Termination of Employment: Risk of Liability for Defamation

Most employers have been counseled and are very careful with respect to any statements that are authorized to be made concerning the termination of an employee. However, there are exceptions.

Recently an Illinois Appellate Court affirmed a jury verdict awarding a terminated employee $2 million in compensatory damages and $6 million in punitive damages (the jury awarded $10 million which was reduced by the trial judge to $6 million) where the terminated employee alleged that the employer had breached the employment contract and defamed him by stating that he had been terminated “for cause.”

The particular employee had been president of the employer for a number of years, and following his termination found it impossible to become re-employed by reason of the “for cause” termination. The appellate court responded to the employer’s argument that it should be exonerated under the “innocent-construction rule”, that even though a word may have an innocent meaning, it is not required to be innocently construed, especially where the reasons given for the for cause termination were untrue.