When a fellow HR director calls asking for a post-employment reference about one of your former employees, it’s a dilemma—especially when you don’t have anything positive to say about the former employee. Your ethical side cries out to warn your fellow traveler from HR that this guy is bad news and shouldn’t be hired. But your professional side knows that bad-mouthing a former employee can get you into a heap of legal trouble and that the last thing your company needs is to be sued for defamation.
So what should you say? This article will give you a strategy to resolve the dilemma.
Damned If You Do
The legal risk of saying negative things about a former employee stems from defamation, i.e., a tort that involves saying something untrue and harmful about a person that harms his or her reputation and causes damage. Making negative remarks about an employee in the context of a post-employment reference can lead to liability for defamation. And even if the words you use are truthful and not defamatory, once employees learn what you said they might blame you for not getting the job and drag you into a lawsuit.
Example: An investment dealer with a stellar track record is fired without cause. His supervisor, who has always treated him badly, meets with the dealer’s former clients and suggests that the dealer might have misappropriated client funds, even though he has no evidence or reason to believe this is true. To make matters worse, the supervisor tells a prospective employer that the dealer is under investigation by the government but omits a critical piece of information: the investigation is based on a customer complaint that the employer has already looked into and determined to be groundless. The dealer sues and the court finds the supervisor guilty of defamation and awards the dealer a double notice period, plus punitive damages [Musgrave v. Levesque Securities Inc.].
To avoid defamation, some employers give every former employee a positive reference, even if they’re undeserved. That’s a bad idea, especially if you fired the employee for theft, sexual abuse or violence. If the employee engages in similar conduct at her new job, you might be liable for the resulting injuries under a theory of negligent or fraudulent misrepresentation. Moreover, the positive things you say could come back to haunt you if the employee uses them in a wrongful dismissal lawsuit as evidence that she was fired without cause.
Another common approach is to provide minimum, factual information, like confirming the dates of employment or say nothing at all about former employees. This is a defensible policy if you follow it consistently. The problem is that there’s a tendency to clam up only when you’re giving references about bad former employees while being perfectly willing to talk at length and in detail about former employees you feel positive about. This inconsistency doesn’t resolve the reference dilemma; it only makes it worse.
Damned If You Don’t
So the answer is simple: Just don’t give a post-employment reference to any employee. After all, there’s no law that requires employers to furnish references. Or is there? In fact, several courts have cited an employer’s refusal to provide an employee a reference as evidence of bad faith justifying Wallace or punitive damages.
Example: A company fires a broker without warning or explanation and refuses to give him a letter of reference even though he’s always been a trustworthy, honest and hardworking employee. Unable to find another job, he sues. The Nova Scotia court awards him almost $600,000 and blasts the employer for failing to provide a letter of reference, calling the failure a “callous disregard for his future” [Barakett v. Levesque Beaubien Geoffrion Inc.].
Example: A car dealer fires a bookkeeper with 23 years of service for incompetence without warning and it refuses to provide her a letter of reference or help her find a new job. The Ontario court hits the dealer with Wallace damages. The employer “played hardball and must accept the consequences of its actions,” it rules [Brien v. Niagara Motors Ltd.].
Example: By way of contrast, the employer’s willingness to provide the employee a letter of reference is one of the factors a Saskatchewan court cites in dismissing an employee’s claim for Wallace damages [Fox v. Silver Sage Housing Corp.].
Use Written Policy to Ensure Appropriate References
So where does this leave you? What options do you have? What you should do, the lawyers say, is give accurate references and back them up with the facts. “Employers have nothing to fear from the provision of frank, honest and objective references,” says an employment lawyer in Ontario. But implementing such a policy requires delicacy. You need to establish a policy and set of ground rules to ensure that you and your employees do it right.
What a Policy Should Say
Appoint one person to be in charge of references. Give the HR manager or another person sole authority to create or approve letters of reference at your organization. Instruct supervisors to direct the reference letters they write to this person. And make this person the point of contact for any follow-up calls with prospective employers.
Require written requests for references. Private investigators, ex-spouses and other individuals have been known to pose as prospective employers to get confidential information about a former employee. One way to ensure that persons requesting a reference are legit is by requiring them to put their request in writing.
Establish guidelines on the substance of references. The policy should lay down guidelines on what to say in a reference letter. One option is to establish a standard fill-in-the-blanks form letter listing limited information of a purely factual nature like names, job titles and dates of employment and leave no room for qualitative or descriptive information.
Regardless of your approach, indicate in your policy that information listed in the reference letter must be truthful and based on the facts. The general rule: Make sure that you can verify and prove everything you say in the reference letter. You might want to specifically ban the inclusion of opinions and subjective conclusions. Just deliver the raw facts about the employee and let prospective employers draw their own conclusions. Also limit the information you provide to the questions you’re asked and don’t volunteer information that’s not requested.
Make employees sign consent form. When employees leave your organization, have them sign a written consent form that authorizes your company to disclose employment reference information, make sure the form releases your company from liability related to the reference.
Ban verbal references. Some prospective employers will just call and ask what you know about a former employer and whether you would rehire them. But experts agree that it’s a bad idea to respond verbally. You can get caught saying something that you shouldn’t have said. Plus, you won’t have a record of the reference which could help defend against a future lawsuit.
Require consistency. You must follow your policy and provide the same types of information for every former employee. If you don’t, your inconsistency could be branded as a breach of contract, which could lead to additional liability. This doesn’t mean that each reference letter must be identical. But if your policy is to provide information about your employees’ work habits, you’ll need to do it across the board.
6 Ways Employers Can Be Liable for Employee References
- Defamation. Employers who give false references with the intent to injure a former employee’s reputation can be liable for defamation, also known as slander (for oral statements) and libel (for written statements). The good news is that the employee won’t win the lawsuit if you told the truth.
- Misrepresentation. If you give a glowing reference for an employee who didn’t deserve it, the employee’s future employer can sue you for negligent or fraudulent misrepresentation. If it can show that it hired the employee based on your recommendation and it was injured by the employee’s conduct, it may win.
- Interference with Contractual Relations. Employees who lose a job based on your recommendation can argue that you interfered with a prospective employment — or contractual — relationship [Kotch v. Casino St. Albert Inc.].
- Wrongful Termination. If you dismiss an employee for just cause and then turn around and give her a great recommendation, she may be able to come back at you for wrongful dismissal. If you tell a prospective employer that she was a great employee, what were your grounds for letting her go?
- Privacy Violation. Some privacy laws, such as Alberta’s Freedom of Information and Protection of Privacy Act, prohibit employers from sharing certain employee information without written consent, especially if they’re public employees.
- Increased Notice Period. Refusing to provide a reference or failing to provide an accurate one can put your company at risk of increased damages for bad faith conduct involved with a dismissal.
The more you can learn about prospective employees from their previous employers, the more likely you are to make a sound hiring decision. Unfortunately, the more you say to other employers about your own previous employees, the greater your risks of being sued. The result of this tension is that the giving and receiving of post-employment references has evolved into a liability-avoiding dance.
An article from HR Insider 2015
(cases in order cited)
Musgrave v. Levesque Securities Inc.,  N.S.J. No. 109, March 31, 2000
Barakett v. Levesque Beaubien Geoffrion Inc.,  N.S.J. No. 103, March 14, 2001
Brien v. Niagara Motors Ltd.,  O.J. No. 3246, August 20, 2008
Fox v. Silver Sage Housing Corp.,  S.J. No. 477, August 13, 2008
Kotch v. Casino St. Albert Inc.,  A.J. No. 1122, Sept. 1, 2005
Sheryl Ferguson / Human Resources Administrator / PEO Canada