The truth can really hurt, as Staples Inc. learned the hard way after mass e-mailing its employees to inform them that a co-worker had been fired for breaching the company’s travel and expense policies. An expense claim of $1,129 for a Big Mac was one tip-off that something was seriously wrong with Alan S. Noonan’s expense reports.

The traveling salesman admitted to auditors for the Boston-based office products giant that he had been careless. He explained he had inadvertently misplaced the decimal point on the $11.29 meal he bought at the airport. But other anomalies in his expense claims convinced a special forensics team that Noonan had deliberately falsified his expense reports.

In 2006 Staples fired Noonan, and the next day its vice president, Jay Baitler, sent 1,500 employees in the North American division an e-mail advising, “It is with sincere regret that I must inform you of the termination of Alan Noonan’s employment with Staples. A thorough investigation determined that Alan was not in compliance with our [travel and expense] policies.” The memo emphasized that employees had to comply with company policies at all times.

Relying on agreements Noonan previously signed, which penalized him if he was fired “for cause,” Staples denied Noonan severance benefits and did not let him exercise his stock options. Noonan hit back with a libel and breach-of-contract suit. He admitted to errors on his expense claims, but denied willful misconduct or any other behavior that justified his firing.

The company won summary judgment on all the claims in the U.S. District Court for the District of Massachusetts. The judge agreed with Staples that because Noonan clearly violated the company’s travel and expense policies, the e-mail statements were true and therefore not subject to a libel claim.

The 1st Circuit initially affirmed, but after a rehearing, partially reversed itself in a Feb. 13 decision that remanded the libel claims to the district court.

“Everything said in the e-mail was true–or at least substantially true,” Circuit Judge Juan Torruella acknowledged in his opinion. Yet the panel held that under the 1902 state defamation law, “even a true statement can form the basis of a libel action if the plaintiff proves that the defendant acted with ‘actual malice.’”

Alarm Bells

The court’s ruling that true statements can be actionable if made with “actual malice” rang alarm bells with some employment law practitioners.

But that was nothing compared to the protests from media organizations, which accused the court of imperiling freedom of the press. They objected even though the decision deals with the common law of defamation in the private sphere of employment law, not with constitutional defenses available in defamation cases involving public figures or matters of public concern (see “Defamation Dust-Up”).

Stephen Hirschfeld, a partner at Curiale Hirschfeld Kraemer, notes that in most states only false statements may be defamatory and truth is an absolute defense that cannot be defeated by malice or excessive publication.

“In most states, so long as the statement you are making is true, the impact it has on the person’s reputation is irrelevant,” he says.

That is not the case in Massachusetts, however. The 1st Circuit ruled that Massachusetts law recognizes “a narrow exception” to the libel defense of truth. “The truth or falsity of the statement is immaterial, and the libel action may proceed, if the plaintiff can show that the defendant acted with ‘actual malice’ in publishing the statement,” said the panel, defining actual malice as “ill will” or “malevolent intent.”

The panel concluded that Noonan had produced some evidence from which a jury could infer actual malice. For example, during Baitler’s 12 years at Staples, he had never before identified a fired employee in a mass communication.

“[A] jury could permissibly infer that Baitler singled out Noonan … to humiliate him,” Torruella wrote.

A jury could also dismiss as pretextual the company’s explanation that it named Noonan in order to underscore to employees that they must comply with company policies. Noonan claims Staples intentionally harmed his reputation by sending the e-mail to employees who did not travel and had no need for a reminder about the expense policy.

Legal Minefield

Douglas Currier, a partner at Verrill Dana, said the moral of the story is that employers should generally refrain from publicly discussing fired employees. Comments are likely to drive a person to go see a lawyer when they otherwise wouldn’t, he warns.

Terence Connor, a partner at Hunton & Williams, advises companies to respect everyone’s privacy. “Accomplish your termination discreetly and your enforcement [of company policies] separately,” he says.

Hirschfeld emphasizes that public statements about employees present a legal minefield for employers because workers can sue for invasion of privacy in most states. “What [a plaintiff] would argue is that the statement that was made was true, but it had very personal information about [the plaintiff] and should not have been disclosed,” he says.

Making a public example of a dismissed employee “is the worst possible thing you can do in employment law,” Hirschfeld adds. “When you start singling people out like that, that’s when you get claims not just for invasion of privacy, not only for defamation, but also for intentional infliction of emotional distress. You don’t want to publicize private confidential personal information to people who don’t absolutely need to know it.”