Employment references: Care, not silence, required

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At first glance, requesting and providing employment references would seem to be a straightforward matter as well as a useful and necessary part of our employment system – one that gives a prospective employer a candid and unbiased evaluation of a candidate’s qualifications and job performance. Clearly, maintaining the free flow of this type of information is in the interest of virtually all employers and the large majority of employees.

However, references can also be a potential source of liability for the unwary employer. For example, in the January 1997 issue of FOCUS, we reported the decision of the British House of Lords in Spring v. Guardian Assurance, in which a majority of the court ruled that employers can be held liable for damages caused to employees by negligently prepared references (see “U.K. decision rules employers liable for negligent references” on our Publications page).

In the wake of Spring and certain American judgments, some employers have adopted the practice of providing only bare bones, “name, rank and serial number” information in an effort to eliminate risk. While understandable, this practice hardly constitutes a satisfactory response to the problem: it is unfair to employees who would benefit from a frank and positive reference, and it closes off an important source of information required by employers in need of recruits.

In this article, FOCUS looks at how to minimize the risks surrounding employment references. It is our view that, if appropriate precautions are taken, employers stand to benefit from supplying and receiving honest, factual references. (See also “Finishing touches — wrapping up the termination process” on our Publications page.)

EMPLOYER WHO PROVIDES THE REFERENCE

Most, but not all, of the risks associated with references are incurred by employers who provide references. The principal ones are outlined below.

Defamation

A reference that is critical of an employee may be defamatory in nature. However, courts have recognized that it is in the public interest that the flow of this type of information not be impeded and so have made the defence of qualified privilege available to employers. As a result, as long as the source of the reference honestly believes the defamatory information is true (the belief does not have to be reasonable), the employer is protected.

However, the privilege is “qualified” in that it is lost if there is evidence that the author of the statement knew it to be untrue or was motivated by malice. It is therefore prudent to avoid a situation where the person giving a negative reference has a history of personal conflict with the employee, either on or off the job.

Moreover, if the Spring case is followed in Canada, the defence of qualified privilege may be less effective, because the focus in such cases shifts from malicious falsehood to negligent misrepresentation.

The other defence to a claim based on defamation is that the information was true. Here, it should be noted that the law presumes that the defamatory information was false and the burden of proving that the information is true rests on the author of the statement. This is not always an easy matter.

Negligent or fraudulent misrepresentation

If the information provided by an employer is based on negligently collected information, the employer may be liable for negligent misrepresentation. Spring, above, is an example of a case in which an employer was found to be liable to the employee who was the subject of the negligent reference. While it does not appear to have been followed in Canada yet, decisions of the House of Lords carry considerable weight with Canadian courts.

It is also possible that a referring employer can be found liable to a prospective employer where the former negligently misrepresents to the latter certain important aspects of the candidate’s qualifications or performance, and the new employer suffers damages as a result. While such cases are rare in Canada, they are not unknown.

Where it can be shown that the referring employer has intentionally “whitewashed” an employee by suppressing damaging information, and the new employer relies on the misleading reference to hire and suffers damages, the former may liable to the latter for fraudulent misrepresentation or deceit. An example of this would be where the referring employer suppresses the fact that a terminated employee was suspected of theft; the new employer places the employee in a position of trust; and the employee steals from the new employer.

Refusal to provide a reference

It is generally held that there is no obligation on an employer to provide a reference, independent of an obligation contained in a contract of employment. However, where an employee has been terminated, some courts have viewed a refusal to provide a reference as a basis for eliminating the employee’s duty to mitigate his or her damages. In one case, the court went so far as to award exemplary damages against an employer for having damaged the employee’s competitive position in the job market by the refusal.

Reference where employee dismissed for cause

On the other hand, where an employer has dismissed an employee for cause, providing a positive reference is inconsistent with the allegation of cause and may harm the employer’s position in the event of litigation. As it is in the interests of the employer that the employee find alternate employment as soon as possible to mitigate any damages a court may eventually see fit to award, and a reference will facilitate this outcome, it may be advisable to have legal counsel arrange to have a reference provided on condition that it not be referred to in litigation.

However, if an employee has been dismissed as a result of allegations of serious misconduct which cannot be clearly substantiated, the prudent course may be to refuse to supply a reference.

Suggested precautions

As noted above, there are clear benefits to maintaining the reference system. We believe that, in most cases, the risks of providing frank and factual references can be controlled if employers take the following precautions:

  • Avoid decentralizing responsibility for providing references. Implement a policy under which all reference requests are channelled to a designated person whose authorization is required before a reference is supplied.
     
  • Develop a checklist for the supplier of the reference to ensure that the appropriate steps have been taken.
     
  • Ensure that the contents of all references are recorded and filed.
     
  • As much as possible, ensure that negative references are supported by evidence of the facts justifying the negative evaluation.

EMPLOYER WHO RECEIVES THE REFERENCE

Wrongful hiring

Some court decisions, particularly in the United States, suggest that there is a positive duty on employers to conduct a thorough check of a prospective employee’s references. In one such case, the Pinkerton company was forced to pay a manufacturing company $200,000 when it was revealed, after one of its guards had stolen a quantity of gold, that Pinkerton had failed to check the guard’s references before hiring him.

Checking references

Employers should not overlook the benefits of thoroughly checking candidates’ references. Doing so will decrease the risk of the employment relationship ending in dismissal and litigation. Here are some points to keep in mind:

  • Ensure that your application form requests candidates’ permission to seek references from previous employers.
     
  • Obtain explanations of any discrepancies your reference check turns up.
     
  • Be cautious if previous employers are reluctant to provide specific information or fail to return your calls.
     
  • Advise the employer of the purpose of your call and offer to call back if you called at an inconvenient time.
     
  • Ask about the candidate’s interaction with co-workers, management and customers, his or her strengths and weaknesses, initiative and achievements.
     
  • Where a credit check is necessary, notify and obtain authorization from the candidate. If the candidate is not hired as a result of the credit check, he or she must be notified of the fact.

IN OUR VIEW

Ontario employers have nothing to fear from the provision of frank, honest and objective references and much to gain by not impeding the free exchange of employment information. However, the process by which references are given and received requires that controls be put in place to minimize the chances of providing erroneous or defamatory information. If cause is alleged against an employee, special care is called for. Clearly, a centralized system under the supervision of a designated person who is versed in the pitfalls of providing references is preferable to a decentralized system of responsibility. See also “Qualified privilege protects comments made during reference check from defamation action” on our What’s New page.

For more information on this subject, please contact Lynn Harnden at (613) 563-7660, Extension 226.