Thursday, December 16, 2010

Court of Appeal Holds Employer's Lawsuit Against Former Employees For Defamation And For Related Claims Can Proceed

By Sun Hi Ahn and Christopher S. Andre 

In Overhill Farms, Inc. v. Nativo Lopez, et al., the California Court of Appeal affirmed the decision of an Orange County trial court to deny the defendant former employees Anti-Slapp ("Strategic Lawsuit Against Public Participation") motion to strike Overhill Farms' lawsuit against the former employees as to Overhill Farms' claims for alleged defamation, intentional interference with prospective economic advantage, intentional interference with contractual relations, and extortion arising out of statements in a press release issued by the former employees stating Overhill used an Internal Revenue Service social security number discrepancy letter as a "pretext" to terminate a large number of employees and referring to Overhill Farms' actions as "racist and discriminatory abuse against Latina women immigrants" thus allowing Overhill Farms' lawsuit against the former employees to proceed.  The Court of Appeal's opinion contains much that is potentially useful to California employers.

Overhill Farms received from the IRS a letter notifying Overhill Farms that 231 of its employees supplied invalid social security numbers and that Overhill Farms' use of invalid tax identification information exposed Overhill Farms to penalties and criminal liability.  An IRS agent told an attorney for Overhill Farms that Overhill Farms could not continue to employ anyone could not provide a valid social security number.

In response to the IRS letter, Overhill Farms sent to each of the 231 employees a letter informing them they had provided an invalid social security number, requesting that they correct any errors within 30 days, and informing them they would continue to be paid.  Just one of the employees provided information showing the invalid social security number was in error.  Nearly all of the employees failed to respond.  Overhill Farms sent to the employees a second letter providing them with an additional 30 days to address the discrepancies.  Overhill Farms also continued to pay for the benefits of those employees.  Overhill Farms also met with the representatives of the employees' union, who acknowledged that nearly all of the employees were "not 'authorized to work in the United States."  After the second 30-day period expired, Overhill Farms terminated the employees who failed to respond to its requests or otherwise failed to provide a valid social security number.

After the terminations, the employees approached Nativo Lopez of Hermandad Mexicana Latinoamericana , also named as a defendant, to help them organize a response to the terminations.  That response took the form of a press release stating the employees "were protesting 'racist firings by Overhill,'" picketing at two of Overhill Farms' facilities, and picketing and leafleting at the business of one of Overhill Farms' customers accusing Overhill Farms of being an "UNFAIR and RACIST EMPLOYER."  One leaflet stated Overhill Farms' president "is confident that we are passive and will accept this racist and discriminatory abuse against Latina women immigrants and our families without a fight."  Fliers urged recipients to boycott Overhill Farms and stated Overhill Farms "is '[a]n abusive and racist employer in the manner that it treats its workers" and similar accusations.

The defendant former employees responded to Overhill Farms' lawsuit by filing an Anti-SLAPP motion to strike Overhill Farms' complaint.  California' Anti-SLAPP statute provides a mechanism to challenge a lawsuit or a cross-complaint arising out of protected speech.  If the party bringing such a motion establishes that the claim(s) sought to be stricken arise out of protected activity, such as protected speech, the burden then shifts to the party asserting the claim(s) to show a probability of prevailing on its claims.  If the party asserting the claim(s) shows such a probability, the court must deny the Anti-SLAPP motion.

Both the trial court and the Court of Appeal determined that Overhill Farms met its burden of showing a probability it would prevail on its claims against the former employees by showing that a number of the statements by the former employees' either "declares or implies a provably false assertion of fact," namely that Overhill Farms used the IRS discrepancy letter as a "pretext" for terminating the employees for racist or other discriminatory reasons.  The Court of Appeal explained that while mere expressions of opinion are often not actionable acts of defamation, the former employees' allegations of racism viewed in context "is not merely a hyperbolic characterization of Overhill's black corporate heart -- it represents an accusation of concrete, wrongful conduct," and "a claim of racially motivated employment termination is a provably false fact."  The Court of Appeal explained that "an employee's failure to explain or correct an invalid social security number, after being notified of the problem and asked to do so, clearly is grounds for firing."  The Court of Appeal noted that Overhill Farms "provided substantial evidence defendants either knew, or recklessly disregarded, facts demonstrating that [Overhill Farms] had not fired hundreds of Latino employees based solely on having been notified of a potentially innocent discrepancy in social security numbers" as the defendants asserted.  The Court of Appeal explained further that "[w]hat actually happened is that Overhill notified the effected employees their social security numbers had been identified as 'invalid,' gave them substantial opportunity to resolve the problem and provide a valid number, and only terminated the employment of those who either admitted falsifying their documents, or failed or refused to respond to the issue at all."

The Court of Appeal held also that Overhill Farms' claims against the defendants were not preempted by the National Labor Relations Act, explaining that "an action for malicious and injurious libel in the course of a labor dispute, although an unfair [labor] practice and prohibited by the Act, was not preempted since it was unprotected conduct and since remedying injury to reputation was of only slight concern to the national labor policy. . . ."

The Court of Appeal's decision in this case is potentially useful to California employers because it establishes that employees and labor organizations cannot make without consequence defamatory statements about an employer.  In other words, an employer is not required to simply tolerate in every instance whatever unfounded or false slings and arrows employees and/or labor organization might hurl the employer's way.