Could A Theft Accusation Lead to a Defamation Suit?

No employer wants to have hired someone only to have to let them go. Even when the reasons are justifiable, organizations need to be keenly aware that what they say regarding why an employee was dismissed or risk finding themselves in court.

A recent article by Jon Hyman, a regular contributor to, describes the dismissal of Jason Shann from his job for theft from of Atlantic Health System. Shann worked for Atlantic Health as the Enterprise Desktop Management Team Leader in the company’s IT department.

While working for of the company, Shann, who suffered from tinnitus, found that his condition would manifest itself unpredictably.  When his condition got worse, Shann began to suffer from anxiety and depression as a direct result.

Atlantic Health gave Shann FMLA leave for 21 in order for him to take care of his health and also gave him intermittent leave after the initial after the initial 21 days were up. Shann’s condition continued to deteriorate.  He then took short-term disability during which he intended to apply for permanent disability and then retire from Atlantic Health.

It was during this period that the organization discovered a number of thefts by Shann.  He had removed a number of computer assets and equipment from the company’s premises without any authorization.  At the same time, the company learned that Shann had used unauthorized third-party software to overwrite more than company 27,000 files. It was at this time that Shann’s employment was terminated by Atlantic Health.

During the course of the investigation, the company wanted to determine whether or not Shann had been operating a side business he was on company time. The company disclosed both Shann’s name and the reason for his dismissal to one of the company’s computer vendors.

Shann filed a lawsuit in the U.S. District Court of New Jersey against Atlantic Health for discrimination based on disability and for defamation. The court dismissed the allegation of discrimination against Atlantic Health stating in an opinion that the reason for Shann’s dismissal was ultimately for theft.  The court, however, would not dismiss Shann’s claims that he was defamed by the third party vendor. This issue will be decided later in a future trial.

Most employment websites and employers know that giving out the reasons for why an employee was dismissed is very risky. According to an article appearing at, a former employer is not breaking the law if they disclose to another employer why a worker was let go. However, if the worker’s former employer were to give a reason as to why the worker was terminated that was somehow incorrect, untrue, or damaging to their reputation, the terminated worker can sue for defamation. In this case, the court may view such a case differently if the former employee were being bad-mothed to a vendor or others not connected to their employment.

It’s a very good rule of thumb for any organization that saying as little about the dismissal or termination of a worker is probably the best course of action. Most companies follow this ideal for fear that they will somehow end up in court. The laws, however, do vary from state to state, so it is important for organizations to understand and to follow these guidelines before they find themselves in trouble.

At NetPEO, our network of companies maintains the highest level of standards that our clients have come to expect. We pride ourselves on our commitment to transparency and customer service for all of your human resource outsourcing needs.