Publications: Illinois Appellate Court Confirms Employer Liability for Adverse Internal Performance Assessments

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A January 21, 2005, decision of the Illinois Appellate Court for the First District (Cook County) suggests that while at-will employment in Illinois is alive, it may not be well. In Popko v. Continental Casualty Co., 2005 WL 123869 (Ill.App. 1 Dist.), the court affirmed a jury’s verdict in favor of a discharged, former in-house attorney employed by the defendant. The former employee sued for defamation and tortious interference with employment, admitting his at-will employment status, but claiming that he was defamed through internal company memoranda documenting his alleged misconduct (profanity and challenging a supervisor’s authority) during an adverse performance review.

While recognizing that “publication is an essential element to a cause of action for defamation,” the Popko court rejected the employer’s argument that internal evaluative communications do not satisfy this publication requirement. It acknowledged that “courts are split” over whether intracorporate communications made during an internal employee evaluation and discipline process should subject an employer to defamation liability, but held that under Illinois law, the publication requirement is satisfied by communication of the defamatory statements to any third person, including the defendant’s own agent, employee or officer.

The employer in Popko argued that the specter of liability for intracorporate communications would unduly impinge on candid internal communications and inordinately expose employers to liability for relying on supervisors’ reports in evaluating employees and making disciplinary decisions. Nevertheless, the Court held that employers are adequately protected by the availability of a qualified privilege defense. Under this defense, defendant employers may defeat defamation claims by proving the existence of a qualified privilege that arises when an allegedly defamatory communication takes place in the context of an internal company investigation of an employee’s “suspicious conduct within the company.” The Popko court noted that “privileged occasions include situations that involve some interest of the party publishing the statement, such as a corporate employer investigating certain conduct by its employees.”

The Popko Court was also quick to note, however, that the privilege defense is not absolute. Employees can defeat it by proving that the underlying circumstances, including timing, demonstrate the employer abused the privilege and acted with actual malice. Actual malice sufficient to defeat the qualified privilege defense may be inferred from evidence that the employer’s investigation of accusations of employee misconduct was inadequate or incomplete, or from proof that the employer had a “direct intention to injure the plaintiff [employee] or a reckless disregard of [his/her] rights.”

The Popko Court finally rejected the employer’s complaint that the trial court incorrectly barred evidence of the at-will nature of the plaintiff’s employment. The defendant argued that it was unfairly denied “the opportunity to explain to the jury the ‘critical implications’ of plaintiff’s at-will status – i.e., that an at-will employee may be discharged for any reason – and thus were unable to sufficiently attack plaintiff’s argument that his discharge was unfair.” But the Court expressly found that evidence of the plaintiff’s at-will status was properly excluded because the “issue was not relevant to the question of whether plaintiff had been defamed.”

Despite the Popko Court’s conviction that the qualified privilege defense sufficiently protects employers from unwarranted defamation suits, it undoubtedly gives employees the “green light” to include defamation and tortious interference claims in any wrongful discharge suit they might otherwise file. Even employees who plainly fall outside any statutory protected status may find in the Popko decision encouragement to file defamation and tortious interference claims against their former employers. The qualified privilege defense, depending as it does on what are usually hotly contested factual issues, may not be readily resolved through summary judgment procedures, thus potentially protracting and compounding the expense of litigating employee defamation and wrongful discharge suits. The Illinois Personnel Records Review Act (820 ILCS 40/0.01 et seq), of course, entitles current and separating employees to promptly review and obtain copies of their personnel files, including internal evaluative memoranda such as those found actionable in the Popko case. Nothing should be placed in such a file without this in mind.

While truth remains a defense to defamation claims, disputed facts and “swearing contests” are the stuff of which jury trials, including the trials of employee defamation suits such as Popko, are made. The Popko case also reminds employers that the doctrine of “at-will” employment does little to save them from the burdens of marshaling the facts that support their personnel decisions and ensuring the accuracy of any documentation of those facts. The ancient edict that an at-will employee may be discharged for “any reason or no reason” is cold comfort in cases such as Popko. The thoroughness of an employer’s internal investigations, the quality of the evidence underlying its employment decisions and the soundness of its judgment can make all the difference between a successful defense and an adverse verdict.