A recent California Court of Appeal decision, Hearn v. Pacific Gas & Electric Co. (2025) 108 Cal.App.5th 301, offers valuable guidance for employers and third-party investigators involved in drafting workplace investigation reports. The case highlights that retaliation and defamation claims can arise from the contents of an internal report—even when it is not shared outside the organization. In Hearn, although the jury rejected the plaintiff’s retaliation claim, it found the employer PG&E liable for defamation and initially awarded over $2.1 million in damages. Fortunately for the employer, the appellate court reversed the defamation verdict, sparing PG&E a costly lesson. Nonetheless, the decision underscores the importance of carefully crafting investigation findings and limiting their distribution.
Factual and Procedural Background
Plaintiff Todd Hearn worked for PG&E as a meter reader in Napa, CA, but was having some performance issues including delays in maintenance and repair projects, as well as overtime issues. PG&E supervisors began noting, “excessive meal costs, suspicions of misconduct, a high number of rest periods, poor attendance, schedule performance, multiple retaliatory compliance and ethics complaints, poor moral and bad attitude” among “the bulk” of the senior crew and foreman in the Napa yard. Because of this trend, PG&E started gathering data including timecards and GPS records to “deal with some bad apples.” HR was also brought in to assist with the situation.
Hearn was one of five employees the PG&E investigated because frequent instances of overtime and double time issues, and “potentially false timecards.” Hearn and four other linemen were suspended as a result of this initial investigation. Hearn was then informed he was being placed on “crisis leave” due to an “alarming amount of discrepancies” in his timecards.
PG&E then brought in an outside investigator, Tony Mar, to complete his own investigation and corresponding report. Mar concluded that Plaintiff misused company time, falsified timecards, claimed unearned meals, and went home during work hours on 31 occasions. Mars did not include mitigating factors such as common practices, lack of policies, and informal accommodations for Hearn’s medical condition in his report. Mars also omitted any mention in his report that Hearn received supervisor approval to go home, and seemingly did not give Hearn an opportunity to respond or dispute the findings of the investigation.
Ultimately, PG&E terminated Hearn citing Code of Conduct violations and clearly based the decision on the findings from Mar’s report. Plaintiff alleged that Mar’s report contained false, defamatory statements made with malice, which harmed his reputation and led to his termination. He also claimed he was defamed by Mar’s report because he had to repeat those falsehoods to prospective employers. Hearn also claimed he was retaliated against for raising safety concerns about a device called the “Tripsaver.”
The jury rejected Hearn’s retaliation claim, but found PG&E liable for defamation and awarded $2,160,417 in damages. PG&E moved for judgment notwithstanding the verdict arguing that the claim of defamation was duplicative of wrongful termination, but the court denied the motion. Then PG&E filed an appeal on the issue of whether an employee could pursue a defamation claim for statements made in the course of a termination when the alleged damages arose solely from the termination itself.
Legal Discussion
The court discussed Mar’s report and whether it included defamatory statements. The court pointed out that prior to finalizing the report, Mar acknowledged certain mitigating factors existed, but did not include them in his report—instead focusing on the misconduct. The court found that PG&E’s conduct following Hearn’s suspension was primarily aimed at documenting and substantiating the findings that led to Hearn’s suspension—not necessarily on conducting a fair investigation. The court’s criticism of Mar’s report highlights that its clearly important to conduct, document, and thoughtfully draft investigation reports. Perhaps the jury would not have found the report to be defamatory if Mars provided Hearn with an opportunity to respond, made the report more balanced, included mitigating factors, or more clearly defined factual vs. opinion content in the findings. The result also might have been different if the dissemination of the report was tighter.
However, the court was primarily focused on the issue of damages and ultimately held that the defamation claim was not separately actionable because it sought identical damages to the wrongful termination claim. Tort claims that arise from the same conduct as a termination and seek only employment-related damages are not independently actionable. Therefore, the court reversed the judgment entered in Hearn’s favor on the defamation cause of action and also reversed the costs award.
Takeaways
Even if an investigation report is intended for internal use only, it can still give rise to defamation claims. Employers should exercise caution when drafting such reports by ensuring that factual findings are clearly supported, conclusions are not overstated, and language avoids unnecessary character attacks. It is equally important to monitor third-party investigations and reports.
Additionally, distribution of reports should be strictly limited to those with a legitimate business need to know. Missteps in any of these areas, especially where statements later become discoverable or shared beyond the core human resources or legal team, can open the door to costly defamation allegations, even if the employee was lawfully terminated.
