Employer Loses Appeal Ruling on 'Thief' Comments About Ex-Worker to Clients

Why It Matters

The ruling expands employer liability for off‑hand slander, making nondisparagement agreements a powerful tool for protecting former workers. It forces companies to rethink how they discuss former staff with clients, impacting risk management and HR policy.

Key Takeaways

• Ohio appeals court limits qualified privilege in client communications
• Nondisparagement clauses enforceable beyond defamation standards
• HR must train managers on post‑termination communication policies
• False employee allegations can trigger breach‑of‑contract liability
• Companies risk litigation when protecting business interests with slander

Pulse Analysis

The Ohio First Appellate District’s February decision draws a firm line between legitimate business communication and prohibited disparagement. By rejecting the qualified‑privilege defense, the court clarified that remarks about a former employee’s character—especially when unrelated to the speaker’s own services—are not protected, even if aimed at safeguarding client relationships. This interpretation expands the enforceability of nondisparagement clauses beyond traditional defamation thresholds, meaning that any statement that harms reputation can constitute a breach, regardless of whether it is proven false. For HR leaders, the ruling underscores the need to revisit settlement language and understand its practical reach.

From a risk‑management perspective, the ruling raises the stakes for companies that rely on informal gossip to ‘warn’ clients about competitors. Employers now face two parallel liabilities: a breach‑of‑contract claim under the nondisparagement agreement and a potential defamation suit if the statements are deemed malicious. The financial exposure includes not only damages but also attorney fees and reputational harm. Consequently, organizations are investing in compliance training that delineates permissible client disclosures, establishing clear escalation paths, and documenting all communications. Such proactive measures can curb inadvertent violations and preserve the integrity of client interactions.

The broader employment landscape is witnessing a surge in protective clauses that extend beyond exit‑interview confidentiality to cover any negative commentary. As more jurisdictions adopt similar interpretations, legal counsel advises drafting narrowly tailored agreements that specify the scope of permissible statements and include carve‑outs for factual, job‑related information. Meanwhile, HR professionals must balance the duty to provide accurate client references with contractual constraints, often turning to standardized reference policies. The Ohio case serves as a cautionary benchmark, signaling that future litigation will likely focus on the precise language of nondisparagement provisions and the training surrounding them.

Employer loses appeal ruling on 'thief' comments about ex-worker to clients

By Carleen Bongat · 12 Feb 2026

An Ohio court ruled that bad‑mouthing a former employee to clients can breach nondisparagement agreements, even when companies claim they were just protecting business interests.

The February 11 decision from Ohio’s First Appellate District should serve as a wake‑up call for HR leaders navigating what managers can say about former employees who join competitors.

Grant Hilty thought his dispute with his former employer was settled. After being fired from Donnellon McCarthy Enterprises, a copier services and office equipment company, he and DME signed a settlement agreement that included a mutual promise: neither side would disparage the other.

Then Hilty joined Modern Office Methods, a DME competitor. That’s when things allegedly got messy.

According to testimony at trial, DME managers made damaging statements about Hilty to prospective clients he was trying to win over. The twist? These prospective clients were also current DME customers. DME’s Cincinnati sales manager Steve Sexton told Angela Conners at Maintenance Methods that Hilty was a “thief” who stole from DME, had to be monitored, and wrote incorrect contracts. Conners testified she sent Sexton and his manager an email detailing that Sexton called Hilty a thief who wrote incorrect contracts, and that she did not pursue a contract with Modern Office Methods as a result.

Similar conversations allegedly happened with other potential clients. Quigley at ClaimLinx recalled conversations with a DME representative who described Hilty as a liar. He also described a conversation with DME President Jim George, who called Hilty a “lying piece of shit.” Dr. Moran at New Hope Community Services testified that Sexton told her that Hilty falsified documents, misrepresented facts, and engaged in unethical behavior.

At trial, a Hamilton County jury found that the Conners statements occurred, were untrue, and proximately caused injury to Hilty. But here’s where it gets complicated. The trial court required Hilty to prove that DME acted with actual malice, meaning the company knew the statements were false or recklessly disregarded the truth. This higher standard came from something called qualified privilege, a legal shield that sometimes protects business communications. Because Hilty couldn’t meet that tougher test, the jury determined he had not established defamation.

The appeals court disagreed with applying that protection. The judges found that qualified privilege covers communications that further a shared business interest between the speaker and listener. DME argued its relationship with clients justified the statements. But the court wasn’t buying it.

The court pointed out that DME was hired to provide copy and office services, not investigate outside vendors or competitors. The statements weren’t about DME’s services. They were about potential contracts between the clients and a different company entirely.

The court drew a clear line. Disparaging a business competitor does not directly further or concern a mutual interest in effective office services with clients, the judges wrote. The decision emphasized that DME’s statements went beyond informing clients about their own services and instead attacked Hilty’s ability to perform at his new employer.

The court also tackled the breach‑of‑contract claim. The trial court had dismissed it as wholly derivative of the defamation claim. The appeals court reversed that too, noting that the nondisparagement agreement covered more ground than defamation law. While defamation requires proving a statement is false, the agreement barred any statement that disparages or impugns someone’s reputation, even if it’s an opinion.

The court offered this pointed observation: if DME felt morally obligated to warn clients about Hilty, it should not have contracted away its right to do so through the nondisparagement agreement.

The case now goes back to the trial court with instructions to enter judgment for Hilty on his defamation claim and hold a trial to determine damages. His breach‑of‑contract claim will also get a new trial.

For HR professionals, the message is clear. Nondisparagement agreements mean what they say, and managers need training on what they can and cannot say about former employees, even when clients ask questions.