This article first appeared in Reward Strategy Magazine.
The writing of references has long been a thorny topic in employment law and so the recent case of Hincks v Sense Network Limited  which identifies ‘common features’ of the duties of a reference writer is important reading for those involved in giving references.
Background to case
In 2012 Mr Hincks began working as an independent financial adviser for CIFS, which had Financial Conduct Authority authorisation as an appointed representative of the defendant, Sense Network.
In October 2014, Mr Hincks visited a long-standing client to carry out an annual review, during which the client requested a new product for a maturing investment. At this time Mr Hincks was unable to conduct business due to regulatory reasons, so he organised a further appointment with a CIFS director who could conduct the business. On the day, the CIFS director was unable to attend but suggested that Mr Hincks call Sense Network to obtain permission to conduct the business alone. Having spoken to Sense Network, Mr Hincks conducted the business on the understanding that Sense Network had given him authorisation to proceed. Sense Network contended that Mr Hincks had no authorisation and had breached process.
In November 2014, Mr Hincks was asked to provide a statement on the transaction and attend an investigation meeting with Sense Network, following which his authorisation with Sense Network was terminated, prohibiting him from working as an independent financial adviser. Mr Hincks’ appeal was rejected on paper on 6 January 2015.
Mr Hincks applied for various new positions after his termination, but was unsuccessful. Many of these prospective employers received a reference from Sense Network expressing various negative opinions including the following statement in relation to Sense’s findings regarding the transaction that had resulted in termination: “Our subsequent investigation concluded that, in spite of the explanations offered by Mr Hincks, it was reasonable to conclude that he had knowingly and deliberately circumvented the agreed process”. The judge concluded that, but for her findings on liability, the references caused Mr Hincks the loss of a chance of employment.
Mr Hincks’ case was that the negative opinion within the reference was wrong, and was based on an investigation that was unfair in many respects. Mr Hincks further submitted that where a reference includes negative opinion, the reference writer should be satisfied that the opinion is based upon a reasonably held belief and that the investigation was reasonable, procedurally fair, and consistent with the standard to be expected of the reasonable employer.
The High Court’s findings
The judge disagreed with these submissions, and in particular had difficulties with requiring a reference writer to look into the fairness of the investigation as she was concerned that this would stultify the practice of reference writing. The judge therefore found that the standard of care to be exercised by a reasonable reference writer should be expressed in broad terms, but that there were “certain common features” of that duty, which were:
- To conduct an objective and rigorous appraisal of facts and opinion, particularly when giving a negative opinion, whether those facts and opinions emerged from earlier investigations or otherwise.
- To take reasonable care to be satisfied that the facts set out in the reference were accurate and true and that, where an opinion was expressed, there was a proper and legitimate basis for the opinion.
- Where an opinion is derived from an earlier investigation, to take reasonable care in considering and reviewing the underlying material so that the reference writer is able to understand the basis for the opinion and be satisfied that there is a proper and legitimate basis for the opinion.
- To take reasonable care that the reference is not misleading either by reason of what is not included or by implication, nuance or innuendo.
The judge found that the reference writer is under a duty to examine the fairness of the underlying investigation only where there is a ‘red flag’ prompting further enquiry. The judge did not expand on what would constitute a ‘red flag’ but did not find that any of the matters complained of by Mr Hincks amounted to one.
Following this case, reference writers advancing negative opinions must ensure that they have followed the ‘common features’ set out above and that there is an objective and reasonable basis for such opinions. Reference writers must also be alive to any ‘red flags’ prompting further enquiry into the procedural fairness of an investigation and, although the Court did not go into any detail as to what would amount to such a “red flag”, it appears this will be necessary in rare cases only.
- Where possible, it is advisable for reference writers to provide factual references only (note this was not an option available to Sense in the present case).
- If further detail is needed and the reference writer is advancing a negative opinion, ensure there is a reasonable and objective basis for that opinion.
- Only in rare cases will reference writers need to look into the procedural fairness of an investigation upon which the opinions expressed in the reference are premised.
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