It is common practice for employers to provide references for employees and ex-employees, but there are risks involved. Sarah Anderson outlines eight things every employer should know before they give a reference.
1. No legal duty to provide a reference
There is generally no obligation on an employer to provide a reference about an employee or ex-employee.
This is irrespective of whether the request for the reference comes from the employee, a prospective employer or any other third party such as a bank or landlord.
However, there are a few exceptions, such as when dealing with approved persons in regulated financial roles.
2. References must be true, accurate and fair
Employers have duties towards the subject and the recipient of the reference.
They must take reasonable care to ensure that the information in the reference is true, accurate and fair, and does not give a misleading impression.
If the employer fails to take such care, it could find itself being sued for negligent misstatement and ordered to pay compensation.
Employers must ensure that any reference they give, or any reason for refusing to give a reference, is not discriminatory and does not amount to victimisation.
Employers can be liable for discrimination against a former employee even if it occurs after the employment has ended.
3. Policy on giving references
It is good practice for employers to have a written policy on providing references.
The policy should set out when a reference will be provided, who within the organisation may provide references and what information the reference should include.
Many employers have a policy of providing a standard reference including only limited information, for example dates of employment and positions held. This limits exposure to claims.
Reference requests: example documents
Letter providing a reference for a former or current employee
Letter explaining that the employer operates a policy of not providing references
4. Settlement agreements
When an employer receives a reference request, it should check if there is a settlement agreement in place relating to the particular individual.
Settlement agreements often contain the wording of an agreed reference, which the employer agrees to provide in respect of any reference requests made regarding the individual.
5. Employee consent to reference
In writing a reference, an employer is likely to have to process the employee’s or ex-employee’s personal data, as regulated by the Data Protection Act 1998.
Employers therefore need to check that the individual has consented to a reference being provided.
6. Sickness absence
Employers must get explicit consent from the individual if they are providing sensitive personal data, such as physical or mental health information.
Revealing the number of days an employee has been absent, but not the reasons for the absences, will not require explicit consent. However, this does run the risk of disability discrimination.
7. Disclaimer
Employers often include a disclaimer of liability arising from errors, omissions or inaccuracies in the information provided in a reference.
The circumstances in which a disclaimer will be effective are limited. However, there is no disadvantage to the employer including one.
8. Sending the reference
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A written reference should be addressed to the named individual who has requested it and marked “strictly private and confidential” and “to be opened by the addressee only”.
Providing, for example, “to whom it may concern” references raises the risk that the reference may fall into the hands of third parties without the required duty of interest. This has various negative consequences for the employer.
