Can an employee sue when an employer harshly or unfairly criticizes the employee?

Generally no.  Employers are entitled to evaluate an employee’s performance and communicate criticisms to the employee and others within the company to resolve performance issues.  Most criticism falls within the category of opinion, which cannot defame an employee, and harsh criticism alone does not constitute an adverse employment action under Federal civil rights laws.

In certain circumstances, however, a manager may criticize an employee so harshly and broadly as to create potential liability for the company.  In the recent case of Rodarte v. Wal-Mart Associates, Inc., a Virginia federal court ruled that a Wal-Mart cashier stated a valid defamation claim based on the store’s criticism that she provided the Wal-Mart “price match” discount to customers who were not entitled to it.  In raising its criticism, Wal-Mart alerted the local sheriff’s office in Lexington, Virginia, of its concern, and the employee was arrested and prosecuted for embezzlement.  The employee was subsequently found not guilty by a Rockbridge County judge.

The employee sued for defamation and malicious prosecution, among other things, and Wal-Mart sought dismissal of the employee’s claims.  In seeking dismissal of the employee’s defamation claim, Wal-Mart asserted that the employee failed to allege the exact words communicated to the sheriff’s office, and that its actions were privileged.  These defenses can prevent a defamation claim from proceeding beyond the initial pleading stage of a lawsuit.

In this case, however, the court ruled that federal pleading standard applied (instead of Virginia’s “exact words” requirement), and that the employee satisfied this standard.  The court also ruled that, while a privilege applies to communications made during legal proceedings, such communications must relate to a good-faith proceeding anticipated by the speaker.  The court allowed the employee’s claim to proceed because she claimed that Wal-Mart sought to have her prosecuted in bad faith.  For the same reason, the court also allowed the employee’s malicious prosecution claim to proceed.

As this decision shows, employers must exercise discretion when criticizing employees, and use caution in raising performance concerns outside of the workplace.  Employers should adopt a progressive discipline policy, requiring measured escalation of performance issues and discussion of criticism directly with an employee in the first instance.  Employer should further adopt a policy limiting discussions of performance issues to the employee, HR, and the employee’s management chain.   These steps, and the sound advice of legal counsel, will help employers steer clear of the danger of legal liability in addressing employee performance issues.