The law relating to references

It's a common misconception that employers must provide a reference for an existing or former employee. In fact, other than where a reference is needed by a regulatory body or there is a prior written agreement to provide a reference, there is no obligation on an employer to give a reference to an employee. 

However, it is rare for an employer to refuse to provide a reference. This is partly because it is good practice to do so and partly because of the adverse consequences a refusal would have on the employee concerned. The response to a general request for a reference may contain nothing more than factual information about matters such as job description, length of service and reason for leaving. 

Sometimes, though, prospective employers ask more specific questions about matters such as competence and character. It is established that employers owe a duty to former employees to take reasonable care over the preparation of references. Although a reference given by one employer to another about an employee has qualified privilege, which protects employers from liability for untrue statements provided they 'honestly believed' in the truth of what they said, there are some limits to what they can say. 

An employer must not give any information about convictions that are spent under the Rehabilitation of Offenders Act 1974 (Rehabilitation of Offenders (NI) Order 1978 in Northern Ireland), unless the job in question is exempted; maliciously make false statements; or negligently make a wrong statement.

Referees should consider carefully giving favourable references to employees who have been dismissed on the grounds that their work was unsatisfactory. Although they may have no wish to ruin the former employee's future career just because the working relationship broke down, this could backfire if the employee then challenges the reason for dismissal in an action for unfair dismissal. 

In Castledine v Rothwell Engineering Ltd (1973) a tribunal held that an employee had been unfairly dismissed after his employers failed to show a proper reason for dismissal. The employer argued that the reason for dismissal was the employee's lack of ability, but the tribunal found this irreconcilable with the very favourable references they gave him on leaving. 

Employers are often not aware of the action an employee can take if they have suffered a loss as a result of an inaccurate reference. This could be either because they are unable to obtain employment or because they are dismissed for having unsatisfactory references. There are three possible causes of action available to them under the general common law category of 'tort', namely defamation, malicious falsehood and negligence.

Where an inaccurate reference attacks the employee's reputation, defamation is the most obvious cause of action. One element of a defamatory statement is its falsehood. If the maker of the statement wants to allege that the statement is true, then he or she has the burden of proving it is so. As mentioned earlier, in the context of job references, the referee will have the protection of the defence of qualified privilege. Malicious falsehood protects a person from loss of business reputation. The employee has the burden of proving that the statement was made 'maliciously' that is defined as 'calculated to cause damage.'

However, both malicious falsehood and defamation may prove inadequate due to the difficult task of establishing malice and the fact that an employee is looking for a remedy that will compensate him. The best course of action is to sue his former employer for negligence. 

An employer could be liable in negligence for providing an inaccurate reference as the employer has a duty of care not to make negligent misstatements. The case of Spring v Guardian Assurance (1994) confirmed that an employer who gives a reference about a former employee is under a duty to take reasonable care in the preparation of that reference and would be liable to the employee if the reference was inaccurate and the employee suffered loss as a result. The duty requires employers to take reasonable care and skill to ensure the accuracy of any facts that are communicated to the recipient of the reference from which he or she may form an adverse opinion of the employee concerned.

One further point to consider is the case of an employer who recruits someone on the basis of a good reference that then turns out to be inaccurate and they suffer loss as a result. The employer may have to go through the expense of recruiting again, or could suffer loss through the incompetence or dishonesty of the employee. While it might be possible to pursue deceit for fraudulent misstatement, where a referee has been careless, the new employer will have a potential action against the referee for negligent misstatement. The reference content may also come to light if an employee asks their new or prospective employer for a copy of the reference because there is no exemption from the need to disclose data. (Under the Data Protection Act 1998, an employee is not entitled to see a reference given by their old employer.)

It would appear that a referee now owes two incompatible duties: one to the future employer and one to the employee. On the one hand, the employer must take care that he or she does not paint too bad a picture of the employee so as to blight his or her prospects. On the other hand, the employer must ensure that he or she mentions any facet of the employee's capability or conduct that he or she thinks might be material to the future employer. 

At the end of the day, employers must exercise care when preparing references. However, if an employer takes a common-sense approach, there should be nothing for the employer to worry about. Employers must ensure that all the facts on which the reference is based are accurate and that the overall impression of the employee is not misleading.  

l Philip Richardson is an employment associate solicitor at Stephensons Solicitors LLP. [email protected].