For affirmance in part, reversal in part and remandment -- Chief Justice Wilentz and Justices Clifford, Handler, Pollock, O'Hern, Garibaldi and Stein. Opposed -- None. The opinion of the Court was delivered by Garibaldi, J.
This appeal presents an unusual question of what constitutes a cognizable claim of reverse sex discrimination under the New Jersey Law Against Discrimination, N.J.S.A. 10:5-1 to -42 (LAD). Plaintiff John Erickson claims he was the victim of sexual discrimination in that his employer, defendant Marsh & McLennan Co., Inc. (M & M) discharged him because of a romantic consensual relationship between his supervisor and a female employee. This appeal also addresses whether an employer, in responding to inquiries from prospective employers concerning a former employee, has a qualified privilege protecting it from a libel action.
On November 2, 1981, M & M hired Erickson as an "at-will" employee and assigned him to the company's Morristown Office as an account representative in the Major Accounts Casualty Department. In May 1982, the company transferred Erickson to the Commercial Accounts Department as an account executive. Erickson asserts that this transfer was a promotion because an account executive enjoys a higher job category than account representative. Several executives from M & M, however, testified that Erickson had been unilaterally transferred from the largest and most prestigious department to a smaller
and less prestigious department, at the same salary, because he had failed to grasp certain technical aspects of his job.
In his new position, Erickson's supervisor was Angela Kyte, an Assistant Vice President and the Manager of Commercial Accounts. Kyte's supervisor was Frank Hayes, a Vice-President and Operations Manager of the Morristown Office. Erickson was the "team leader" of Karen Niedhammer, an account representative, and Stuart Torbert, an insurance assistant.
The events leading to the lawsuit began in February 1983. On February 8, 1983, Niedhammer and a colleague, Kelly Lennan, met with Kyte in her office. Niedhammer reluctantly reported that on several occasions Erickson had sexually harassed her. On February 10, 1983, Hayes had dinner with Lennan, Niedhammer, and a friend of Lennan. During dinner, Niedhammer told Hayes that Erickson had acted inappropriately towards her. Niedhammer essentially informed Hayes of the incidents she had reported to Angela Kyte on February 8, 1983.
The M & M office closed early the next day due to a severe snowstorm. Several M & M employees, including Hayes, Lennan and Niedhammer, went to a local restaurant for drinks. Because of bad road conditions, Hayes drove Lennan and Niedhammer to Niedhammer's home, where Lennan was staying while Niedhammer's husband was away. Unable to remove his car from the snow, Hayes stayed at Niedhammer's home for the night. The next day he drove Lennan back to her car at the restaurant.
The following Monday, February 14, 1983, Kyte and Hayes met to discuss Niedhammer's allegations. Kyte prepared a memorandum regarding that meeting:
[Hayes] wants to know what I plan to do about it. [I] told him I was not sure, but had planned to talk to John about it and cool him off. Frank called [Ed] Pazicky, [Richard] Mikulak, personnel for advice. Pazicky said do something fast and either fire or give threat of firing if actions continue.
After the meeting, Hayes instructed Kyte to question other female employees discreetly to determine whether Erickson had ever sexually harassed them. Two women reported that Erickson
had previously made improper gestures and comments to them.
The next day, Kyte met with Erickson to discuss the allegations made against him. According to Kyte, Erickson admitted the acts but stated that he had intended them only as a joke. A memorandum that Kyte wrote to Erickson recounted the meeting:
John, confirming our discussions of this morning, your behavior towards your subordinate, Karen Niedhammer, and other female members of the department has included incidents, actions and comments which are unprofessional in nature and can only be interpreted as a form of sexual harassment.
I have expressly instructed you to stop any such conduct as physical contact and suggestive comments, whether joking or not, and to avoid and prevent any situations which can be interpreted as sexual harassment in the future. Further, you are not in any way to mention this matter to Karen or bring it up to her in any way.
Should there by any further incidents of this nature or breach of the above ban it will be considered grounds for termination.
A copy of this memo is being entered in your personnel file.
After receiving the memorandum, Erickson consulted an attorney. His lawyer, Michael Critchley, sent a letter dated March 10, 1983 to Kyte stating that Erickson denied every accusation and wished to discuss the matter. According to Kyte, she had not been aware that Erickson was contesting the sexual-harassment allegations until she received Critchley's letter.
Kyte referred Critchley's letter to Hayes, who forwarded it to Frank Cooper, Assistant Vice President and Manager of M & M's Employee and Government Relations Department in New York. After reviewing the matter, Cooper sent Critchley a letter dated March 31, 1983, stating:
We recognize the seriousness and sensitivity of the issue and assure you that as long as there are no further thematic recurrences attributable to your client and he complies with the proscriptions of Ms. Kyte's February 15th memorandum, the matter is closed.
He also advised Critchley that all documents concerning the sexual harassment charge would be kept separate from Erickson's personnel file. In an April 18, 1983 letter to Cooper, Critchley reiterated his request for a conference and specifically requested "an opportunity to confront Ms. Niedhammer for the purposes of refuting the validity of her charges and thereafter having the matter closed." Cooper denied this request in a letter to Critchley of May 3, 1983:
I see no benefit to be derived from the confrontation you suggest. Furthermore, in our view such an undertaking would be disruptive to the working environment. Consequently, I ask you to encourage your client to put this matter behind him as we have, and go forward with the work at hand.
Cooper also advised Critchley that he had asked the Morristown Office to forward all documentation concerning the matter to him so that he could store it in his confidential file. Cooper explained that putting the document in that file, which would not be available to management, would "virtually reduce to zero the probability of anyone drawing negative inferences in the future from a review of Mr. Erickson's file."
On May 2, 1983, Kyte prepared a formal appraisal of Erickson in which she evaluated his performance as falling between "acceptable" and "inadequate." She did not, however, recommend his discharge. On May 9, 1983, Erickson responded to Kyte's appraisal report:
I am very distressed over the contents of this report and I am in total disagreement with it. I do not view this report as an objective assessment of my knowledge and skills, but a prejudicial view which is motivated as a result of my response to the recent allegations brought against me.
The alleged deficiencies contained within the report were never brought to my attention since the inception of my employment with Marsh and McLennan, Inc. Further, no where within the report is there any mention, nor is it implied, that I had been previously advised of said alleged deficiencies.
I find it highly coincidental that such allegations are forth coming at this time. Surely, my knowledge, skills and abilities have not dissipated since I began my employment with Marsh & McLennan and, most certainly, not since my retention of legal counsel became known to Marsh and McLennan in March of 1983.
After receiving the response, Kyte concluded that Erickson's unwillingness to acknowledge his deficiencies would prevent him from responding favorably to her "constructive criticism."
According to a memo prepared by Kyte, Erickson's response was the "final catalyst which convinced me once and for all that no amount of critique or constructive criticism was going to be acted upon for the benefit of improving John Erickson's work performance."
Subsequently Kyte consulted with Hayes and recommended Erickson's termination. Hayes then communicated with the head of the New Jersey operation, Roger Egan, of the New York Office. Having worked with Erickson in the past, Egan had criticized his work on a project in which Kyte had to rewrite an entire report. Egan, Hayes and Kyte agreed that Erickson should be discharged, and on May 20, 1983, Hayes fired Erickson. Niedhammer did not replace Erickson.
After his termination, Erickson sought employment with other insurance-brokerage firms. Howard James Insurance Services, Inc., and Joseph L. Iraci Insurance Agency asked M & M for references. Howard James Insurance Services, Inc. stated that the job for which they were considering Erickson "entails a general knowledge of all lines of insurance along with general abilities to deal with the public and a strong organization ability." They inquired whether M & M would recommend Erickson for such a position and the reason for his discharge.
In response to this inquiry, Kyte wrote:
John left our operation because his level of expertise and areas of interest in insurance did not match the depth required for the proper service of [M & M] clients.
John does possess a general knowledge of commercial insurance and is well known among the insurance markets. If these are qualities you are seeking for your Account Executive position, we would recommend John Erickson to you.
Kyte's response to Joseph L. Iraci Insurance Agency's inquiry for "any information" regarding Erickson's past history and performance was similar to her ...