The pitfalls for employers when giving references for former employees

References

Amanda Wright explores the pitfalls for employers when giving references for former employees

There is no legal obligation to provide a reference for an ex-employee. However, some employers may be required to provide references for certain employees by the rules of a professional body. For example, employers in the financial services industry are generally subject to the rules of a professional body, such as the PIA or LAUTRO, whose rules state that references for employees registered with that professional body must be given within a set period of time and must contain specific information. This includes full and frank disclosure of all relevant matters, including details of misconduct.

Failure to provide a reference may have serious consequences for an ex-employee, and employers should therefore only refuse to provide a reference in exceptional cases. Problems will normally only arise when an employee leaves employment in dubious circumstances or is dismissed for gross misconduct or incompetence. Employers may become liable to an ex-employee and his prospective employer when providing a reference. This gives rise to practical difficulties for employers when providing references for dismissed employees. In the case of Coote v Granada Hospitality Ltd, the ECJ decided that the employer's refusal to give a reference for a dismissed employee who had brought a sex discrimination complaint in relation to her dismissal amounted to victimisation meriting protection under the Equal Treatment Directive, even though the Sex Discrimination Act 1975 does not make unlawful discriminatory acts committed after the employment has ended.

Liability to former employees.

The case of Spring v Guardian Assurance plc (in which references were given under LAUTRO rules) established that, when writing a reference, an employer owes a duty to the ex-employee to take reasonable care to ensure that the reference is factually correct. In particular, employers should ensure that information which may be detrimental to the employee is included only after reasonable efforts have been made to check the accuracy of that information. Failure to do so may mean that the employer is liable to the employee in damages if the employee suffers loss as a result of the ex-employer's negligent reference.

Employers may also be liable for defamation if a reference is given maliciously or negligently. However, if the referee honestly believes the reference to be true and gives it without malice, he will have a defence to a defamation action. Again, it is therefore crucial to check that a reference is factually correct and that any comments which could be detrimental to the employee can be substantiated.

Liability to prospective employers

The employer also owes a duty of care to the recipient of the reference. Thus, a new employer may be able to claim damages against the ex-employer for any loss suffered as a result of a negligent or inaccurate reference.

In order to minimise the risk of being held liable for a negligent reference, employers often include a disclaimer stating that they will not be held liable for any loss suffered as a result of the provision of the reference. However, this type of disclaimer must be reasonable in order to be valid. Reasonableness is assessed according to the precise circumstances. If the referee discloses information which, to his own knowledge, is factually incorrect it is unlikely that liability will be excluded. If the referee states an opinion on something about which he does not have first-hand knowledge, it is likely that the disclaimer will be effective to exclude liability. For example, it would be reasonable to rely on the disclaimer if the employer responds to a question from the prospective employer about the employee's suitability for a particular position which the employee has not previously held; but it would not be reasonable to rely on the disclaimer if the employee has held that position with the ex-employer. Employers should note that they are unlikely to be able to avoid liability to an ex-employee for negligence or defamation by including a disclaimer.

References for dismissed employees

Employers should be particularly cautious when providing references for employees who have been dismissed or who have left employment in dubious circumstances. These employees will often seek a reference as part of a severance deal or a settlement of potential claims against the employer. Although this can be used as a bargaining tool in negotiations, employers should be aware of the additional risks associated with providing a reference in such cases.

First, a good reference supplied for an employee who has been dismissed may be strong evidence against the employer in any subsequent Employment Tribunal proceedings where the employer is trying to justify a dismissal, for example on the grounds of misconduct or incompetence.

Second, employees with over two years' continuous service have the right (under the Employment Rights Act 1996) to request a written statement giving particulars of the reasons for their dismissal. Employment Tribunals have the power to award an employee two weeks' pay if the written statement is not given or if the particulars are inadequate or untrue. Employers should therefore ensure that the information given in a reference is (or would be) consistent with the reasons for dismissal given in a written statement.

Third, employers must take particular care to ensure that references are not inaccurate or misleading, in order to avoid the risk of incurring liability to the ex-employee or prospective employer (see above). This often requires careful attention to detail. An employee may have been dismissed following disciplinary proceedings where, for example, the employer has concluded that the employee was guilty of dishonesty or other gross misconduct. However, the employer will sometimes not be in a position to say with absolute certainty that the employee committed a particular act. Therefore it should not normally be stated in a subsequent reference that the employee has in fact committed the relevant act, but that the employee was dismissed because the employer had a reasonable belief, following investigation, that the act was committed by that employee.

Problems often occur when individual managers respond to requests for references without understanding the full legal implications of doing so. This can be avoided by central monitoring of requests for references and the drafting of individual references. It is also good practice to provide guidelines to managers which contain detailed advice on the employer's policy towards providing references and on the information which should be given in a reference.

In most cases, employers will not encounter any problems when providing references for ex-employees. As the law stands at present, prudent employers will provide only the blandest of references or refuse to give a reference altogether when an employee is dismissed or resigns in less than straightforward circumstances. It remains to be seen whether the law will change to impose an obligation on employers to provide references but, for the time being, the balance of power remains with the ex-employer.