“PG&E Win Boosts Employers’ Defamation Defense,” Law360, written by Katherine Catlos, Esq. and Mizeille Avina Sterne, Esq., 3-25-25

Kaufman Dolowich Partner Katherine Catlos and Associate Mizeille Avina Sterne weigh in on the impact of the recent ruling from the Court of Appeal of the State of California, First Appellate District, that reversed a $2 million-plus judgement against PG&E in their Law360 article, “PG&E Win Boosts Employers’ Defamation Defense.” 

The case sets a precedent that could potentially affect the trajectory of similar defamation and retaliation cases moving forward, for both employers and employees alike.

Please see below for the full Law360 article:

On Jan. 24, in Hearn v. Pacific Gas & Electric Co., the Court of Appeal of the State of California, First Appellate District, reversed a $2 million-plus judgment against PG&E.

This case serves as an instructive reminder of the complexities surrounding defamation and retaliation claims in the context of employment termination.

It also sets a precedent that could potentially affect the trajectory of similar defamation and retaliation cases moving forward, for both employers and employees alike.

Background

In this case, a former PG&E lineman, Todd Hearn, filed a lawsuit in Napa County Superior Court in 2020 against his former employer, alleging both retaliation and defamation. Hearn claimed that PG&E falsely accused him of misusing company time, misstating his work activities and fraudulently submitting time cards in an internal investigation.

He asserted that these false accusations ultimately led to his suspension and termination, along with four other linemen.

Hearn contended that these accusations, and his subsequent suspension and termination, were retaliatory, stemming from his repeated efforts to report various safety concerns — e.g. unsafe equipment, downgrading dangerous issues to save money and not having adequate safety plans — to PG&E management.
While the jury rejected the retaliation claim, they ruled in favor of Hearn on the defamation claim, finding the actionable statements were not substantially true, and that the author of the internal investigation report acted with malice. A finding of malice allowed Hearn to withstand PG&E’s defamation defenses.

The jury likely reasoned that there was evidence showing that PG&E failed to acknowledge Hearn’s explanations for his misconduct and omitted concrete evidence explaining his performance in its internal investigation report. This suggested potential bias and led to the inference that PG&E may have been motivated primarily by a desire to justify Hearn’s termination, as opposed to conducting a neutral investigation.

The jury awarded Hearn more than $2 million, which included both past and future economic and noneconomic damages.

On appeal, PG&E argued that the defamation claim could not survive, as it was premised on the same conduct that gave rise to Hearn’s termination, and the damages sought were solely related to his loss of employment.

In its 1988 Foley v. Interactive Data Corp. decision, the California Supreme Court established a reluctance to expand tort remedies in employment termination cases and emphasized the contractual nature of the employment relationship.[1]

In Hunter v. Up-Right Inc., the California Supreme Court in 1993 extended its Foley analysis to cases where the alleged tort — fraud — was directly tied to the act of termination itself.[2]

In Lazar v. Superior Court, the California Supreme Court in 1996 clarified that Hunter did not create a blanket prohibition on all tort claims in the employment context, and such claims are still viable if based on conduct distinct from the termination, such as misrepresentations made to induce someone to accept employment.[3]

As the alleged defamatory statements in PG&E’s report led directly to Hearn’s termination, and Hearn sought only damages arising from the loss of his employment, the First Appellate District in San Francisco on Jan. 24 reversed the trial court’s decision and ruled in favor of PG&E, effectively wiping out Hearn’s multimillion-dollar defamation verdict.

Implications for Employees and Employers

The ruling in Hearn v. PG&E carries significant implications for both employees and employers in California.

The most immediate implication of the ruling is that it may be more difficult for similarly situated employees to pursue separate defamation claims against their employers when the alleged defamation is directly related to the reasons for their termination, and the resulting harm is primarily the loss of employment.

The appellate court’s decision suggests that in such cases, the claim is essentially one of wrongful termination rather than defamation.

Employees seeking to bring a defamation claim must demonstrate other damages unrelated to the termination, such as lost job opportunities, damage to their reputation or other measurable consequences that extend beyond termination. They must also show how the statements were not only false, but also made with malice or without a reasonable basis for believing they were true.

Alternatively, they should pursue a wrongful termination claim as a more viable legal pathway for recovering damages in employment disputes such as this.
Employers may find some reassurance in this ruling; however, it does not grant them a free pass to make false or malicious statements about an employee to justify a termination.

Employers should continue to exercise caution and diligence in all aspects of the employment relationship, including when conducting investigations, documenting performance issues and making termination decisions. Thorough documentation of disciplinary actions and internal investigations can serve as a critical defense in a potential litigation.

The court did not explicitly rule on whether the “common interest” privilege under California Civil Code, Section 47(c), applied, or whether it was defeated in this case. However, employers and employees alike should be aware of its applications and its limitations.

The common-interest privilege can protect some internal communications related to legitimate business concerns, such as investigations into employee misconduct, performance evaluations and disciplinary actions.

However, this privilege can be lost if it’s abused, particularly if statements are made with malice or without reasonable basis.

To maintain this protection, employers should ensure that communications are made in good faith, based on reasonable grounds, after conducting due diligence and without malice.

This can be done by ensuring that the basis of such communications, such as internal investigations, are conducted fairly and consistently across all employees, and employers should base their findings on objective evidence, free from bias.

Employees should also seek and be given the opportunity to respond to the allegations to ensure that the investigation results are credible and defensible if challenged.

Impact on Retaliation Claims

The PG&E ruling also has broader implications for retaliation claims. It reinforces that, for employees to prevail on a retaliation claim, they must provide compelling evidence of a direct causal connection between their protected activity — e.g., an employee’s alleged report of illegal or unsafe workplace practice — and the adverse employment action taken against them. e.g., termination.

If an employer can show documented performance issues such as an internal investigation and documented policy violations it will be extremely difficult for an employee to succeed on a retaliation claim.

Conclusion

With that said, the Hearn v. PG&E decision underscores the importance of clear, well-documented employment practices.

While the ruling provides employers with a stronger defense against defamation claims tied to termination, it also highlights the need for fairness and diligence in internal investigations and communications.

Katherine Catlos is a partner and the chief diversity and inclusion officer at Kaufman Dolowich LLP.

Mizeille Avina Sterne is an associate at the firm.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of their employer, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654.
[2] Hunter v. Up-Right, Inc. (1993) 6 Cal. 4th 1174.
[3] Lazar v. Superior Court (1996) 12 Cal.4th 631.

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