In Rosenberg v MetLife, Inc., 2007 NYSlipOp 02627 (March 29, 2007), over strong dissent, the NY Court of Appeals extended absolute privilege from defamation for statements made by an employer on the NASD's U-5 form, stating taht "statements made by an employer on a NASD employee termination notice are subject to an absolute privilege in a suit for defamation."
According to NASD regulations, whenever a securities dealer is terminated, the employer is required to file a U-5 form, stating the reason for termination, within 30 days. Traditionally, statements made by a former employer have been subject to only a "qualified privilege," meaning that an employer may comment on the reason for terminating an employee so long as the comments were made without malice, i.e. they were made in good faith and for a legitimate purpose. For example, when an employer receives a reference phone call, they are free to say the reason the employee was fired, such as being suspected of robbery or some other immoral act, so long as the employee actually was suspected of the immoral act, without fear of legal repercussions.
By granting an abosolute privilege, however, which is traditionally reserved for judicial and legislative proceedings, an employer is wholly immune from liability unless the statements are completely unrelated to the purpose of the communication. The court's reasoning rested on the premise that the NASD is a self-regulating body -- which has the capacity to deter malicious comments within its own framework -- and the public interest in encouraging complete disclosure to the NASD without threat of reprisal outweighs the invidivual interest in any possible defamation action.
According to NASD regulations, whenever a securities dealer is terminated, the employer is required to file a U-5 form, stating the reason for termination, within 30 days. Traditionally, statements made by a former employer have been subject to only a "qualified privilege," meaning that an employer may comment on the reason for terminating an employee so long as the comments were made without malice, i.e. they were made in good faith and for a legitimate purpose. For example, when an employer receives a reference phone call, they are free to say the reason the employee was fired, such as being suspected of robbery or some other immoral act, so long as the employee actually was suspected of the immoral act, without fear of legal repercussions.
By granting an abosolute privilege, however, which is traditionally reserved for judicial and legislative proceedings, an employer is wholly immune from liability unless the statements are completely unrelated to the purpose of the communication. The court's reasoning rested on the premise that the NASD is a self-regulating body -- which has the capacity to deter malicious comments within its own framework -- and the public interest in encouraging complete disclosure to the NASD without threat of reprisal outweighs the invidivual interest in any possible defamation action.
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