Sarah Rushton looks at the problems associated with providing employee references and questions what value they have when employees change workplaces.
Most employees assume that they will be given an employee reference if they leave their place of work, but providing references can sometimes be problematic for employers. We highlight eight possible complications that employers should be careful to avoid.
An employer risks a victimisation claim if it refuses to give a reference, or gives a poor one, where an employee has done or intends to do a “protected act” – such as bringing discrimination proceedings or giving evidence or information in connection with them.
An employee can successfully bring a claim of victimisation arising out of a poor reference or a refusal to give a reference, even where the complaint of discrimination was not upheld.
Refusal to provide a reference may be discriminatory if the reason is based upon a protected characteristic under the Equality Act 2010 (eg age, disability, race, religion or belief, or sex).
Breach of contract
An employee may have a contractual right to a reference, eg where a reference has been agreed as part of a settlement.
Employers owe a duty of care to the new employer and the subject of the reference.
Employee references must be true, accurate and fair. Moreover, liability can be incurred even where the employer makes a statement that is not in a formal reference.
For a former employer to be liable for giving an inaccurate reference, the new employer would have to show that the old one had provided an inaccurate reference, that the new employer had relied on it and had suffered loss and that it was reasonable for a liability to be imposed. That will be difficult for the new employer to prove. However, employers sometimes give references to other parties, such as mortgage companies. In these circumstances, it is easier to prove loss where the information is incorrect or misleading.
Tips for minimising risks when providing empl0yee references
- Have a clear written policy setting out who is authorised to give a reference and the form that it will take. It should also set out circumstances in which a reference may be refused or where the employer may deviate from the written policy.
- Limit references to issues of fact. Many employers provide references that simply give dates of employment and job titles. If an employer chooses this option then it should make it clear to the new employer that it is only prepared to provide limited information.
- Include a disclaimer. It will not assist an employer in defending claims by the subject of the reference but may discourage claims from the person receiving the reference.
- If a reference is given as part of a settlement agreement, reserve the right to refuse a reference or to amend it if matters come to light that would render it misleading.
For an employee reference to be libellous, it must lower the employee in the eyes of right-thinking members of society or hold them up to ridicule or contempt. Defamation is a difficult claim to make against an employer because of the defence of “qualified privilege”. Courts recognise that it is in the interest of society to have certain information passed on freely and have established that a defence of qualified privilege applies where references are given. However, the defence will be lost if an employee can show that the statements were made out of spite or malice.
Personal data is exempt from an individual’s right of subject access if it is in a confidential reference. However, the exemption applies only to references given, not to references received. Therefore, if an employee suspects that they have been given an inaccurate or poor reference, they may be able to get a copy by making a subject access request to the employer who received the reference.
An employee may be entitled to a reference because their employment is regulated, eg by the Financial Conduct Authority. Regulated individuals have to be “fit and proper” and one matter taken into account is whether or not the person has been dismissed, or asked to resign and resigned, from employment.
A regulated firm is obligated to disclose anything that may affect whether or not an employee should
be regarded as fit and proper, and that obligation is binding on current and former employers. It is worth considering this when negotiating employee exits because it can be problematic to obtain settlement agreements where disciplinary proceedings are commenced, but settlement is reached prior to their conclusion.
A resignation or settlement may be negotiated as part of an exit for expediency and to avoid a formal disciplinary finding, but it may still be necessary to disclose to a regulator the fact that disciplinary proceedings were commenced. Obviously, this can cause problems for the ex-employee.
Disclaimers limit liability between the old and the new employer, but will not limit the liability of the old employer to the employee, unless there is a specific written agreement between them.