In a decision issued July 31, 2009, the Utah Supreme Court ruled that in order for an employee to prevail on a defamation claim against his or her former employer, the employee must show that the employer knew the statements were false or acted in reckless disregard of the truth of the statement. The case, Ferguson v. Williams & Hunt, Inc., involved a law firm's termination of an employee at the firm. The employer conducted an investigation of the employee's billing practices when it noticed a substantial deviation in the billing practices of the employee and the absence of the employee from the firm at times he claimed he billed large amounts of time. The firm conducted an investigation. After doing so, it concluded that the employee had overbilled his largest client. Accordingly, it fired the employee and told his client that the firm could not trust the accuracy of his bills. The employee's client subsequently terminated its relationship with him.
The employee sued the firm for, among other things, defamation. He argued that the purported investigation of his billing practices was flawed and did not take into account time away from the office that he spent billing. The Utah Supreme Court ruled that, because under Utah law the employer had a conditional privilege in its communication with the client, the employee had to show that the firm actually knew the communication was false or that the firm was reckless in establishing the truthfulness of the claims. It therefore ruled that the employee had no claim because the employee did not establish that the statements were knowingly false or were made with reckless regard for the truth.