References have for a long time been an accepted part of the recruitment process. They provide prospective employers with an idea of the capabilities of a potential employee and ensure that employers do not have to rely simply on paper qualifications or a one-hour interview. However, how can an employer be sure that the reference before them is an accurate reflection of its subject? And are there any rules about providing a reference for a former or departing employee?

DO I HAVE TO PROVIDE A REFERENCE?

Departing employees and prospective employers expect references to be supplied as a matter of course but in most cases there is no obligation to do that. Some exceptions to this rule do exist. For example, there may be a term in an employee’s contract requiring the employer to provide a reference, or a similar term may be implied because of custom and practice. Equally, there are some regulatory bodies which can compel members to provide references (eg businesses governed by the Financial Services Authority), Finally, an employer could find itself in trouble if its reasons for refusing to provide a reference amount to unlawful discrimination – where an employee has previously brought a claim of race or sex discrimination and the employer withholds the reference as a way of ‘getting even’.

WHAT IF I DO WANT TO PROVIDE A REFERENCE?

An employer is obliged to ensure that references are true, accurate and fair and do not give a misleading impression of the individual concerned. It will be liable in negligence if it fails to exercise reasonable care in preparing a reference. In the leading House of Lords case of Spring v Guardian Assurance an employee was able to claim for negligent misstatement and breach of the implied term in his contract that any reference given would be compiled with all reasonable care, because his employer had suggested that he was dishonest when it did not have proper grounds for that. As a result the employer was liable for some loss of earnings arising from the failure to secure employment because of the damaging effect of the reference.

CAN’T I JUST GIVE HIM A GOOD REFERENCE, EVEN IF HE WAS A POOR WORKER?

Equally, an employer owes a duty of care to prospective employers and so it is important to ensure that a reference is not over generous. An employer who ends up with an individual who bears no resemblance to the reference can sue the author for negligent misstatement. More seriously, if an employer knowingly provides false information intending it to be acted upon, it will be guilty of fraudulent misstatement if another party relies on that and suffers a loss as a result. That the reference author did not intend the recipient to suffer any losses is irrelevant. Under these circumstances, therefore, even losses which could not necessarily have been foreseen by the employer giving the reference may be recoverable by the new employer.

Employers are often reluctant to give poor references to departing staff, even those who have not performed particularly well. In particular, having a satisfactory reference (from an employee’s point of view) is often a prerequisite for entering into a severance deal. An employee is hardly likely to sign a compromise agreement that includes a reference which will make it difficult for him to obtain future employment in their chosen field of work. However, employers need to consider the content of any such reference carefully, given their potential liability to the former employer and the recipient of the reference.

WHAT CAN I LEAVE OUT?

Employers should bear in mind that whilst references have to be true, accurate and fair, they do not necessarily have to be full and comprehensive. If an employer is not inclined to give a negative reference, yet at the same time wants to avoid the risk of negligent misstatement, it would be well advised to be selective about what the reference contains. For example, an employee may have poor team-working skills, but be very organised and always on time. An employer could legitimately say the employee is “well organised and punctual” and simply remain silent about their team -working ability.

However, an employer cannot simply remain silent about an employee’s traits, whether positive or negative, if those omissions give an unfair or misleading impression of the employee. An individual may have been outstanding, apart from the fact that he was found to have stolen money from his employer. That omission would be misleading and could expose the employer to a claim from the recipient of the reference, if it suffered a loss as a result of relying on that reference.

If an employer does mention an employee’s failings, the reference can still be unfair if negative comments are not in context. An employee may have been moody and irritable in the office during his last month of employment. If that was due to losing a close relative, then it would be important to mention that in the reference (having first considered, of course, whether the employee would want such personal information to be disclosed). In summary then, the key test in relation to any reference is the overall impression of the employee which it gives. It is not enough that the reference contains a number of facts each of which is true in isolation. It is also important to look at this issue from the point of view of the recipient of the reference. Prospective employers should be prepared to read between the lines – it is not what is there but what is not there, given that many employers will be reluctant to provide departing employees with bad references – the selective as opposed to the critical reference.

CAN A REFERENCE BE GIVEN ON A CONFIDENTIAL BASIS?

The Data Protection Act 1998 covers information which is kept in any “relevant filing system”.This is any organised system, be it computer- or paper-based, of storing and retrieving personal data. If a reference is kept in any kind of organised file it will be covered by the Act.

Generally speaking, individuals are entitled to see information about themselves that is covered by the Act. However, under an exemption in the Act, if an employee requests a copy of a confidential reference about them, the employer does not have to provide a copy. Nonetheless, unless the employer has a particular reason for withholding the information, it would usually be reasonable to disclose the reference if requested for the good of employee relations. Employees should ideally have been made aware of any shortcomings they may have via appraisals, so negative comments in a reference ought not to come as a surprise.

It is also important to note that the exemption described above would not apply in the case where the employee asks a prospective employer to provide a copy of a reference which it had received from the previous employer. If the reference is kept in a way which is covered by the Act, a request for a copy must ordinarily be complied with (subject to any other exemptions which may be applicable). Under the Act, individuals have the right to see what information is being held about them and, if necessary, to correct any mistakes but are not necessarily entitled to have access to that information about other people. Such information could include the identity and/or opinion of the author of a confidential reference. It may therefore be lawful to delete information about other people from the reference before it is disclosed, though bear in mind that where the reference is obtained from a small organisation, it may be easy for the employee to deduce who has provided a reference even where identifying information has been removed.

If a reference is stated to be “in confidence”, consideration must be given as to whether the information it contains is actually confidential. If some of it is already known to the individual, it cannot reasonably be withheld. If some of it is not, the author should be contacted to ask whether there is any objection to it being passed on and, if so, why. If the writer objects, the person holding the reference must use their judgement. The referee’s interest in having their comments kept confidential should be weighed against the individual’s interest in seeing them. If it is reasonable in the circumstances to comply with the individual’s request to see the reference without the referee’s consent, then the employer should agree to that request.

MOVING FORWARD

The key point to take away is the need to strike a careful balance. Employers should be wary in particular of taking the “easy option” of giving a departing sub-standard employee a glowing reference just to hasten their departure. Whilst it may seem a harmless parting gesture at the time, employers may soon regret it if that reference results in expensive and time-consuming Court proceedings. Equally, however, a “warts-and-all” portrait, or a blanket refusal to provide a reference, may trigger complaints and litigation from the disgruntled ex-employee. Careful, objective consideration of the proposed reference – remembering that it may well be seen by the employee in due course – will be all-important in achieving that crucial balance.

HR FORUM 2006

The pace of change in employment law can be dazzling. With legislation being constantly updated, it can be difficult for a busy HR professional, lawyer or adviser to keep up to date and more importantly, plan for the future. Cobbetts has established an HR forum – a comprehensive range of workshops designed to give your team at all levels the necessary skills and knowledge needed to maximise and manage the performance of your most valuable asset – your people.

The next forum focuses on Handling Requests for Flexible Working and will be held on the following dates:

Tuesday 27 June, Leeds

Thursday 29 June, Manchester

Tuesday 4 July, Birmingham

Cost: £25 + VAT (£29.38 inc VAT)

For more information about HR Forum or to book your place contact Clare Fletcher on 0845 165 5239 or at clare.fletcher@cobbetts.co.uk

If you have any queries or require more detailed advice on any of the above matters, please contact:

Judith Watson

Tel: 0845 165 5205

E-mail: judith.watson@cobbetts.co.uk

Ronald Drake

Tel: 0845 404 1523

E-mail: ron.drake@cobbetts.co.uk

Kathy Halliday

Tel: 0845 404 2370

Email: kathy.halliday@cobbetts.co.uk

The content of this newsletter is merely informative and should not be relied upon as a substitute for legal advice. Copyright 2006 Cobbetts LLP - All Rights Reserved - May 2006