The California Court of Appeal issued an important decision clarifying that an employee cannot recover damages for a defamation claim that is derivative of a wrongful termination claim. Defamation causes of action are often alleged by employees in tandem with and related to an underlying discrimination or wrongful termination claim. The Court in Hearn v. Pac. Gas & Elec. Co., 108 Cal. App. 5th 301 (2025) held that in order for an employee to recover defamation damages, the defamatory conduct must be based on conduct other than the conduct giving rise to the termination.

Todd Hearn was a former Pacific Gas & Electric Company (“PG&E”) lineman. After an investigation into potential discrepancies in his time records, Hearn was suspended and ultimately terminated. The termination was based on investigative reports that collected witness statements and analyzed Hearn’s time records and GPS locations.

Hearn filed a civil complaint alleging claims for (1) retaliation for allegedly disclosing safety violations under Labor Code section 1102.5; (2) retaliation for allegedly lodging a bona fide complaint about unsafe working conditions under Labor Code section 6310; (3) wrongful termination in violation of public policy; and (4) defamation.

Ultimately, only Hearn’s claims for retaliation under Labor Code section 1102.5 and defamation went to a jury trial. The jury found PG&E not liable for the retaliation claim but did find PG&E liable for defamation. PG&E appealed the judgment, contending Hearn was precluded from bringing a tort claim for defamation that was based on the same alleged injury from his wrongful termination claim.

The Court of Appeal reversed the judgment. Notably, the Court concluded that in order for an employee to recover defamation damages based on a wrongful termination “(1) such tort claims must be based on conduct other than that giving rise to the employee’s termination . . . and (2) the damages sought cannot exclusively result from the termination itself.”

In Hearn’s case, the Court of Appeal found he could not “recover damages for wrongful termination by recasting his claim as one for defamation.” Hearn did not seek any reputational damages for his defamation claim that were distinct from his loss of employment. The Court also stated that the allegedly defamatory investigative reports “were generated within the scope and context of Hearn’s disciplinary proceedings and termination, and both the defamation claim and Hearn’s termination arose from the same conduct.”

The Hearn decision provides employers possible defenses to defamation claims that are derivative of wrongful termination claims. The viability of such defenses are fact specific and employers should consult their counsel regarding the Hearn decision when conducting workplace investigations or when defending defamation claims.