You say it best when you say nothing at all – The risks of providing unfavourable or false references

Providing references to prospective new employers about employees can be a tricky business. There are range of important considerations for those delivering references to take into account and often conflicting interests can creep into the equation.

Common concerns include:

  • The risks of providing an unfavourable reference;
  • The risks of giving an exaggeratedly favourable reference;
  • How much information to give away;
  • The impulses of managers to keep high-performing employees by giving mediocre or false references.

In this blog, we outline some of the most serious risks associated with providing false references and some strategies to minimise exposure to those risks.

Defamation

It is possible for defamation to occur in the giving of a reference, though in Australia, the bar to prove that defamation has occurred is quite high and the onus of proving defamation rests with the aggrieved person.

Defamation is the publication or dissemination of statements about a person that are likely to cause damage to that person’s reputation.

There are a number of defences to defamation (such as triviality, honest opinion and qualified privilege) however, these defences will not always protect a person providing a reference, particularly where the person is acting with malice.

Malice is viewed in the law as an improper motive, as is acting with ill-will or spite. If a referee is spurred by malice in the giving of an unfavourable reference, they may be straying into the territory of defamation.

An employee who has been defamed may be entitled to sue for damages.  

Negligent misstatement

There is another cause of action available to those aggrieved by an unfavourable reference – negligence in the form of a negligent misstatement.

A negligent misstatement can occur where a person makes an incorrect statement about an employee and that results in the employee missing out on a job or suffering some other form of loss.

Both of these examples have played out in the courts in the UK where certain principles about this cause of action have been established. In Spring v Guardian Assurance plc [1994] UKHL 7 the House of Lords held that an employer who provides a reference to a prospective new employer about employee owes a duty of care to the employee in respect of the preparation of that reference. If the employer breaches this duty they then will be liable in damages for the economic loss suffered by the employee as a result.

A negligent misstatement in the process of providing a reference can also aggrieve a new employer who relies on the misstatement to their detriment. This might occur if a manager gives a glowing reference about an employee, knowingly claiming that the employee has certain attributes or skills that the manager knows the employee does not possess.

As with claims of defamation, an employee or new employer who has suffered loss as the result of a negligent misstatement may sue for damages.

Strategies for employers

There are a number of strategies employers may choose to implement to minimise their possible risk to claims resulting from the giving of references.

  1. Training for managers

As a matter of good practice, managers should receive guidance from employers about how to deliver references appropriately.

This should include training on any of the employer’s policies relevant to providing reference, the personal risks to managers of providing a false reference and the privacy issues that may arise in the giving of references.

For example, managers should be advised to restrict their comments about employees to matters concerning the employment relationship, leaving aside any personal affiliation and avoiding discussions about private matters such the employee’s personal life or circumstances.

  1. A verbal references policy

Written references don’t always allow for the full picture to be discussed in the process of providing a reference and are open to interpretation by a reader more than say a phone call where the matters in question can be more fully discussed. Often employees seeking written references will also write suggestions for their managers and request simply that their manager sign the reference, which is their own opinion of their abilities, not that of their manager.

To avoid misinterpretation or situations where a manager signs off on an inaccurate reference, employers many introduce a policy prohibiting written references, instead requiring that all reference be delivered verbally.

In some circumstances, written references are required for specific types of licencing applications in which case, exemptions to the policy should be sought and granted on a case by case basis.

  1. Statements of Service

Many employers maintain a policy on reference giving whereby employees are issued with a Statement of Service at the end of their employment setting out their job title, their duties and their length of service, only.

Verbal support for a Statements of Service can then be provided by managers or HR to the extent that they confirm the contents of the Statement but offer no further value judgements about the performance or character of the employee.

In some circumstances, managers may be permitted to provide more detailed verbal references upon request.

  1. No references policy

For some employers, the risk of accusations of misstatement in the process of providing references is too high to tolerate. Accordingly, they may consider a complete ban on providing references in a No References Policy.

In these circumstances, confirmation of employment (e.g. though a Statement of Service) may be the limit of what an employer is prepared to provide or allow managers to provide.

This is an extreme approach to take and can be frustrating for employees seeking new employment and for managers who are asked to provided references and are capable of doing so honestly and professionally.

Lessons for employers

The approach an employer and/or a manager takes to giving a reference will always depend on the circumstances and employee in question.

The potential risks involved in providing a reference require that referees take a fair and honest approach to the task and act in good faith, without malice or negligence. Employers and managers should also be mindful of employee privacy and limit any comments they do make to matters relating to the employment relationship and avoid personal matters they may have come to understand about the employee during their employment.

Shane Koelmeyer is a leading workplace relations lawyer and Director at Workplace Law. Workplace Law is a specialist law firm providing employers with legal advice, training and representation in all aspects of workplace relations, employment-related matters and WH&S.

02 9256 7500 | sydney@workplacelaw.com.au

Information provided in this blog is not legal advice and should not be relied upon as such. Workplace Law does not accept liability for any loss or damage arising from reliance on the content of this blog.

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