## Facts

- Carole Lewis, Mary Smith, Michelle Rafferty, and Suzanne Loizeaux worked as dental-claim approvers in Equitable’s St. Paul office in an indefinite, at-will relationship.
- Equitable assigned each plaintiff to assist its Pittsburgh office for a two-week period, providing a $1,400 travel advance and general expense guidance, but not detailed expense-report rules.
- After they returned, Equitable required detailed expense reports and repeatedly directed plaintiffs to revise them, eventually supplying written guidelines.
- Plaintiffs refused further revisions, and Equitable terminated them, stating the reason was “gross insubordination.”
- Equitable had issued an employee handbook describing discipline and discharge procedures (including warnings and probation) except for serious misconduct; plaintiffs claimed these procedures were contractual and were not followed.
- In seeking new employment, plaintiffs alleged they were effectively required to repeat to prospective employers that they had been discharged for “gross insubordination.”
- Plaintiffs sued for breach of contract (handbook-based procedures) and defamation (based on the “gross insubordination” statement and compelled self-publication), and a jury awarded compensatory and punitive damages.

## Issues

1. Whether Equitable’s employee handbook created enforceable contractual limits on at-will discharge.
2. Whether Equitable breached any handbook-based contractual obligations by discharging plaintiffs for “gross insubordination” without following progressive discipline, and whether the jury instructions on contract and good faith warranted reversal.
3. Whether Minnesota recognizes defamation liability where publication occurs through compelled, foreseeable self-publication by the discharged employee to prospective employers.
4. Whether truth or qualified privilege defeated defamation as a matter of law, or whether the jury could find falsity and abuse of privilege.
5. Whether punitive damages are available for defamation premised on compelled self-publication.

## Decision

- The Minnesota Supreme Court affirmed that the handbook’s definite disciplinary and discharge procedures could become enforceable contract terms modifying at-will employment.
- The court affirmed the jury’s finding that Equitable breached those contractual obligations and upheld compensatory damages for the contract claim.
- The court recognized a Minnesota cause of action for defamation based on compelled self-publication when it is reasonably foreseeable the employee must repeat the stated reason for discharge to prospective employers.
- The court upheld the defamation liability and compensatory damages, leaving intact the jury’s determinations on falsity and abuse of any qualified privilege.
- The court reversed the punitive damages award, holding punitive damages were inappropriate in compelled self-publication defamation due to policy concerns.

## Legal Principles

- An employee handbook may modify at-will employment and create enforceable contractual obligations when its terms are sufficiently definite and reasonably understood as promises, absent an effective disclaimer.
- An employer breaches such an employment contract by failing to follow the handbook’s stated disciplinary procedures when those procedures apply.
- Defamation may be established through compelled self-publication if (a) the employer provides a defamatory reason for discharge, (b) it is reasonably foreseeable the employee will be required to disclose that reason to prospective employers, and (c) the statement is false and defamatory.
- Truth and qualified privilege defenses in the employment context may present fact questions; privilege does not bar liability if abused.
- Punitive damages are not recoverable for defamation claims predicated on compelled self-publication in order to avoid deterring employers from providing reasons for discharge.

## Conclusion

The court treated Equitable’s handbook as contractually binding disciplinary procedure terms, affirmed liability and compensatory damages for both breach of contract and defamation based on compelled self-publication, and reversed punitive damages on policy grounds unique to self-publication defamation.


Lewis v. Equitable Life Assurance Soc'y of the United States, 389 N.W.2d 876 (Minn. 1986)