Employers must walk a fine line when they suspect an employee is engaging in misdeeds. On one hand, if they don’t act quickly and forcefully they could risk liability for harm to co-workers or customers. But at the same time, acting too quickly or forcefully poses the risk of liability for defamation, as recent cases illustrate.
For example, a graphics company in Charleston, S.C., recently agreed to pay a significant settlement to former employee George Walton, who had been wrongly accused of embezzlement and arrested. Walton had left the company a few years earlier to take a new job. After he left, his old boss Maria Elliott saw what she thought was a $10,000 discrepancy in payments to him. Elliott didn’t have her outside accountant conduct a forensic analysis, apparently because she didn’t want to pay for it. Instead, she fired her bookkeeper over the alleged discrepancy and notified the police after combing through the books herself.
Walton’s own forensic accountant, however, allegedly determined that Walton had been overpaid by mistake, something Walton claims he told Elliott himself months before he left.
After the charges against Walton were dropped, he sued his ex-employer for defamation. Elliot never admitted fault, but she agreed to settle for multiple times the alleged discrepancy.
Similarly, a hospital nurse in Indiana accused a doctor, Rebecca Denman, of having alcohol on her breath while on duty. Though the hospital’s policy mandated immediate reporting and blood testing in such situations, the nurse waited 13 hours to report Denman, denying the doctor an opportunity to defend herself. These allegations were later raised among administrators and Denman’s colleagues and she was suspended without pay.
Denman filed suit, claiming the accusation was not only false but damaged her reputation. A jury agreed and awarded substantial damages.
It’s critically important to conduct an appropriate investigation when you suspect an employee of wrongdoing. A good employment lawyer can assist in the process.