed with NELF, and reaffirmed that, even though White may have been damaged because of the reason for his discharge, in the at will employment situation Blue Cross had the right to terminate White for any reason or no reason and had no legal obligation to investigate whether the client hospital’s accusation was true and no obligation on Blue Cross even to inform White of the accusation.  

The Court also agreed with NELF that White was not without remedy for any harm he suffered, because he could bring an action against the client hospital for defamation, intentional interference with advantageous relations, or both.  As the Court concluded:  “If defamation law is to provide a remedy for White, the correct party to be charged with culpability must be, as it always has been, the originator of the defamatory statement communicated to a third party.”

Opposing Double Compensation under the Workers’ Compensation Act 

This case raised the issue whether the Connecticut Workers’ Compensation Act permits an employer to offset disability retirement payments against wage replacement benefits otherwise due an injured worker under the Act. Eileen Smedley suffered a back injury while employed by the State of Connecticut and received workers’ compensation benefits. In 1999, she retired with State Disability Retirement benefits. Smedley has been employed in private industry earning less than she earned in her former state job, and she is again seeking wage supplement benefits under the Act, which would, if these were awarded without regard to the amount that she is receiving in disability retirement benefits, result in Smedley receiving more income than she had as a state employee.  The Workers’ Compensation trial commissioner included Smedley’s disability retirement benefits in calculating her eligibility for workers’ compensation benefits, and concluded that she was ineligible for workers’ compensation benefits. The Workers’ Compensation Commission upheld that ruling, and Smedley appealed. 

The Connecticut Supreme Court took the appeal, and NELF filed a brief in support of the employer State of Connecticut on its own behalf, and on behalf of the Connecticut Business and Industries Association. In its brief, NELF argued that both the plain language of the Act and case law prohibit double compensation. NELF also argued that there is compelling public policy in favor of preserving the continued financial viability of the workers’ compensation system by avoiding duplicate benefits and excessive compensation. The system is supported by the mandatory contributions of employers, and excessive payouts ultimately have one of two impacts: they force a reduction of wages and benefits available to workers generally, or they increase the cost to employers. If the employer is the state, the result can be tax increases, program cuts, or both.  In its decision, the Connecticut Supreme Court decided against NELF’s position and for Smedley, based entirely on the specific statutory provisions of the State Employees Retirement Act.  Somewhat troubling is dictum in a companion case dealing with the same issue, Starks v. University of Connecticut, 270 Conn. 1, 850 A.2d 1013 (2004), that state disability retirement benefits may be analogous to Social Security or private disability insurance payments.  

Nevertheless, the Connecticut court took NELF’s concern about double dipping seriously. Despite statutory authorization, the state retirement board had not deducted workers’ compensation benefits from retirement benefits because of administrative convenience.  The court held that where the statute explicitly authorized a deduction from retirement benefits to offset workers’ compensation, and not vice versa, the administrative agencies must handle the offset according to the statutory mandate and not based on administrative convenience.