References - top tips for employers

Recent press reports have concerned employers hiring employees with murky backgrounds, or allowing employees to leave quietly following serious allegations of sexual misconduct. Should this information be revealed during the referencing process?

Taking or providing references requires you to manage your legal obligations and to ensure that you don’t prejudice an employee’s job prospects. Here are our top tips for employers *.

1. You are not obliged to provide (or request) a reference

The general rule is that employers are neither required to request a reference for a prospective employee, nor to provide a reference for a former employee. However, in situations involving a dispute with an employee, you should be wary of refusing to provide a reference since, in certain cases such as discrimination and whistleblowing, the former employee could use your refusal to allege victimisation or detrimental treatment.

2. Your job offers and employment should be conditional

Many employers make job offers and on-going employment conditional upon the receipt of satisfactory references. This helps avoid a potential breach of contract if the contents (or lack) of a reference results in you withdrawing the offer or dismissing an employee who has already started work.

3. Don’t rely on the content of the reference alone as part of your recruitment decision

Before receiving the reference, you should pay due regard to the applicant’s application form, interviews and/or any relevant tests. You may also need to consider extenuating circumstances for any inadequate (or missing) references.

If you receive a reference referring to a claim for discrimination, and you withdraw the offer of employment as a result, this could also constitute victimisation.

4. Remember that you are potentially liable to the subject of the reference

If you provide a reference for a departing employee, you owe the subject a duty to take reasonable care to ensure the information it contains is true, accurate and fair. If this is not the case, your departing employee could have potential claims for defamation, malicious falsehood, negligent misstatement, or breach of contract. It is, therefore, extremely important to check any facts you are planning to include in a reference.

Be careful when making comments regarding the subject’s performance, attendance or sickness absence if there is any risk that this could be considered to be disability discrimination. If negative comments are made, this could also constitute victimisation (if, for example, the subject has made allegations of discrimination), or detrimental treatment where the subject has blown the whistle.

5. Don’t forget your potential liability to the recipient of the reference

If you provide a reference, you also owe a duty of care to the recipient, in other words your departing employee’s prospective employer. If the reference is misleading (for example making positive statements about performance without mentioning an incident of misconduct) and a prospective employer relies on it, then you could be liable for negligent misstatement. Keep this in mind when a departing employee is trying to agree a favourable reference as part of a settlement deal.

6. Responsibility for the provision of references

You should have a consistent policy in place for the provision of references. This could, for example, include an agreed format and guidance on the type of information which can and cannot be provided.

Many organisations seek to ensure consistency and accuracy in their references for departing employees by assigning this responsibility to their HR Director and/or Head of Compliance.

If one of your employees provides a reference on your behalf without having authority to do so, as the employer you may be held vicariously liable if the reference has been given negligently.

In situations involving a dispute or a potentially contentious reference you may wish to seek internal or external legal advice before acting.

7. Always include disclaimers

A disclaimer can be effective in discharging an employer’s liability for negligent misstatement to the recipient of the reference. Most organisations as a matter of course include a standard disclaimer when providing a reference. However, even if you have included such a disclaimer, you could still be liable to the recipient of the reference for deceit. In addition, without prior agreement to the disclaimer from the subject of the reference (which is unlikely to be forthcoming, and is in any case subject to the normal rules regarding unfair contractual terms) you will still have potential liability.

8. Proceed with care in respect of senior or long-serving employees

When dealing with senior or long-serving employees, you may feel obliged to provide more substantive references which express details about the individual’s character, performance and/or contribution to your business. You should remember that the risks set out above will also apply to those employees and, in fact, the potential risks to future employers may be greater. You should therefore avoid including subjective views and/or potentially inaccurate or misleading statements.

You should also make sure that any personal references are not drafted on company headed paper.

9. In conclusion

As a result of the various risks set out above, it is now common for many employers to provide a standard reference stating only the dates of employment and position(s) held for all employees – even where employees have departed on less than amicable terms. These are normally provided with the inclusion of appropriate disclaimer wording.

* This article does not cover regulatory obligations, such as those for PRA and FCA regulated firms. This will be the subject of a future article.

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.