Not recommended

Granada
was recently forced to pay almost £200,000 compensation to an ex-employee for
failing to supply a reference, highlighting the importance of getting it right.
Veronica Dean answers some of your most frequently asked questions

Is an organisation obliged to provide a reference? As a rule there is no
obligation on an employer to provide a reference to a prospective employer of
one of its past or current employees. But as with all general rules there are
exceptions – as Granada Hospitality discovered recently when an award of
£195,000 was made against it.

Granada refused to provide a reference to a former employee as a consequence
of her having brought a successful sex discrimination action against the
company in 1993 (she was awarded £11,000). Granada refused to provide any of
the organisations she applied to with a job reference, making it very difficult
for her to secure new employment. The ex-employee, who had been the manageress
of a bowling alley owned by the Granada Group, brought her second claim against
the company in 1994. It took five years to pursue, including a referral to the
European Court of Justice.

The Employment Appeal Tribunal in Coote v Granada Hospitality (No 2), 1999,
IRLR 452, held that in light of the directions given by the ECJ, Coote was
entitled to have an employment tribunal determine her claim that she had been
unlawfully victimised, contrary to the Sex Discrimination Act 1975 when Granada
refused to provide her with a reference. This was despite the fact that she was
no longer employed by the company. Coote was ultimately awarded £195,000 in
compensation.

This case is undoubtedly an extreme example. The law relating to references
is constantly changing but despite the Granada case the general rule remains
that there is no obligation on an employer to provide a reference.

What is our duty of care to the subject of the reference?

An employer may be liable to an employee for any economic loss he or she
suffers as a result of any negligent misstatement.

In the case of Spring v Guardian Assurance, 1994, IRLR 460, the House of
Lords determined that an employer has a duty to take reasonable care in
compiling or giving a reference and in verifying the information on which it is
based. Where an employer gives an inaccurate reference about an employee to a
prospective employer and it is foreseeable that the employee may be caused
financial loss as a result of failing to obtain new employment, then it is fair
and reasonable that the employee should be compensated.

That is not to say that the reference must in every case be full and
comprehensive, however, as shown by last year’s Court of Appeal case,
Bartholomew v London Borough of Hackney, 1999, IRLR 246. Bartholomew was
employed as head of Hackney’s race equality unit. He was suspended pending
investigations into alleged financial irregularities and Hackney began
disciplinary proceedings against him. Bartholomew, meanwhile, brought a claim
against the Council alleging racial discrimination. The parties reached a
settlement and as a result Bartholomew withdrew his complaint and the
disciplinary action automatically came to an end.

Hackney was subsequently asked for a reference. The reference confirmed he
had taken voluntary severance following deletion of his post and that at the
time of leaving he had been "suspended from work due to a charge of gross
misconduct and disciplinary action had been commenced. This disciplinary action
lapsed automatically on his departure from the authority." Bartholomew had
an offer of employment withdrawn as a result of the reference and he made a
claim for damages against Hackney.

Bartholomew alleged that the council was in breach of its duty of care in
providing a reference which, although factually correct, was unfair. The court held
that there was a duty of care to provide a reference that is in substance true,
accurate and fair and not unfair or misleading overall, even if its separate
components are factually correct. The duty does not mean that a reference must
in every case be full and comprehensive.

What should a reference contain?

In general any reference should contain details such as the length of the
employee’s service, the position the employee held, the employee’s competence
in the job, their timekeeping and attendance record, reason(s) for leaving, and
any personal observations relating to the employee that might be relevant to
their employability.

Care should be taken, however, where the information provided is opinion
rather than fact. It must be possible to justify every statement in the
reference, for example from personnel records or performance reviews. All
references should be vetted before despatch to check for pitfalls and
liabilities that might flow from any inaccuracies.

What are the obligations towards the prospective employer?

Not only does an employer owe a duty of care to the subject of the reference
but also to the recipient. If reasonable care is not taken in preparing a
reference the recipient may sue the referee for any damages incurred as a
direct result of relying on it.

Employers should therefore guard against giving inaccurate references in the
hope of "offloading" troublesome employees. In practice, if a job is
offered subject to satisfactory references and as a consequence of the
reference the job offer is made unconditional, it is clear the reference has
been relied upon. Losses may include wasted recruitment, training and legal
costs.

Can we avoid liability through a disclaimer?

Disclaimers in a reference can be of some assistance but the disclaimer is
subject to a test of reasonableness under the Unfair Contract Terms Act 1977.
It is likely to be deemed unreasonable to seek to disclaim liability in respect
of facts in the referee’s own knowledge, although it may be reasonable to
disclaim liability in respect of opinion, for example about the employee’s
suitability for the prospective position.

Is it safe to withdraw a job offer if the references are unsatisfactory?

While it is for the recruiting employer to decide if the employee is suitable
for their needs, what is a "satisfactory" reference must be
determined using objective tests. Particular care should be taken when
withdrawing an offer of employment in light of a reference, especially where
the reference discloses for the first time a disability or involvement in trade
union activities that a prospective employer does not wish to accommodate.
Withdrawing an offer of employment may in such circumstances give rise to a
discrimination claim.

Does the subject of the reference have the right to see it?

All references should as matter of course be marked private and
confidential, if only to protect the referee from libel actions. But bear in
mind that under the provisions of the Data Protection Act 1998, employees may
have a right to see information about themselves. Although the employee has no
right of access to the confidential reference provided by the former employer,
they arguably have a right to see the reference once it is in the prospective
employer’s hands.

Veronica Dean is partner in employment law at Edge Ellison

www.edge.co.uk

Case Study Kidd v Axa Equity & Law

Avoid a crippling burden on employers

In Kidd v AXA Equity & Law Life Assurance Society and another, High
Court, 27 January 2000, unreported, an unsuccessful attempt was made to push
the boundaries of the referee’s duty of care still further.

Much of the evidence was hotly disputed and, to save time and costs, the
court proceeded on the basis of an assumed set of facts. Essentially, Kidd was
an approved representative for AXA Equity & Law, authorised to sell its
financial products. He resigned, intending to join Allied Dunbar.

The references provided by AXA Equity & Law were poor, referring to the fact
that investigations were continuing into the conduct of Kidd’s affairs with
clients as a result of a number of complaints. Allied Dunbar decided not to
proceed with the engagement and Kidd commenced proceedings for damages against
both companies.

The crux of his case against AXA Equity & Law was that it had owed him a
duty to provide a full, comprehensive and fair reference. Mr Justice Burton
encapsulated the legal obligation on a reference provider as: "… a duty to
take reasonable care… not to give misleading information… whether as a result
of the unfairly selective provision of information, or by the inclusion of
facts or opinions in such a manner as to give a false or mistaken inference in
the mind of a reasonable recipient."

There is no additional duty, however, to give a full and comprehensive
reference or even to refer to all material facts. The judge concluded that this
would be imposing a fresh and possibly crippling burden on employers. Kidd’s
claim therefore failed.

Richard Lister works in the employment law department of Lewis Silkin

Golden rules of references

– Do not discriminate against an employee or former employee for an unlawful
reason in refusing to give a reference.

– Ensure all references are marked strictly private and confidential and for
the attention of the addressee only.

– Consider marking the reference with a disclaimer.

– Get all references vetted by personnel department before they are sent.

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