Intracompany Communications Are Publications for Purposes of a Defamation Claim

Author: Wayne D. Garris

In Bals v. Verduzco, +600 N.E.2d 1353 (Ind. 1992), the Supreme Court of Indiana considered whether an employee evaluation has been published, for purposes of a defamation claim, once the evaluation has been communicated to management by a direct supervisor within the organization.

In Indiana, an employee filing a defamation lawsuit must show: a communication with defamatory content; the communication was made with malice; the communication's publication; and harm resulting from the defamatory communication. Publication occurs when a defamatory statement is communicated to a third party or parties. An employer may defend against a claim of defamation by asserting a privilege. An absolute privilege applies in certain limited circumstances, such as to statements made during court proceedings (i.e., the absolute litigation privilege). A qualified privilege attaches to communications made in good faith by a party who has an interest or a duty to make the communication, if the communication is made to a person having a corresponding interest or duty. For example, a supervisor may have a duty to communicate an employee's performance appraisal to a superior.

In this case, the court held that an intracompany communication, i.e., submitting poor performance appraisals to management, constitutes publication to a third party because of the potentially damaging effect the intracompany communication can have on an employee's reputation. However, the court held that a qualified privilege applies to this type of communication, and an employee must show that the communication was made in bad faith in order to overcome the privilege.

Key Points

Background

Verduzco supervised Bals at Inland Steel Company. Bals was terminated after Verduzco submitted several poor employee evaluation reports to company management.

Bals filed a lawsuit for defamation against Verduzco. The trial court found in favor of the supervisor, holding that the submission of the evaluation reports did not constitute publication for purposes of proving defamation. The employee appealed to the Indiana Court of Appeals. The appellate court affirmed the trial court decision.

The employee appealed to the Supreme Court of Indiana, arguing that the supervisor's internal communications constituted publication. The supervisor responded that the submission of the reports does not constitute publication, but even if the reports were published, then the communications would be privileged.

Decision

The court held that intracompany communications satisfy the publication requirement. However, the court also held that a qualified privilege attached to the communications, and that the employee did not present adequate evidence so as to overcome the qualified privilege.

The court began by discussing the disagreement among various jurisdictions regarding whether or not a communication between employees or officers of the same employer constitutes publication to a third party. Some jurisdictions find that an intracompany communication regarding performance appraisals is a communication within the same entity, and therefore not actionable as a defamation claim. However, the Indiana court followed other jurisdictions and concluded that intracompany communications constitute publication for defamation purposes. In making its decision, the court relied on principles found in the Indiana Constitution that recognize an individual's interest in protecting his or her reputation.

The court stated that damage to an employee's reputation within an organization may be as bad or worse as damage to his or her reputation outside of the workplace. The court explained that an individual does not give up his or her constitutionally protected interest in a good reputation when entering the employment setting. The effect from a defamatory communication within the workplace may hinder an individual's ability to sustain employment. The court concluded that Indiana law permits an employee access to the courts for an injury suffered as a result of defamatory content that is communicated within a company, especially if the employee would have the same access to the courts if those comments were made outside of the company.

However, just because an employee may show publication for defamation purposes does not mean that the employee has met his or her burden to prove the employer is liable for defamation. The court found that because the communication concerned the submitting of performance appraisals within the workplace, a qualified privilege applied to the communication.

Claiming qualified privilege provides a defense to an employee's defamation claim. The privilege attaches when a communication regarding a subject in which the party making the communication has an interest in or duty is made, in good faith, to a person having a corresponding duty. The privilege generally applies to intracompany employee evaluations unless the employee can show that the communicator was primarily motivated by ill will in making the statement; there was excessive publication of the defamatory statement; or the statement was made without belief or grounds for belief in its truth.

Once the court applied the qualified privilege to the intracompany communication, the employee argued that the supervisor made the statements without belief or grounds for belief in their truth. In support of his claim, the employee presented arguments challenging the accuracy of his evaluations. However, he was unable to provide any evidence that the supervisor made the reports without belief or grounds for belief in their truth. As a result, the court held that the privilege applied to the supervisor's communications, and the employee failed to show the communications were made in bad faith. Therefore, the employee's case was dismissed, and the employer was not held liable for defamation.

Commentary

This case provides an excellent discussion of various courts' treatments of publication for purposes of defamation claims. In some states, courts view internal communications as communications within one organization or entity, and not to a third party (therefore, no publication is possible). In others, like Indiana, courts view internal communications as communications among different individuals, and not within one entity (therefore, the publication requirement is satisfied).

However, in these jurisdictions, a qualified privilege generally attaches for communications made with a co-worker or supervisor with corresponding duties and interests. Although the privilege is not absolute, an employee must meet a substantial burden in proving that the communication was made in bad faith. Bals v. Verduzco provides Indiana employers with assurance that, if acting in good faith, supervisors can evaluate and discipline employees for poor performance while enjoying some level of protection from employee claims. Even though the employee was unsuccessful in this particular case, employers should recognize the importance of ensuring that internal communications are made in good faith so that the qualified privilege attaches. Specifically, supervisors should evaluate or discipline employees based on facts, express their opinions based on verifiable information, and limit dissemination of evaluations and other sensitive material to those with a demonstrable need to know.

Additional Resources

Employee Management > Performance Appraisals

Employee Management > Employee Communications