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Friday Workplace Briefing

When an Employer Disparages an Ex-Employee – Defamation and Reputational Damage

When an employee leaves or is dismissed, it is tempting to tell the world their failings. Recent cases on non-disparagement and defamation tell an ugly truth to angry employers who don’t hold their tongues.

For this week’s Friday Workplace Briefing, Andrew and Nina will be discussing when an employer disparages an ex-employee: the consequences in defamation and reputational damage.

To view the full episode and catch up with the week’s latest news and developments please visit this link.

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About the Hosts

Managing Principal - Victoria

Senior Associate - Workplace Relations

Episode Transcript

Nina Hoang: So defamation really is our main topic, yeah.

Andrew Douglas: Yeah. I think for Nina and I, we’ve felt the frustration of post Covid. We’ve had a number of employers who said to us things about past employees, which I totally get. And I think at times, it may sneak out the corner of my mouth when I shouldn’t say it too.

Nina Hoang: Or on Friday Workplace Briefing .

Andrew Douglas: Or on Friday Workplace Briefing where it definitely shouldn’t happen. But what’s happening now is we are living in a much more litigious world than we have five years ago.

Nina Hoang: Oh yeah.

Andrew Douglas: Five years ago no employee would’ve ever thought or contemplated in bringing defamation proceedings. That’s not the case now. Can I just say five years ago, nearly no employer brought defamation proceedings against a current or past employee either because the proceedings are so expensive by their very nature.

Nina Hoang: Yeah.

Andrew Douglas: But it’s changed. The commercial world is much sharper. The margins are smaller.

Nina Hoang: And it’s, I feel like more normalised through the media because we are seeing outside of the employment relationship just a lot more defamation claims being brought.

Andrew Douglas: We are, we are seeing a lot more. So what I thought I’d talk to you a little bit about is before we go into Barcos, which is the most recent case, is, what is defamation? So defamation arises where I publish something that is, whether it’s a statement that I write, whether I go onto Friday Workplace Briefing-

Nina Hoang: Social media post or something.

Andrew Douglas: Yeah, whatever it is, a publication requires a recipient. So the first thing to prove is there was a publication that was received by somebody, that the nature of that particular publication carries an imputation, an imputation is a meaning, so it doesn’t have to be an actual word, you can publish something absolutely true but the manner in which you publish it, if it has an imputation-

Nina Hoang: So that, it has to have a negative connotation.

Andrew Douglas: Yeah, which could harm, hurt or humiliate.

Nina Hoang: Yeah.

Andrew Douglas: Then you’ve got a defamation. And then there are a series of defences. Like fair comment, if we’re talking about how FCW are going as a business and they’re an aggregational business, and they’re driving hard into the world and someone says carelessly driving hard into the world. I don’t think we are. But if someone were to say that, I couldn’t bring an action against the individual who said that.

Nina Hoang: No. And truth is another one as well.

Andrew Douglas: Yeah, but with fair comment, if it’s something that’s within the public domain, truth is a partial defence in New South Wales, full defence down here, there is also qualified privilege. So it might be something that’s reported from court, for instance. So there’s a series of defence. It’s a very structured area of work. But what we are seeing and Barcos is a really interesting case that just went through our county court case where a once employee of an organisation left and the prior employer went on their Facebook and made some comments about dishonesty.

Nina Hoang: Yeah.

Andrew Douglas: And behaviours.

Nina Hoang: Pretty bad ones.

Andrew Douglas: None of which were true. Now the thing that creates aggravated damages or the thing that creates real cost in defamation is where you can demonstrate malice. So where someone says something with the intention of hurting-

Nina Hoang: Yeah.

Andrew Douglas: That dramatically builds up the damages. Okay? So, and that’s called malice in defamation. And that’s what happened in this case, ’cause the reason for the publication was resentment and anger.

Nina Hoang: Yeah, ’cause-

Andrew Douglas: And to hurt this guy in his new business.

Nina Hoang: Yeah.

Andrew Douglas: Okay? So really good case to talk about because this is a past employee bringing a claim against a current employer.

Nina Hoang: Yeah. And he won $90,000.

Andrew Douglas: Yeah. I think his cost, by the way, he probably won’t get indemnity costs, so he’ll probably lose it all in cost, ’cause running a trial to the district court-

Nina Hoang: It’s very expensive.

Andrew Douglas: In defamation is probably three to $400,000 in total cost.

Nina Hoang: Wow.

Andrew Douglas: ‘Cause there’s a complex series of stages that goes with it. But my point about all this is remember, an employee can sue an employer and a person who is a leader, but a company, unless it’s injurious falsehood, which is a much harder test, cannot sue, see, sorry, cannot say he does suffer loss, in defamation, unless it’s, has under, I’ve forgotten under 15, under, I’ve forgot what the rules are for not-for-profit. There’s a few small exceptions where a company can say they’re defamed, but they’re very, very limited circumstance. So this is really an individual’s remedy, okay?

Nina Hoang: Oh, so companies can never sue for defamation?

Andrew Douglas: Well there are very limited circumstance under which they can, and I’ve forgotten what it is. And there are some not-for-profits who can, but basically most companies can’t. Okay?

Nina Hoang: Wow.

Andrew Douglas: They can sue for a thing called injurious falsehood, but that’s a much harder test where you must prove loss. Now the changes in defamation now show that to actually raise a claim, you must show that it has caused you financial damage.

Nina Hoang: Yeah.

Andrew Douglas: Okay?

Nina Hoang: Some kind of detriment, financial detriment.

Andrew Douglas: So we want to raise this because there’s been several cases around this. There was a NAB employee a few years ago who brought a claim.

Nina Hoang: Oh yeah, but that one was silly.

Andrew Douglas: Come on, you’re starting to be like me.

Nina Hoang: No, but it was say-

Andrew Douglas: On the farewell message which said, you know, one person is leaving, we hope to be able to execute-

Nina Hoang: But it literally, I could read the message and it was so great.

Andrew Douglas: That was done in your printer, I’m surprised it can-

Nina Hoang: It was like, “So and so will assume the role of platform owner for internet banking replacing the other person’s name in addition to ensuring the successful delivery of in-flight work, the new person will also be tasked with working closely with the NAB Connect team to identify and execute on opportunities to bring the platforms closer together. We like to thank the previous person for the significant contribution she has made to both platform and digital, and we’re working through next steps with her.” How is that any negative implication?

Andrew Douglas: Well, no, when she said the imputation was she failed to deliver it. And that might be self-awareness, that’s not an imputa-

Nina Hoang: Yeah. It’s exactly self-awareness.

Andrew Douglas: But imputations are things that have to be reasonably held.

Nina Hoang: Yeah.

Andrew Douglas: So it’s not a subjective understanding of what’s there. It is a person viewing that would reasonably draw the imputation.

Nina Hoang: Yeah.

Andrew Douglas: So there’re the examples. But I also want to talk about the Van Olsen and-

Nina Hoang: Yeah, that’s one’s a really interesting one.

Andrew Douglas: Case about non-disparity, which, no, I’ll speak slowly, I’m told I speak too quickly. Non-disparagement clauses in deeds of release and release and restraint documents, which generally say you cannot disparage the employee and the employer. And what Van Olsen’s case found was Van Olsen when published he was a journalist and academic, a critic on channel nine. Was it channel nine or channel?

Nina Hoang: Channel 10.

Andrew Douglas: Channel 10. I knew I’d get that wrong, but he analysed its failing, its commercial failing. He didn’t deal with his termination. He dealt with it on evidence that was available to the general public. And his defence to disparagement was, well, I’m not disparaging about my employment. It’s part of public knowledge. It’s fair comment. And what the court said is, there are no defamation tests or defences that exist. It is a matter of reading the contract. And what the contract said is, “You shall not disparage your employer”, and it’s undeniable that what you did is, and therefore you’ve breached it. And in doing that, you’ve torn up the benefit. And therefore in his case he was paid money. There is a requirement to repay. That’s an argument that sits there. If it was the other way round, you’ve been, the employer gave a release for actions they may bring, you’ve re-enlivened their entitlement to bring it.

Nina Hoang: Oh.

Andrew Douglas: So interesting times.

Nina Hoang: Yeah.

Andrew Douglas: I’ve raised this because that is the only case recently on non-disparagement. It was a really good judgement, but it didn’t deal with the day-to-day non-disparagement issues we have.

Nina Hoang: Yeah.

Andrew Douglas: We’ve maintained in our disparagement clauses, the employee will not disparage the employer because we’ve got a case that says-

Nina Hoang: Yeah. It’s much broader.

Andrew Douglas: It provides us broader protection. But be aware, there will be argument going forward from employees who are represented by a plaintiff firm saying it’s too broad. All right, let’s get on the case study.

Nina Hoang: Yeah, the action packed case study.

Andrew Douglas: Off you go.

Nina Hoang: Gwen was sick of Charlie. Gwen was CEO of Build A Dream (BAD), a seaside apartment developer on the Eastern Sea Board of Australia. Charlie was an architect employed by BAD and a panellist of the hit reality show, Make Mine Magnificent (MMM), a renovation show for young couples creating flash homes, achieving capital growth and doing it on a shoestring budget. Charlie had a detailed contract that carved out MMM but otherwise had water tight restraint clause and exclusivity of work with BAD. Gwen thought Charlie was a ponce.

Charlie had recently been raising his concerns about safety on the BAD developments.

Literally BAD developments.

Gwen had pushed back and told him to stay in his lane. Gwen’s brother Cyril was a sparkie who was contracted in on BAD sites. Recently Gwen had appointed him as director to the BAD board saying to anyone who would listen that it was to add some lived building experience to the board. Charlie raised concerns with Cyril

Particularly around the contractors they use in scaffold work, where they had failed to cover the platforms at heights and often used loose boards that moved, leaving voids people could fall through. Two days after that conversation, a chippie employed by BAD slipped on a loose board and fell seven metres through a void breaking his back. Charlie rang Cyril angrily and said, “See what I said? What are you doing, nothing?” Cyril replied he had no idea what was happening in the business. He said that Gwen had put him on the board to shore up BAD’s relationship with the bank.

To support that idea, she had also issued 5% of the BAD Class A shares, which paid good dividends to Cyril when he was appointed to the board. When Gwen heard about the discussions with Cyril, she cracked it, called Charlie and fired him for disloyalty. Charlie said, think carefully what you’re doing as there’s big trouble if you keep doing it. She spoke to Cyril, got some advice from a lawyer and offered Charlie a deed with a release against workplace litigation and a non-disparagement clause.

Charlie obtained advice that his case was worth close to 1 million, but happily accepted $100,000 payment as compensation for the foregone general protections claim. Two weeks later, the Herald Sun spoke to Gwen who said that Charlie was a talentless gossip, incompetent at his work and disliked. She also was clear that she’d be issuing injunctive proceedings preventing his new employment with a key competitor, which Charlie was due to start with three days later.

Oh gosh, that was long.

Andrew Douglas: Yeah. So who’re the safety risks with? Absolutely everybody. So, Gwen’s got to go to jail chance in that one. Cyril on the most recent case we’ve talked, has got some real problems.

Nina Hoang: I don’t think Charlie’s done enough either, really.

Andrew Douglas: Yeah, but-

Nina Hoang: He’s raised the concerns like-

Andrew Douglas: Yeah, but he doesn’t have an operational responsibility of an employee so his section 25 obligations-

Nina Hoang: Yeah.

Andrew Douglas: Exercise reasonable care to bring-

Nina Hoang: Wouldn’t be reckless endangerment, but yeah. I feel like he probably-

Andrew Douglas: Yeah.

Nina Hoang: Could get out into section 25.

Andrew Douglas: No, I don’t reckon they would. I reckon they’d leave him alone, ’cause he’s a bit of a whistleblower. But the company, the BAD company, and the BAD directors-

Nina Hoang: The BAD company.

Andrew Douglas: Are in a lot of trouble.

Nina Hoang: Yeah.

Andrew Douglas: Is Charlie’s restraint enforceable? So look, the answer to this is no, and the reason is because there was a termination and after Loon’s case and court hall, if they never get the name right, it’s very clear from the full federal court that if you terminate somebody and you repudiate and that repudiation is accepted, then unless you specifically apply in some release document to include the releases in, you are released from those restraints. So the short answer is, Charlie is fine to go out and get work.

Nina Hoang: But if she hadn’t terminated and just done the deed, would the restraint still be in effect?

Andrew Douglas: No, that’s the whole thing. And even if somebody, you are going to terminate someone and you really need the restraints, you must build them into the release document.

Nina Hoang: Okay.

Andrew Douglas: Okay? So the next question is, does Charlie have a good general protections claim? Here’s a great one because the nature-

Nina Hoang: Made several complaints.

Andrew Douglas: Yeah, the nature of the disparagement for, let’s start off, tears up the release, okay? Doesn’t entitle the recovery of the monies that were passed.

Nina Hoang: Yeah.

Andrew Douglas: But does allow him to re-agitate the issue. And his main reasons for termination were raising safety complaints. So they’re in real strife, ’cause that’s the power of reaching a non-disparagement.

Nina Hoang: Yeah. Repeated safety complaints or-

Andrew Douglas: And does Charlie have a good defamation claim? And the answer is, was there a publication? Yes?

Nina Hoang: Yes.

Andrew Douglas: Was it received by a number of people, including potential competitors, potential clients?

Nina Hoang: Yeah.

Andrew Douglas: Absolutely yes. Was it done with malice?

Nina Hoang: Yes.

Andrew Douglas: Absolutely. All Charlie has to show is that he’s suffered, and he can prove loss, and he’s up and running with his defamation claim.

Nina Hoang: I don’t think he would’ve had a $1 million general rejections claim though.

Andrew Douglas: Well, they got some advice.

Nina Hoang: They got bad advice.

Andrew Douglas: I can think of some of the plaintiffs firms who may have told him that.

Nina Hoang: All right, on that basis, thanks for joining us-

Andrew Douglas: They’re not ones we worry about greatly, but anyway-

Nina Hoang: On the defamation episode. Please give us a thumbs up.

Andrew Douglas: Give us a thumbs up. Great to see you today, lovely to catch up with you, Nina.

Nina Hoang: Yeah. Bye.

Andrew Douglas: Bye-bye.

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Andrew Douglas and Nina Hoang will be discussing the Secure Jobs reform of fixed term contracts becoming law today, what the new law means, how it operates and how you manage it.