Worried about legal liability for providing a bad reference? Truth is the best defence

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In the increasingly litigious world of employment law, employers may often be hesitant to provide a negative reference for a former employee. This hesitation often stems from concerns that the former employee may bring an action claiming damages for defamation or fraudulent misrepresentation.  Although these concerns are not without justification, the recent decision of the Ontario Superior Court of Justice in Papp v. Stokes et al (April, 2017) may help to put them in the proper perspective.

By way of background, Mr. Papp was employed as a staff economist with Stokes Economic Consulting Inc. The employment was terminated after just less than three years.  Although the termination was without cause, apparently there were some issues relating to Mr. Papp’s working relationships with his coworkers.  Shortly after his termination, Mr. Papp asked the president of the company, Mr. Stokes, if he would agree to be a reference.  Mr. Stokes agreed.

In July of 2014 Mr. Stokes was contacted by a prospective employer of Mr. Papp and was asked about Mr. Papp’s ability to work with others and his ability to develop positive working relationships. Mr. Stokes stated that Mr. Papp did not work well with others and that he did not work well in a team setting.  When asked whether he would re-hire Mr. Papp, Mr. Stokes was documented as saying “No way.”

Based on these statements Mr. Papp was not hired for the position. He commenced an action against his former employer seeking damages for wrongful dismissal in the amount of $65,000, damages for defamation in the amount of $500,000, punitive, exemplary and aggravated damages in the amount of $200,000, and damages for intentional infliction of mental suffering in the amount of $30,000.

At the commencement of the trial, the employer conceded that Mr. Papp was entitled to common law reasonable notice. This was set by the Court at four months based on the Bardal factors.  Mr. Papp was not as successful with his claim for defamation damages.

The Court discussed the law of defamation and noted that a plaintiff is required to prove three things in order to obtain judgement and an award of damages:

  1. that the impugned words were defamatory – in other words that they would lower the plaintiff’s reputation in the eyes of a reasonable person;
  2. that the words referred to the plaintiff; and
  3. that the words were communicated to at least one other person other than the plaintiff.

Once these elements are established on a balance of probabilities, the onus shifts to the defendant to establish either that the statements were substantially true (referred to as “justification”) or that the statements were made in a protected context (referred to as “privilege). In terms of the defence of privilege, the Court noted that statements in the context of a reference check fall within the range of “qualified privilege”.  The qualification is that this privilege does not apply if the plaintiff can prove that there was malice in the making of the statements.  Malice includes recklessness, which is described as indifference to the truth or falsity of what was said.  The employer put forth both defences for the defamation claim.

In applying the law to the facts, the Court concluded that Mr. Stokes’ statements during the reference check were in fact defamatory. The statements would tend to lower Mr. Papp’s reputation in the eyes of a reasonable person; they did refer to Mr. Papp; and they were communicated to at least one person other than Mr. Papp.

The Court next considered the employer’s defences. It found on the balance of probabilities that Mr. Stokes’ statements during the reference check were substantially true, and therefore that the defence of justification was established.

In terms of the second defence, that of qualified privilege, the Court concluded that there was no malice in Mr. Stokes’ statements, nor was he reckless in making them. The Court noted that Mr. Stokes discussed Mr. Papp’s relationships with a number of employees and verified his views appropriately.  The Court proceeded to dismiss the defamation action holding that Mr. Stokes established a “complete defence”.  The Court also held that there was no basis for punitive, exemplary or aggravated damages, or damages for intentional infliction of mental suffering.

 

In our view    

This decision is very positive for employers. It confirms that qualified privilege applies to employment reference checks, and that employers can be candid in discussing the performance and interpersonal working relationships of former employees.  The caveat for employers is that where the reference is negative, they must try to ensure that the statements they make can be supported by evidence of facts.  Such facts will assist an employer for both defences in the event of a claim of defamation.  The facts may show that the statements are true, and therefore establish the defence of justification.  Even if they do not, such facts may demonstrate that there was no malice or recklessness in making the statements and therefore assist in establishing the defence of qualified privilege.

For further information please contact Colleen Dunlop at 613-940-2734 or Steven Williams at 613-940-2737.