Lewis v. Equitable Life Assurance Society of the United States
62 A.L.R. 4th 581, 389 N.W. 2d 876, 1 I.E.R. Cas. (BNA) 1269 (1986)
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Rule of Law:
An employer may be held liable for defamation under the doctrine of 'compelled self-publication' when it provides a defamatory reason for termination that it knows, or should know, the employee will be compelled to repeat to prospective employers. Additionally, definite disciplinary procedures in an employee handbook can create an enforceable unilateral contract that modifies an at-will employment relationship.
Facts:
- Plaintiffs Carole Lewis, Mary Smith, Michelle Rafferty, and Suzanne Loizeaux were hired by The Equitable Life Assurance Society (company) for indefinite, at-will terms.
- Each plaintiff received an employee handbook stating that, except for serious misconduct, 'no employee will be discharged without previous warning and a period in which to bring performance up to a satisfactory level.'
- The company sent plaintiffs on a business trip to Pittsburgh after providing them with inadequate and erroneous oral instructions on expense reporting.
- Each plaintiff received a $1,400 travel advance which, having no instructions to the contrary, they spent.
- Upon their return, the company repeatedly demanded that plaintiffs alter their honestly prepared expense reports to conform to different guidelines they had not previously seen, in an effort to recoup about $200 from each.
- Plaintiffs refused to make further changes, maintaining that their expenses were honestly incurred based on the initial instructions they received.
- The company terminated all four plaintiffs for 'gross insubordination.'
- In subsequent job applications, prospective employers asked plaintiffs for their reason for leaving the company, compelling them to state they were terminated for 'gross insubordination.'
Procedural Posture:
- Plaintiffs sued The Equitable Life Assurance Society in Ramsey County District Court (trial court) for breach of contract and defamation.
- A jury returned a verdict in favor of the plaintiffs, awarding both compensatory and punitive damages.
- The company (appellant) appealed the judgment to the Minnesota Court of Appeals.
- The Court of Appeals affirmed the company's liability but remanded the case for recalculation of future damages.
- The case was then appealed to the Minnesota Supreme Court for review.
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Issue:
Can an employer be held liable for defamation when an employee is compelled to publish the defamatory reason for their termination to a prospective employer, and this self-publication was foreseeable to the employer?
Opinions:
Majority - Amdahl, Chief Justice
Yes, an employer can be held liable for defamation under the doctrine of compelled self-publication. The publication requirement of defamation is satisfied when a plaintiff was compelled to publish a defamatory statement to a third person and it was foreseeable to the defendant that the plaintiff would be so compelled. Here, it was foreseeable that plaintiffs would have to disclose the reason for their termination to prospective employers. The jury found the statement 'gross insubordination' was false, and the company's qualified privilege was lost because it acted with actual malice. Separately, the handbook's definite language on dismissal procedures created a unilateral contract which the company breached by terminating plaintiffs without the promised warning and probationary period. The court affirmed compensatory damages but reversed punitive damages, reasoning that their availability in this new cause of action might deter employers from communicating any reason for discharge, which would be against public policy.
Dissenting - Kelley, Justice
No, the court should not adopt the doctrine of compelled self-publication, and the employee handbook did not create an enforceable contract. The handbook's language was merely a general statement of policy and lacked the definiteness required by Pine River to alter the at-will employment relationship. Recognizing compelled self-publication expands defamation liability excessively, discourages plaintiffs from mitigating damages, and will deter employers from giving employees any reason for termination to avoid litigation. Furthermore, the employees' repeated refusal to comply with company requests was, in fact, insubordination.
Concurring-in-part-and-dissenting-in-part - Simonett, Justice
Yes, as to the defamation claim, but no, as to the breach of contract claim. The plaintiffs' remedy lies in tort, not contract, because the handbook did not convert the at-will relationship into one requiring termination only 'for cause.' The handbook provision for a warning and performance-improvement period was irrelevant to the kind of confrontation that occurred here. However, the majority is correct to recognize the tort of compelled self-publication as a valid cause of action for defamation and is also correct to reverse the punitive damages award.
Concurring-in-part-and-dissenting-in-part - Coyne, Justice
Justice Coyne joins in Justice Simonett's opinion, concurring on the defamation issue and dissenting on the breach of contract issue.
Analysis:
This landmark decision significantly impacts employment law in two ways. Primarily, it establishes the tort of 'compelled self-publication' in Minnesota, creating a major exception to the rule that publication must be made by the defendant. This places a greater burden on employers to ensure that the stated reasons for termination are truthful and well-documented, as they can now be held liable for statements made only to the employee if it's foreseeable the employee will be forced to repeat them. Second, it reinforces the principle that specific disciplinary procedures in employee handbooks can be contractually binding, giving juries latitude to interpret policy language as a concrete offer that modifies at-will employment.
