Why employers should take care with references

Posted on
Even a personal endorsement on LinkedIn could carry employer liability.

It might seem surprising but there is no general entitlement to receive a reference from an employer. If employers decide not to provide references, the policy should be applied consistently to avoid allegations of discrimination or victimisation from employees not receiving a reference. In the financial services sector, employers may be obliged to update the relevant authorities with material information about employees.

Duty of care

If a reference is provided, the employer owes a duty of care to the employee concerned to exercise reasonable care and skill. This means providing a reference which is truthful, accurate and fair and does not give a misleading impression. Fairness has been determined by tribunals by looking at the overall balance of the reference and any opinions expressed. 

Negligence

An employer may be at risk of a claim for ‘negligent misstatement’, either from the employee or from the recipient employer, if the reference contains inaccurate information causing loss. Claims for defamation or malicious falsehood are also possible if the reference contains information which is untrue or which disparages the employee. A failure to exercise reasonable care and skill in providing references has been held by the courts to be a breach of the implied term of trust and confidence (a duty which forms part of every employment contract), providing employees with the basis for constructive dismissal claims.

Disciplinary procedures

If an employee leaves employment with disciplinary proceedings pending, the employer is not obliged to complete any outstanding investigation. However, the employer must limit unfavourable comments in any references it produces to issues that have been properly investigated, and which it has reasonable grounds to believe are true. Case law has established that where a reference mentioned that an employee had been suspended pending disciplinary action when he left the organisation, the employer did not have to state that the employee vigorously disputed the charges.

Where an employee is dismissed following disciplinary warnings, or for gross misconduct, this should be referred to in a reference if the employer is specifically asked why the employee left. If not, then the employer must consider whether omitting this information is likely to give a false impression. 

Agreed references

Where an employee leaves under the terms of a settlement agreement containing an "agreed" reference, deviating from it could be breach of contract. However, a recent case, Camurat v Thurrock Borough Council found that such an agreement could not trump an employer's statutory duty to report issues to the police or the Independent Safeguarding Authority. The clause covering the reference in the agreement should include a provision permitting amendments if new information comes to light.

Data protection issues must also be considered: employers should ensure that employees are happy for a reference to be given, and remember that they could see a copy of it through a subject access request to a new or potential employer.

Announcements

As with references, announcements (external or internal) regarding an individual's departure (voluntary or involuntary) must not give a false impression that others might rely on, potentially causing them loss. Nor should it undermine any ongoing procedures, for example, an appeal against disciplinary action. In most cases the announcement may be agreed with the employee beforehand.

Personal recommendations

An employer could find itself liable for so-called ‘personal’ references (in other words, an employee vouching for a colleague in a personal capacity), including in relation to the giving of recommendations or testimonials on LinkedIn or other social media, unless it makes clear that such references are not given on its behalf. Employers could publish internal guidance, or perhaps issue a general prohibition against such colleague endorsements.

Checklist

Employers should:

  • have a published reference policy governing who may give references on behalf of the company and what those references can contain
  • ensure that every statement within the reference can be substantiated
  • stick to the facts and avoid subjective comments
  • consider whether any omissions would result in a misleading impression
  • avoid referring to misconduct unless it has been proven, or was fully investigated, and the employer has a reasonable belief that the misconduct took place
  • insert a disclaimer of liability in to the reference and ensure that it is marked "private and confidential for the addressee only"
  • consider inserting a clause into contracts of employment, setting out that the employer has no duty to provide a reference
  • remember the data protection implications of giving references.

This article was originally published on www.cipd.co.uk