Wrongful Termination and Defamation Claims in Minnesota

How do wrongful termination and defamation claims fit together?

A wrongful termination claim attacks your decision to fire. A defamation claim attacks what you or your managers said about the employee. A lawful firing can still produce a defamation claim, and a truthful explanation does not save an unlawful firing.

The Minnesota Supreme Court described the default rule in Dukowitz v. Hannon Security Services, 841 N.W.2d 147 (Minn. 2014): “In Minnesota, the employer-employee relationship is generally at-will, which means that an employer may discharge an employee for “any reason or no reason””. Defamation runs on separate elements, stated in Stuempges v. Parke, Davis & Co., 297 N.W.2d 252 (Minn. 1980): a statement “must be communicated to someone other than the plaintiff, it must be false, and it must tend to harm the plaintiff’s reputation and to lower him in the estimation of the community.”

The two claims usually share facts. The employee argues that the stated reason was false and that the falsity shows the real reason was unlawful. Your best defense of both claims is the same record: a reason that is true, documented before the decision, and stated the same way every time.

What makes a Minnesota termination wrongful?

A Minnesota firing is wrongful when it breaks a statute, breaches a contract (including a definite handbook promise), or punishes an employee for refusing to break the law. Each route is an exception to the default rule that “the employer-employee relationship is generally at-will” (Dukowitz).

The routes a former employee can use:

1. Discrimination. Under Minn. Stat. § 363A.08, subd. 2, except when based on a bona fide occupational qualification, it is an unfair employment practice for an employer, because of a protected characteristic such as race, sex, disability, sexual orientation, or age, to “(2) discharge an employee.” The Minnesota Human Rights Act (“MHRA”) covers any “person who has one or more employees” (Minn. Stat. § 363A.03, subd. 16); federal Title VII starts at fifteen employees (42 U.S.C. § 2000e(b)).
2. Reprisal. Under Minn. Stat. § 363A.15, a reprisal for opposing discrimination or taking part in a proceeding “includes, but is not limited to, any form of intimidation, retaliation, or harassment.”
3. Whistleblowing. Minn. Stat. § 181.932, subd. 1, bars discharge because the employee “in good faith, reports a violation, suspected violation, or planned violation of any federal or state law,” or refuses an order the employee “has an objective basis in fact to believe violates any state or federal law” after telling you why. The statute reaches an employer “having one or more employees in Minnesota” (Minn. Stat. § 181.931, subd. 3). Under Minn. Stat. § 181.935, paragraph (a), the employee may recover “any and all damages recoverable at law, together with costs and disbursements, including reasonable attorney’s fees.”
4. Refusing to break the law (common law). Dukowitz describes this as “a narrow public-policy exception” for an employee “discharged for refusing to participate in an activity that the employee, in good faith, believes violates any state or federal law or rule or regulation adopted pursuant to law.” The court in Dukowitz declined to extend it to an employee fired for applying for unemployment benefits.
5. Contract, including a handbook. In Pine River State Bank v. Mettille, 333 N.W.2d 622 (Minn. 1983), the court held that handbook provisions definite enough to be an offer, distributed to employees, and accepted by continued work can become part of the employment contract. The court also stated: “An employer’s general statements of policy are no more than that and do not meet the contractual requirements for an offer.”

For each route in more depth, see Minnesota’s exceptions to at-will employment, Minnesota’s retaliation statutes, and handbook acknowledgments.

What must a former employee prove to win a defamation claim?

A former employee must prove a false statement, communicated to someone other than the employee, that tends to harm the employee’s reputation. In Minnesota, a statement passed among your own managers counts as communicated, and so can a statement the employee was compelled to repeat to a prospective employer.

The internal-publication rule comes from Frankson v. Design Space International, 394 N.W.2d 140 (Minn. 1986): “We therefore hold that preparation of the defamatory letter and distribution of that letter to a personnel file and to two officers, Lindelow and Wooldridge, constituted publication sufficient for a defamation action.” The question inside a company is therefore whether the statement was privileged, not whether anyone outside heard it. See intra-company publication for how that plays out in termination letters.

The second rule is compelled self-publication. In Lewis v. Equitable Life Assurance Society, 389 N.W.2d 876 (Minn. 1986), the employer told four employees only that they were fired for “gross insubordination,” and each had to repeat that reason in job interviews. The court held “that in an action for defamation, the publication requirement may be satisfied where the plaintiff was compelled to publish a defamatory statement to a third person if it was foreseeable to the defendant that the plaintiff would be so compelled.” The office manager in Lewis admitted that the question from prospective employers was foreseeable. A conclusory label you give at the termination meeting can follow the employee into every interview.

How does the qualified privilege protect what an employer says?

An employer’s statement about a termination is protected by a qualified privilege when it is made on a proper occasion, from a proper motive, and on reasonable grounds. Once you show the privilege, the former employee must prove malice. Without an investigation, the privilege may never attach.

Minnesota’s test, as quoted in Lewis: “communication, to be privileged, must be made upon a proper occasion, from a proper motive, and must be based upon reasonable or probable cause.” Lewis held “that an employer’s communication to an employee of the reason for discharge may present a proper occasion upon which to recognize a qualified privilege.” To overcome the privilege, the employee must show you “made the statement from ill will and improper motives, or causelessly and wantonly for the purpose of injuring the plaintiff” (Stuempges).

The cases show where employers lose the privilege and where they keep it:

• No investigation. In Wirig v. Kinney Shoe Corp., 461 N.W.2d 374 (Minn. 1990), managers accused a cashier of theft on secondhand reports. The court held that “an employer who takes no steps to investigate but relies entirely on accusations either made by employees who may be biased or on secondhand hearsay with no identification of sources” lacks reasonable grounds, and it found no privilege as a matter of law. The court noted that, in its earlier cases finding reasonable grounds, “investigative steps had been taken, including personal questioning of the affected employee.”
• A broken promise. In Stuempges, a manager promised a good reference if the employee resigned, then told an employment agency that the employee was a poor salesperson. The court held that the falsity of those statements, after the promise, “takes this case out of the realm of privilege.”
• Neutral wording, limited circulation. In Frankson, the employee pointed to a commission dispute as the real motive. The court reversed both damage awards because the evidence was insufficient to show malice overcoming the privilege, stating that “neither the language used, “failure to increase sales,” nor the mode and extent of publication, communication to those involved in the decision-making process and deposit of a copy in Frankson’s personnel file, allows the conclusion that the statement was malicious.” It also noted that other courts refuse to find malice “when the plaintiff only presented evidence of another possible reason” for the action.

Before anyone states a misconduct reason, an internal investigation that includes asking the employee for their side gives the privilege its footing.

What are the rules for the written termination reason?

Minnesota does not require you to volunteer a reason. If an involuntarily terminated employee asks in writing within the statute’s window, you must respond in writing with the truthful reason, and that written statement cannot be the basis of the employee’s defamation claim against you.

Minn. Stat. § 181.933, subd. 1, provides: “An employee who has been involuntarily terminated may, within 15 working days following such termination, request in writing that the employer inform the employee of the reason for the termination. Within ten working days following receipt of such request, an employer shall inform the terminated employee in writing of the truthful reason for the termination.” Subdivision 2 provides: “No communication of the statement furnished by the employer to the employee under subdivision 1 may be made the subject of any action for libel, slander, or defamation by the employee against the employer.” Check the current text of § 181.933 before relying on those windows.

Three practical points follow from the text. The protection covers “the statement furnished by the employer to the employee under subdivision 1,” so it does not reach what a manager said at the termination meeting, to coworkers, or to a reference caller. The reply must be “truthful,” and a reply that differs from the reason in your file gives the employee evidence for both claims. And when the employee was injured by a violation of the whistleblower statute, ignoring the request carries its own cost: under Minn. Stat. § 181.935, paragraph (b), an employer that “failed to notify, as required under section 181.933 or 181.934, an employee injured by a violation of section 181.932 is subject to a civil penalty of $25 per day per injured employee not to exceed $750 per injured employee.” For the statute’s conditions in more detail, see whether you must explain a firing.

What protection does Minnesota’s employment reference statute give?

Minnesota’s reference statute bars a former employee’s claim over listed reference information unless the employee proves, by clear and convincing evidence, that the information was false and defamatory and that you knew or should have known it was false and acted with malicious intent. The protection applies only to the listed categories and only when you follow the statute’s steps.

Under Minn. Stat. § 181.967, subd. 2, no action may be maintained over disclosure to “a prospective employer or employment agency” unless the employee proves “(1) the information was false and defamatory; and (2) the employer knew or should have known the information was false and acted with malicious intent to injure the current or former employee.” Subdivision 3 sets the categories for a private employer, some of which require the employee’s written authorization:

• On request, without authorization: dates of employment; compensation and wage history; job description and duties; training and education the employer provided; and “acts of violence, theft, harassment, or illegal conduct documented in the personnel record that resulted in disciplinary action or resignation and the employee’s written response, if any.” That last category “must be in writing with a copy sent contemporaneously by regular mail to the employee’s last known address.”
• Only with the employee’s written authorization, and only in writing: subdivision 2 “also applies to the written disclosure of” “(1) written employee evaluations conducted before the employee’s separation from the employer,” “(2) written disciplinary warnings and actions in the five years before the date of the authorization,” and “(3) written reasons for separation from employment.” “The employer must contemporaneously provide the employee or former employee with a copy of information disclosed under this paragraph and to whom it was disclosed by mailing the information to the employee or former employee.”

Two limits matter for a disputed termination. Subdivision 6 states that the section “does not apply to an action involving an alleged violation of chapter 363 or other statute,” so it does not answer a discrimination or whistleblower claim. And a reference can itself be the claim: under Minn. Stat. § 363A.15, it is a reprisal to “inform another employer that the individual has engaged in” protected activity, and the Whistleblower Act defines “penalize” to include “post-termination conduct by an employer” (Minn. Stat. § 181.931, subd. 5). See references after a disputed termination.

Why does the unemployment hearing stay out of the lawsuit?

What you tell Minnesota’s unemployment insurance program to decide a former employee’s benefits is absolutely privileged, and testimony and findings from the benefits hearing cannot be used in the later lawsuit. You can answer the benefits claim candidly without creating a defamation claim; the one exception is a human rights agency.

Under Minn. Stat. § 268.19, subd. 2, paragraph (c), “Information obtained under the Minnesota Unemployment Insurance Law, in order to determine an applicant’s entitlement to unemployment benefits, are absolutely privileged and may not be made the subject matter or the basis for any civil proceeding, administrative, or judicial.” Under Minn. Stat. § 268.105, subd. 5, paragraph (b), hearing testimony “may not be used or considered for any purpose, including impeachment, in any civil, administrative, or contractual proceeding, except by a local, state, or federal human rights agency with enforcement powers.” Note that exception: a human rights agency investigating a discrimination charge may consider it.

Subdivision 5a adds that no findings or decision of an unemployment law judge “may be held conclusive or binding or used as evidence in any separate or subsequent action in any other forum.” A benefits ruling for either side does not decide the lawsuit. Dukowitz held that firing an employee for applying for benefits does not create a common-law wrongful-discharge claim, because the Legislature has set its own consequences in the unemployment statutes.

How do truth and damages limit a defamation claim?

Truth is a complete defense, but in Minnesota, for a statement that is more than a simple allegation, the truth must match what your statement implied, not only its words. A former employee’s emotional distress cannot carry a defamation claim alone, and punitive damages are unavailable when the only publication was the employee’s own compelled repetition.

Stuempges states the rule: “Truth, however, is a complete defense, and true statements, however disparaging, are not actionable.” Lewis narrowed how an employer proves it. The employer argued that the employees truly had been fired for “gross insubordination.” The court held that truth must go to “the underlying implication of the statement, at least where the statement involves more than a simple allegation,” so the employer had to prove the employees actually engaged in gross insubordination. The jury found they had not. Under Lewis, a conclusory charge that “went beyond accusations” requires proof of the conduct it names; the court distinguished a case where “the underlying statements were presented merely as “allegations of misconduct.”” A factual description of what happened and which policy it broke should be the default, because each fact in it can be checked against your file.

On damages, Maethner v. Someplace Safe, Inc., 929 N.W.2d 868 (Minn. 2019) explained that emotional-harm damages “are insufficient in themselves to make the slander actionable”; they attach only to a defamation claim already made out by harm to reputation. Statements that harm a person in their business or profession are defamatory per se and “actionable without any proof of actual damages” (Stuempges), but under Maethner “a private plaintiff may not recover presumed damages for defamatory statements” that involve a matter of public concern unless the plaintiff can establish actual malice. And in Lewis, the court held “that punitive damages are not available in defamation actions based upon compelled self-publication.” For the distress claims that often ride along, see emotional distress claims.

How should a severance release handle both claims?

A severance release can resolve both claims at once if it names defamation and wrongful termination among the released claims and meets the statutory rules for discrimination waivers. Under the MHRA, the employee may rescind a release of MHRA claims for a period after signing and must be told so in writing.

Minn. Stat. § 363A.31, subd. 2, provides that a release of MHRA rights covering past or current acts “may be rescinded within 15 calendar days of its execution, except that a waiver or release given in settlement of a claim filed with the department or with another administrative agency or judicial body is valid and final upon execution,” and “A waiving or releasing party shall be informed in writing of the right to rescind the waiver or release.” For federal age-discrimination claims, 29 U.S.C. § 626(f) provides that “An individual may not waive any right or claim under this chapter unless the waiver is knowing and voluntary,” and lists minimums including “a period of at least 21 days within which to consider the agreement” (at least 45 days for a group program) and “a period of at least 7 days following the execution of such agreement” to revoke, and for that ordinary waiver “the agreement shall not become effective or enforceable until the revocation period has expired.” Severance payment on an ordinary release should therefore wait until the federal revocation period and the MHRA rescission period have both run. When the employee has already filed an age-discrimination charge with the Equal Employment Opportunity Commission or a lawsuit, the statute instead requires that “subparagraphs (A) through (E) of paragraph (1) have been met” and that the employee receive “a reasonable period of time within which to consider the settlement agreement.”

A release also gives you a place to set the reference terms: what you will say to a prospective employer, who will say it, and that it will stay within Minn. Stat. § 181.967 categories. The release does not cover later conduct under either discrimination statute: an MHRA waiver is “contrary to public policy and void if the waiver or release purports to waive claims arising out of acts or practices which occur after the execution of the waiver or release” (Minn. Stat. § 363A.31, subd. 1), and an age-discrimination waiver is valid only if “the individual does not waive rights or claims that may arise after the date the waiver is executed.” For drafting detail, see severance agreement drafting.

A former employee’s combined claim usually turns on two questions: whether the stated reason was the real and lawful one, and whether what your people said about it stayed true, documented, and within the privileges Minnesota gives employers. If you would like a second set of eyes on a planned termination, a reference request, or a demand letter from a former employee, email Aaron Hall at aaron@aaronhall.com with a brief description of the situation. More on how employers handle these matters is on the Minnesota employment law page.