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Lessons on employer protection against malicious prosecution

In a recent California Court of Appeal decision, the court shed light on the protections available to employers who report suspected criminal activity by their employees to law enforcement.
Saide Lugo was employed by Pixior, LLC. According to Lugo, she quit her job after a dispute with the company.

However, Pixior claimed that Lugo, upon her departure, maliciously deleted valuable company files. Pixior reported this alleged misconduct to the police, which led to an independent investigation and Lugo’s subsequent arrest and criminal prosecution.

During the preliminary hearing, it was revealed that one of Pixior’s employees had lied under oath. As a result, the prosecutor determined that the case against Lugo could no longer be proven, and the case was dismissed. The trial court declared Lugo factually innocent of the charges.

Following this, Lugo filed a lawsuit against Pixior and some of its employees, alleging malicious prosecution. Lugo contended that Pixior had falsely accused her of wrongdoing, leading to her wrongful arrest and prosecution.

Pixior responded by filing an anti-SLAPP motion to strike the complaint, contending that Lugo’s lawsuit targeted protected activity – the reporting of suspected criminal conduct to the police.

The court’s ruling

A trial court denied the motion to dismiss, but the California Court of Appeal ruled in favor of Pixior.

The court found that the company’s report to the police constituted protected activity and that Lugo failed to demonstrate a probability of success in her malicious prosecution claim.

The court emphasized that when law enforcement conducts an independent investigation based on an employer’s report, the employer is generally shielded from liability for malicious prosecution, even if the employee is later exonerated or the charges are dropped.

Anti-SLAPP statutes

SLAPP suits are lawsuits that are filed with the intent to censor, intimidate, or silence critics by burdening them with the cost and stress of a legal defense.

Many states have enacted anti-SLAPP laws to discourage frivolous lawsuits and protect the rights of individuals and organizations to speak out on matters of public concern. As of 2024, 32 states (including Massachusetts) and the District of Columbia had anti-SLAPP legislation, although the scope and strength of these laws vary between jurisdictions.

Takeaways for employers

The Lugo v. Pixior decision demonstrates that employers who make good faith reports of suspected criminal activity may be afforded protections against malicious prosecution claims under Anti-SLAPP laws.

However, employers must also ensure that their reports to law enforcement are truthful and based on genuine suspicions of criminal misconduct. False or misleading reports may not only strip employers of anti-SLAPP protections but could also lead to additional legal consequences.