Andrew Masters Issues a Reference Warning to Employers

13 July 2004

Most employers will at some stage be asked to provide a reference on a former or current employee. As part of any responsible recruitment strategy most employers will not take on an employee without at least a satisfactory reference. However, many employers are unaware of the potential legal pitfalls that can arise when preparing a reference. Here is a brief guide to consider when preparing an employment reference.

The Employee’s Right to a Reference

Generally, a business is under no obligation to provide an ex-employee with a reference. Exceptions to this rule include:

• An express clause in the employee’s contract or a compromise agreement (failure to provide one in these circumstances will be a breach of contract)
• Certain regulatory bodies insist that their members obtain and provide references (e.g. LAUTRO)
• Although not strictly a reference, if an employee has been continuously employed for one year or more, an employer must within 14 days of a request from the employee provide written reasons for any dismissal

The Employer’s Duty When Preparing a Reference

If an employer chooses to provide a reference, the referee has a duty of care to both the employee and the business receiving the reference. The referee must ensure that the reference is not only true and accurate but also fair and reasonable. The reference must not give an unfair or misleading impression overall even if each element is factually correct. Referees should not be ‘economical with the truth’. Even if everything said is true, if what is left out would change the reference, it could be negligent!

Post Employment Discrimination

Further protection is available for workers covered by discrimination legislation. In certain circumstances, failure to provide a reference or the giving of an unjustifiably bad reference can amount to unlawful discrimination, provided that the discrimination arises out of and is closely connected to the employment relationship. Recent cases and amendments to the Sex Discrimination Act 1975 and Race Relations Act 1976 (Disability Discrimination Act 1995 is amended on 1 October 2004) confirm that discrimination laws can also cover references for ex-employees.

Disclosure of References

Under the Data Protection Act 1998 (DPA), references are not covered by the usual rule that employees have the right to see documents that relate to them. This is provided that the referee gives a reference in confidence for employment, self-employment or educational purposes.

However, this exemption applies only to disclosure by the referee and not by the recipient, for example the new or potential employer. If the employee requests a copy from the recipient, under the DPA the recipient will need to obtain consent from the referee. If such consent is not forthcoming, the recipient makes the final decision as to whether the benefit of disclosure outweighs the duty of confidentiality to the referee. The referee cannot therefore rely on protection under the DPA.

Given the risks of disclosure, the most sensible approach will be for employers to assume that the employee will eventually read any reference they produce.

Employers should also be careful not to include “sensitive information” about the employee, for example information about their health, trade union membership, religion or belief or sexual orientation. Under the DPA, explicit consent will be required from the employee before the information is disclosed.

Guidelines

Employers should therefore closely monitor the giving of references. To avoid future claims:

• consider whether you wish to provide a reference (remember it is not, in most instances obligatory)
• if a reference is given, decide whether simply to confirm employment details or give a full reference including an assessment of work and character
• decide who can give references and indicate whether the referee has personal knowledge of the employee
• obtain a second opinion within the organisation on the content of the reference
• ensure references are true and accurate, fair and reasonable
• treat all requests for references equally and avoid discrimination
• avoid giving “sensitive information” under the DPA (unless specific consent has been given)
• take particular care when giving oral references (which can carry the same weight if challenged but may not be as thought through); and
• consider a disclaimer in any reference to increase your level of protection, for example

“Please note that in common with all references given by the firm, this reference is given in the strictest confidence and on the express understanding that no liability is accepted by the firm or the author in relation to any error, omission or negligent misstatement contained in it.”

For more information please contact Andrew Masters, Partner & Head of Employment.
 

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