Defamation claim by former employee barred

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The Worker’s Compensation Act bars an employee’s claim that his employer defamed him, even when the alleged defamation occurred after the employee had been terminated.

The Wisconsin Court of Appeals also held on June 2 that the Act bars claims for intentional infliction of emotional distress, even if it occurs when the employee is suspended.

Mary K. Farady-Sultze was employed by Aurora Medical Center of Oshkosh, Inc., as a social worker. She worked at both Aurora’s Wautoma and Oshkosh locations.

In May 2008, she stopped working at the Wautoma location, but Aurora continued to pay her for sixteen hours of work at that location each pay period until October. Farady-Sultze did not receive paycheck stubs, but she had access to an electronic copy of the stubs.

Aurora eventually discovered the error, suspended her on Nov. 11, and terminated her on Nov. 18.

Wrongful Discharge

Farady-Sultze brought suit for wrongful discharge, defamation, and intentional infliction of emotional distress. The circuit court dismissed the claims and the Court of Appeals affirmed, in an opinion by Judge Richard Brown.

The court first held that the wrongful discharge claim was properly dismissed, because Farady-Sultze was an at-will employee and she failed to show that her termination violated public policy.

IIED

The court next held that the intentional infliction of emotional distress claim is barred by the Worker’s Compensation Act.

That was the holding by the Supreme Court in Jenson v. Employers Mutual Casualty Co., 161 Wis.2d 253, 468 N.W.2d 1 (1991).

Farady-Sultze attempted to distinguish Jenson by arguing that the tortious acts in Jenson occurred while Jenson was still employed, but in her case, they occurred after her termination.

But the court rejected the argument for two reasons. First, although Aurora’s actions occurred during the final week of her employment, while Farady-Sultze was suspended, she was still an employee at the time, just like the employee in Jenson.

Second, the court concluded that the rule in Jenson would apply, even if she had been terminated earlier. “While it is true that the acts in Jenson occurred during employment and not after termination, the Jenson court did not make or discuss the distinction that Farady-Sultze now raises.”

Defamation

Finally, the court held that the defamation claim was properly dismissed pursuant to the Act.

In both Becker v. Automatic Garage Door Co., 156 Wis.2d 409, 456 N.W.2d 888 (Ct.App.1990), and Wolf v. F. & M. Banks, 193 Wis.2d 439, 534 N.W.2d 877 (Ct.App.1995), the Court of Appeals held that defamation claims by an employee against an employer are preempted by the Act.

The court noted that, in Wolf, as in Farady-Sultze’s case, the alleged defamation occurred after discharge, yet the court still held the claim was preempted.

In addition, the court found that there is no evidence in the record that Aurora has actually defamed Farady-Sultze yet.

Farady-Sultze alleged that Aurora told her that it would inform any potential employers that she had been terminated for theft. However, nothing in the record indicated that Aurora had actually followed through with that policy.

The court wrote, “In other words, if there is to be such an allegation of defamation, there is no evidence that it has occurred yet or that it ever may occur.”

Case analysis

The holdings in this case regarding preemption are insupportable, given the plain text of sec. 102.03 of the Worker’s Compensation Act.

Subsection (1)(b) explicitly states that the Act only applies, “Where, at the time of the injury, both the employer and employee are subject to the provisions of this chapter.”

Subsection (1)(c)1 states that the Act only preempts tort liability, “Where, at the time of the injury, the employee is performing service growing out of and incidental to his or her employment.”

When the employee has already been terminated, neither of those situations exists.

Even when the employee is on suspension, the condition in subsec. (1)(c)1 is not met, and the Act does not apply.

The court is correct that, in Jenson, the Supreme Court held that the Act’s exclusivity provision bars claims for intentional infliction of mental distress. However, it was not at issue in Jenson whether or not the parties were subject to the Chapter. The only issue was whether intentional torts fell outside the realm of the Act altogether.

The court wrote, “The basic question is whether the claim of Jan Jenson is cognizable under the provisions of the WCA.” Jenson, 161 Wis.2d at 261.

In fact, the court expressly found that subsec. (1)(c)1 was met, because the allegedly tortious conduct occurred “at village board meetings and in the confines of the village hall, where both worked.” Jenson was a government employee, and the tortious conduct was allegedly committed by the village president. Jenson, 161 Wis.2d at 270.

The court in Jenson added, “It would appear from a common sense point of view these were times when Jenson, by virtue of her duty to be at the board meetings, was performing services growing out of and incidental to her employment.” Jenson, 161 Wis.2d 270-271.

In contrast, an employee who has been suspended cannot be performing services incidental to employment.

Thus, Jenson is clearly distinguishable in this case, because Farady-Sultze had been suspended at the time of the relevant conduct, and thus could not possibly be “performing service growing out of … her employment.”

The court’s reliance on Wolf is also suspect. While the alleged defamation by the employer appears to have occurred after termination, the employee never raised this as an issue in the case. The Court of Appeals simply held it was bound by Becker, without addressing the fact that the employment relationship had been terminated.

Obviously, an employee who has been terminated has no employment for which she can be performing services.

In light of the plain language of sec 102.03(1)(b) and (1)(c)1, the claims should not be preempted by the Act.

David Ziemer can be reached at [email protected].