Letters and the law

Although there is no obligation to provide a reference for a former
employee, any supplied must be fair, accurate, not misleading and produced with
reasonable care. Anything less opens up the possibility of litigation. Blair
Adams offers procedures to avoid the pitfalls

References include not only the formal letter of recommendation provided by
a manager or HR department but also any subsequent correspondence, e-mails or
telephone calls about the employee in question. The duties that go with
providing a reference continue throughout and cannot be circumvented by
supposedly ‘off the record’ telephone conversations – see the Cox case below.

There is no general legal obligation to provide a reference to a former
employee, or to a prospective employer. However, you may have assumed an
express obligation to provide a reference if:

– you have agreed to do so as part of the settlement of a claim by the
employee;

– a regulatory body requires that references be provided for former
employees (but see below);

– the employee’s contract of employment contains a promise to provide one;
or

– you have undertaken to provide a reference in any other context, for
example, as part of a severance agreement.

Whether or not an employer is under an obligation to give a reference, most
do so. Despite the trend towards giving relatively brief and unenlightening
references, they still play an important part in the recruitment process and can
be crucial in obtaining a new job. Because of the clear duties the courts have
imposed on employers, care must be taken before making oral or written comments
about ex-employees.

Recent cases have established that, in giving a reference, an employer has
two similar, overlapping legal obligations. First, there is a duty of care to
the employee and to any prospective employer to give a true, accurate reference
which does not mislead or give an unfair impression of the employee. Breach of
this duty would amount to negligence.

Second, there is an implied contractual obligation to ensure that any
reference is true, accurate, fair and produced with reasonable care and skill.

Breach of either obligation risks exposure to liability for damages to the
employee if the breach results in suffering a loss, for example, because a job
offer is withdrawn or if provisional employment is not confirmed because the
references are unsatisfactory.

Obligations in practice

Behind the legal labels given to the employer’s obligations are the
following essential elements.

True and accurate – what this means in practice is that the employer
must take care to ensure that any facts given in the reference are true and
accurate, especially if the facts are of the kind that could cause the
recipient of the reference to form an adverse opinion of the employee.

Fair and not misleading – the overall picture given by the reference
must not be misleading. It must be a balanced representation of the employee’s
record and must be weighed in context against what it does not say about the
employee. These elements can operate at several levels as the following cases
demonstrate:

Spring v Guardian Assurance plc, [1994 ] ICR 596. The employer said in Mr
Spring’s reference that he had acted dishonestly in selling a certain insurance
policy. Not surprisingly, a new employer refused to take him on because of
this. The High Court found that Mr Spring had, in fact, not acted dishonestly
and therefore the reference was inaccurate and misleading. The House of Lords
had to decide whether the employer’s failing had breached any legal duty. It
held that it had. There was a duty on the employer to take reasonable care in
the preparation of the reference and, if it failed to do so, it would be liable
for damages to the employee and also the new employer if it too had suffered
any loss.

Bartholomew v London Borough of Hackney, [1999] IRLR 246. The employer
stated in a written reference that the employee had faced allegations of gross
misconduct which had been dropped when he agreed terms for a voluntary
termination of employment. All of this was true and factually accurate: the
question was whether by mentioning it the employer was giving a misleading
impression of Mr Bartholomew’s employment record. The Court of Appeal decided
that in the circumstances, and bearing in mind the wording of the reference as
a whole, it was not.

However, it emphasised that an employer does not discharge its duty just by
putting together a set of factually accurate statements. The reference must be
looked at as a whole for whether it is misleading or not, or gives an unfair
impression of the employee.

Cox v Sun Alliance, [2001] EWCA (Civ) 449. Mr Cox received a fairly bland
written reference from Sun Alliance Life as part of an agreed severance deal
and got a new job with Hambro Life. It emerged that one of his former Sun
Alliance managers had subsequently told Hambro on the telephone that
allegations of financial impropriety had been made against Mr Cox before he
left Sun Alliance. The manager represented that there had been a proper
investigation and that Mr Cox had had the opportunity to answer the charges. In
fact, details of the allegations had never been put to Mr Cox by Sun Alliance,
they had not been properly investigated and had certainly not been proven. As a
result of the manager’s remarks and Hambro’s concerns about the fitness of Mr
Cox to work in the financial services industry, Hambro required him to leave
which he did.

The remarks the Sun Alliance manager made on the telephone were found to be
inaccurate, unfair and careless and caused Mr Cox to lose his new job. Sun
Alliance were held to be liable to pay damages for his loss.

Regulatory rules on references

In both Cox v Sun Alliance and Spring v Guardian Assurance and also in
another High Court case of Kidd v Axa Equity & Law Life Assurance, [2000]
IR:R 301 the employer was, at the time the reference was given, regulated by
Lautro. The Lautro compliance regulations required employers to give "full
and frank disclosure… of all relevant matters which [the employer] believes or
has reasonable grounds for believing are true."

However, the Court of Appeal in Cox was quite clear that a requirement to be
"full and frank" does not justify carelessness or inaccuracy of any sort
and certainly not the sort displayed by the Sun Alliance Life manager who made
comments about Mr Cox.

Equally, where a rule requires disclosure of matters which the employer
"has reasonable grounds for believing to be true," the belief must be
genuine and based on proper investigation rather than personal opinion.

Although the regulatory regime in the financial services industry has since
changed, the clear thrust of the court’s decision is that the wording of a
regulatory rule will not excuse the employer from general obligations regarding
references.

Duty to the prospective employer

The House of Lords in Spring firmly established that the duty not to be
negligent in giving a reference extended not only to the employee who is the
subject of it but to the prospective employer who requests it. Thus, if you are
tempted to write glowingly of a mediocre employee, his new employer could sue
you for the expense of recruiting a replacement when the employee turns out to
be the wrong person for the job. Even if the reference is merely careless
rather than deliberately exaggerated, you may be liable to the new employer for
any loss.

Problem cases

Giving references for employees who are poor performers, difficult
personalities or suspected of, charged with or guilty of misconduct poses
problems. Our suggestions for dealing with them are as follows.

– Do not mention any issue of conduct or performance which has not yet been
put to the employee.

– If any performance or conduct issues have been taken up with the employee,
think carefully about the necessary of mentioning them at all (were they, for
example, in the fairly distant past, relatively minor or not related to the
areas about which the new employer is enquiring?). If you consider it necessary
to mention them, ensure that what you say is true and accurate and that they do
not assume an exaggerated importance unbalancing the reference as a whole by
giving an unfair or misleading impression to the reader.

– Ensure that the reference undergoes scrutiny by someone other than the
writer before it goes out.

– Ensure that those who give references are aware of their obligations and
that these apply when expressing views in writing or orally.

– Ensure those who receive oral enquiries follow set procedures for referring
them as appropriate or taking careful notes of what is said.

Adding a disclaimer

One might consider adding a disclaimer such as: "The above information
is given in confidence and in good faith. No responsibility, however, can be
accepted for any errors, omissions or inaccuracies in the information or for
any loss or damage that may result from reliance being placed upon it."

Be aware that the effectiveness of disclaimers has not been tested in the courts
in the context of employer references and their effect is likely to be very
limited. Public policy considerations led the House of Lords to acknowledge the
existence of the old employer’s duties towards the ex-employee and the new
employer. Similar considerations are likely to make the courts disallow escape
from those duties by simple disclaimers. They would certainly not save the
referee from liability for knowingly giving false information.

Refusing a reference

Is it possible to refuse to give a reference in order to avoid the potential
pitfalls? Put another way, can silence get you into just as much trouble? The
answer is possibly yes.

First, a clear element of the employer’s duty is to be fair and not to
mislead – the impression that is created by a refusal to give a reference
(assuming that it is general policy to provide them) could be just as damning
as giving a poor or misleadingly unbalanced reference. The increasingly common
"dates of employment and position held" brief reference could, in
theory, be misleading if it fails to mention some key fact eg, that a full and
proper disciplinary procedure found the employee guilty of a dishonest act but
that he was allowed to resign rather than be dismissed.

Second, if the employee has already brought any kind of discrimination
claim, not giving him a reference may be interpreted as singling him out for
further "different" treatment amounting to an act of victimisation
against him. This will depend very much on the genuine motivation of the
person(s) who decided not to provide a reference.

In Khan v Chief Constable of West Yorkshire, a genuine desire not to give a
reference in order not to prejudice continuing litigation was held to be
justified and did not constitute an act of victimisation.

Agreed form references

A partial solution is to agree a form of written reference with the employee
(this will usually be as part of an agreed severance deal). At least by doing
that the employee cannot complain about what you have said about him in
writing. However, as the Cox case shows, the real damage can be done by oral
comments.

Our suggestion is that managers or HR personnel who are likely to receive
follow-up enquiries from new employers, whether on telephone or e-mail, should
either be told to explain that it is the company’s policy not to elaborate
further on written references and, therefore, there is nothing they can add; or
receive strict instructions that anything they say must be true, accurate, fair
– and, of course, in line with the written reference.

Blair Adams is a solicitor in the employment department of Herbert Smith

Essential guidelines for referees

– Do not mention any issue of conduct
or performance which has not yet been put to the employee.

– If any performance or conduct issues have been taken up with
the employee, think carefully about the necessity of mentioning them at all.

– Ensure that the reference undergoes scrutiny by someone other
than the writer before it goes out.

– Make sure that those who give references are aware of their
obligations and that these apply when expressing views either orally or in
writing.

– Staff receiving oral enquiries on issued references should
follow set procedures for referring them as appropriate and take careful notes
of what is said.

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