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The Eighth Circuit Court of Appeals released an opinion today in which it affirmed the dismissal of Karen Chambers’ lawsuit against The Travelers Companies, Inc.  Chambers was employed by the insurer as a managing director and oversaw six underwriters in her department.  In 2007, Travelers’ human resources department received a complaint that Chambers had a “controlling” management style, brought personal stress to the department, made inappropriate religious comments and sold religious items in the office.  Travelers chose to conduct a “climate survey” of Chambers’ department to see if others shared these opinions.

It turns out they did.  According to the court’s opinion, the employees who reported to Chambers described their work environment as dysfunctional, team morale as low or non-existent, and Chambers’ management style as “blame and shame” (I personally had never heard of that one before, which is remarkable).  They also stated they felt pressured into purchasing religious items she sold for missionary trips so they wouldn’t be on her “bad side.”

Travelers reported their findings to Chambers in a meeting.  They provided her with some of the information from the climate study and asked for her response.  Chambers was not receptive to the criticism.  Chambers was subsequently placed on a written warning for her behavior.

According to the opinion, Travelers subsequently discovered that Chambers had taken family members on business trips and may have expensed their meals and drinks to the comapny.  She was then terminated.

Chambers brought suit claiming that the employees who disciplined her defamed her in the written warning and by telling her that she was being terminated for “continuing issues.”  She also sued for breach of contract, claiming she was entitled to a $30,000 bonus for the year 2007.

The court affirmed the district court’s decision to throw Chambers’ claims out of court.  Specifically, the court noted that Travelers and its employees had a “qualified privilege” to make the allegedly defamatory statements.  A qualified privilege exists where an individuals is making a statement “upon a proper occasion, from a proper motive and based on reasonable or probable cause.”  Oftentimes, communications between an employer’s agents made in the course of investigating or punishing an employee for misconduct will be protected by the qualified privilege.  However, where the employee can show “actual malice,” that is, the statement was made from “ill-will and improper motives, or causelessly or wantonly with the purpose of injuring the employee,” the privilege will be lost.

Chambers argued that the employees who investigated the incidents did not conduct a thorough investigation and therefore they acted with actual malice. The court held that pointing to instances where Travelers might have done a better job in its investigation does not meet the actual malice standard.  However, if Chambers could have provided evidence that the individuals was skewed or slanted their findings, or were biased in some way, Chambers likely would have presented sufficient evidence to get her claim in front of a jury.  The take-away from this claim is that negative (and arguably defamatory) statements made during an investigation by an employer into alleged misconduct are typically privileged and no claim for defamation will exist.

The court also threw out her claim for the $30,000 bonus.  Specifically, the court cited Travelers’ policy which stated that the bonus payment Chambers was seeking “are discretionary awards used to reward superior performance.”  The court held that when a contract term (here the bonus policy) leaves a decision to the discretion of one party – here, Travelers had the discretion whether to award the bonus – a court won’t second guess that discretionary decision.  In addition, Travelers’ policy stated that an employee is eligible for the bonus only if they are employed on the date the bonuses were distributed.  Chambers had been fired by that time.  Therefore, the court threw out that claim as well.  The take-away from this claim is that you need to review your employer’s compensation policies carefully.  Those policies are often very one sided in favor of the employer and do not always entitle you to the bonus or other compensation you feel you have earned.

If you have questions about any of these issues, feel free to contact me at your convenience.