Breach of Confidentiality — or Whistleblowing???

You’re a business executive.  You’re in trouble with the authorities based on some allegedly shady activities and you find out that a few of your employees went to the press and told them what you were doing. You’re upset. You feel these employees defamed you and you also feel that the information was confidential. How dare they leak that information? So you fire them. Can you be sued? Can your company? Your employees claim they didn’t do anything wrong. They were whistleblowing. So which is it? Did they break confidentiality obligations? Did they defame? Did they violate privacy rights? Or are they statutorily protected whistleblowers? Get ready for lawyer’s stock answer #1… It depends….. C’mon, weren’t you expecting that? Uggggh! What a mess! Read on, and let’s see if we can’t smooth out this mess. Yes, the hypothetical is loosely based on a real, live case. Here, in a nutshell, is the case, and what went down:

Three former Insurance Department employees for the State of Georgia sued after the former Insurance Commissioner, Jim Beck fired them for leaking information about his extra-curricular activities to a television reporter. To settle these claims, the State will now pay them $870,000.

Just for some background: Beck was indited shortly after he took office in 2019, and a conviction in July on 37 counts of wire fraud, mail fraud, money laundering, and tax fraud. The charges stemmed from Beck’s scheme to channel more than $2.5 million from the Georgia Underwriting Association through a series of companies to his own bank account. The Association was the state-chartered insurer of last resort, and he managed it for a number of years before being elected State Insurance Commissioner. Earlier this month, he was sentenced to more than 7 years in prison, and ordered to pay $2.6m in restitution.

The lawsuit arose out of a different set of facts, though.  Fox affiliate WAGA-TV reported about a 2017 arson that burned down a  rental property that Beck owned. The television station obtained a copy of Beck’s insurance application (from the three employees) that showed two weeks before the fire, Beck nearly doubled his insurance coverage, from $95,000 to $186,000. Beck said he increased the insured value because of renovations. No one was ever charged with arson. The news station also reported that Beck at that time also served full-time in a job as a victim-witness advocate, while also managing the Georgia Underwriting Association. Beck allegedly told another Insurance Department employee that he blamed the three employees for “providing the information” for the “reporting by Fox News.” and that he was going to “clean the place up” and “get rid of” the three employees after taking office in 2019.

Can you fire an employee for breaking divulging confidential information? Assuming the information really is confidential, yes, very often you can. Can you fire an employee for defaming their employer? If the statements are made with reckless or malicious disregard for their truth, they are publicized and ruin the person or company’s reputation, then, very possibly, yes. So, was Beck justified in firing the three employees? If he wasn’t justified, was he still allowed to do it? Some firings, while not right, are not illegal.

Why did the State of Georgia feel compelled to settle this case? First and foremost, Georgia, like many states has a whistleblower law. Public employers cannot retaliate against a whistleblower. Are these employees whistleblowers within the meaning of the state statute though? Public employees are allowed to disclose legal violations, within their department as long as they don’t knowingly make false statements, or speak with a reckless lack of concern for whether their statements were false or true. It appears that the statements contained in the disclosure were true — and truth is an absolute defense to defamation claims.

Now, one thing that is not clear to me: Having read the statute, I know that it prohibits retaliation against public employees reporting violations within their department to a government agency. It is less clear to me whether the statute, as written, protects someone who goes to the media with such information. The case settled, so there was no ruling on that question. Regardless of whether the Georgia statute actually protects public employees reporting such misconduct to the media, however, this case can serve as a lesson to all other employers.

Here are some takeaways:

  1. An employee’s report of their employer’s misconduct may well be protected by similar laws. If they are, then they are not a breach of confidentiality, nor are they defamation, They are whistleblowing. Employers need to comply with any employment laws in any state where their employees work, including whistleblower protection laws.
  2. The Insurance Commissioner was a state executive — or at least the equivalent. Most often the type of egregious misconduct discussed here, and that we, unfortunately, hear about all too often is by those in high-level positions of trust who have unfettered discretion. They do what they do because they can. If you don’t want this type of situation in your own company, you need to ask yourself “Who’s monitoring the monitor”? 
  3. If you can’t answer that last question, you either need to make some changes or be ready, at some point, for similar occurrences. Leaving anyone without any accountability is asking for a problem. It’s like owning a beautiful, large, mansion and a large high-def, flat-screen TV on the front lawn, going on a trip and leaving the doors to your house unlocked, and getting upset when the TV is gone and your house ransacked and vandalized. Yes, whoever committed the theft and property damage is wrong and is a criminal, but would you really expect much sympathy from the authorities?
  4. Instead of blaming the whistleblower, thank them and address the problem. Better yet, take proactive steps to minimize the risk of even having that problem. If you don’t, you will bear at least some responsibility for the misconduct, even if you’re not the one(s) who engaged in it.

OK, I think I’ve made my point…

Are you an employer interested in proactively addressing workplace challenges and company culture? Visit my website, to contact me for a complimentary 20-minute consultation. 
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Contents of this post are for educational/informational purposes only, are not legal advice, and do not create an attorney-client relationship. Consult with competent employment counsel in the state(s) in which you employ people with your specific questions.
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See you next time…    


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