Work references can be fraught with danger

Choose your words in a reference for a former employee very carefully. There is more at stake than you think. By PETER VITALE of VECCI

By Peter Vitale of VECCI

Sometimes you will find yourself in a difficult position when former employees ask for a reference, and it will not always be because there may have been a dispute leading up to parting company.

Most employers want to “do the right thing” and help people find a new job by providing a positive reference.

But in cases where the former employee has been considered less than ideal, a quandary often faced is how to provide an honest reference that neither prejudices chances for re-employment but that also does not mislead the prospective employer about that worker’s suitability?

The consequences of failing to tread this delicate balance can be costly for both employee and employer.

The starting point for businesses is the need to understand their duties in giving references to employees. The decisions of courts in Australia and Britain make it clear that an employer is responsible for ensuring that the contents of a reference is not negligently inaccurate.

An employee that is denied employment or terminated as a result of such a reference may well have a legitimate claim for damages against the former employer who gave the reference.

In one British case, the former employer had given an opinion about the employee’s honesty to the new employer that was based on a suspicion that was not proven, or even fully investigated. It was claimed that the employee’s career was so adversely affected that he suffered a mental breakdown and was unable to continue working.

The English Court of Appeal indicated that it was potentially open to the lower court to award damages, which extended to compensation for a loss of income for the whole time the employee was unable to work.

Letting a prospective employer know about only part of an employee’s history might also give rise to liability. A presentation of information that highlights negative aspects of an employee’s career without fully explaining the context of that information can also land a reference giver in trouble.

Again, the former employee may have a claim for damages. Claims could potentially be made for negligence, defamation and breach of contract… just to name three.

On the other side of the ledger, an employer must be aware of obligations to prospective employers. A reference that presents a positive impression of the employee’s qualities, which is carelessly prepared or unreasonable or unfounded, might also be the subject of legal action.

Picture, for example, the future employer who relies on the glowing reference and subsequently employs the subject of the reference who then turns out to not have the capabilities that the reference states or implies that he or she has.

If the employee subsequently proves to be incompetent or dishonest, or engages in other undesirable behaviour that leads to the new employer suffering loss, that loss could be recovered against the employer that gave the glowing reference.

In addition to negligence, the very real possibility of a claim based on the Trade Practices Act (TPA) exists. It’s well known that the TPA prohibits conduct in trade or commerce that is misleading or deceptive, and allows recovery of compensation for those who suffer loss because of that conduct.

That prohibition also extends to statements about what an employer believes about the future abilities of employees, if they prove to be inaccurate and can’t be shown to be based on reasonable grounds.

While there is no case law in Australia on the point, an example that can give rise to particular cause for concern is where the terms of the reference are agreed between the employer and soon-to-be employee, usually as a result of the settlement of a dispute over termination of employment.

In those circumstances, the employer, in their zeal to resolve the matter, may be tempted to go further than is prudent in what it says about the departing employee. It is precisely at this point that the employer should be considering what may happen if a future employer takes the reference at face value.

The lessons for employers:

• Have a clear policy about giving written references and verbal follow up, which is enforced. Consider a no-reference policy.
• Unless there is an express contractual right, employers are not obliged to give employees references. Statements of duties and the period of employment are an alternative.
• It’s still OK to give a reference, but don’t gild the lily.
• Make sure what you say about your former employee is true and accurate, and does not leave out important facts or circumstances.
• Make sure any opinions about the employee’s abilities are soundly based and reasonable and not malicious.
• Don’t agree to give references that you aren’t prepared to back up.

Peter Vitale is a solicitor, the General Manager of Workplace Relations Services at VECCI and a principal at CCI Victoria Legal.