Candidate/Employee References

1. Introduction

These days it is becoming rare for an offer of employment to be made without the prospective employer requiring a reference from a previous employer or person who can vouch for the candidate's level of ability and good character. Mortgage companies may also seek references.

2. The General Rules

There is NO legal obligation on any employer to give a reference unless they have previously agreed to do so in the contract of employment. Employers must take extreme care in providing references and should not include any information in a reference without first checking the truth of any comments made. This is because an employer owes a duty of care both to the employee and also the recipient of the reference. It is not unlawful to provide a "bad" reference if the information given is accurate, truthful and not misleading and it is given in good faith without malice. The cases set out below illustrate these points.

3. Rights of employees and workers who are the subject of references

Employees and workers who believe that an employer has acted negligently by providing an inaccurate reference can bring a claim for damages against the employer for the loss suffered. Damages in this instance could be for the economic loss suffered as a result of losing a potential job or the failure in obtaining a mortgage as a result of the reference. There can of course be no action for negligence if the statement is true.

An employee could also bring a claim for defamation. Defamation occurs where a false statement is made or repeated which is prejudicial to a person's reputation. It is for whoever makes the damaging statement to prove that it is true. In other words, an employer sued for defamation as a result of statements made in a reference will find that the onus is on him/her to prove the truth of the statements made. For example, an employer providing in a reference that the employee is a thief without honest belief in the statement could be held liable by the Court for making a defamatory statement. Statements should therefore be factually true, not merely an opinion and certainly not information received second-hand.

However, even factually true statements may contain misleading omissions or innuendoes that might render them defamatory. An example of this might be a statement disclosing the fact that a worker was dismissed for gross misconduct but failing to add that he had since successfully sued the employer in the Employment Tribunal for unfair dismissal on the basis that the conduct in question did not amount to gross misconduct.

4. Rights of the recipient of a reference

It is reasonably foreseeable that the recipient of the reference will act on its contents. If that recipient relies on a reference, which is inaccurate because it was carelessly drawn up, and thereby suffers loss, s/he could bring a claim for damages against the employer on account of his negligence. For example if an employer provides in a reference to a prospective employer that the employee performed his tasks successfully, when in fact the employee was incapable of performing the tasks in hand, and the employee is taken on, the new employer could bring a claim for damages as a result of the ex-employer's negligent statement if s/he suffers loss arising out of his/her employment of the employee.

5. Case Law

The following cases reaffirm the fact that employers owe a duty to take reasonable care in compiling or giving a reference and in verifying the information on which it is based. They also illustrate the fact that employers will not be penalised for giving information that may result in a job offer being withdrawn if the information given is correct and what is stated is fair.

The leading case on the legal status of references is Spring v Guardian Assurance Plc 1994. In this case Mr Spring sold insurance policies issued by Guardian Assurance on behalf of his employers. Sometime later his employers sold the business to Guardian Assurance Plc who dismissed him. When Mr Spring tried to take up a job with another insurance company he was given a very bad reference by Guardian Assurance Plc. Mr Spring pursued a claim for negligence, breach of contract and malicious falsehood. The Courts did not find that Guardian Assurance had acted maliciously, but Mr Spring's claim for breach of contract and negligence succeeded. The trial judge in reaching a decision stated that the reference "was so strikingly bad as to amount to the kiss of death to [Mr Spring's] career in insurance". The House of Lords held that an employer owes a duty of care to an employee about whom he writes a reference. The employer's duty is to take reasonable care in the preparation of the reference, and he will be liable to the employee in negligence if he fails to do so and the employee thereby suffers damage.

The case of Bartholomew v The London Borough of Hackney 1998 also considered the duty of care owed by an ex-employer to a former employee in respect of references. Mr Bartholomew was employed by the London Borough of Hackney as head of their race equality unit. He was suspended in September amid allegations of gross misconduct involving financial matters. A settlement was reached and Mr Bartholomew accepted voluntary severance in February 1994. The terms of the severance were that Mr Bartholomew's disciplinary matter would be closed upon him accepting a payment in lieu of notice. Fifteen months later Mr Bartholomew sought employment with Richmond-upon-Thames Social Services who requested a reference from his former employers.

The specific information requested was confirmation of the dates of his employment at Hackney and the posts he had held, the number of days absent for health reasons and Hackney's view on Mr Bartholomew's suitability for the new post. The London Borough of Hackney replied that he had been suspended from work at the time of his voluntary severance and disciplinary action for gross misconduct had ceased on his departure. Richmond Social Services subsequently withdrew their offer of employment.

Mr Bartholomew brought a claim for negligence and relied on the Spring case on the grounds that his former employers had breached a duty of care owed by an ex-employer to an ex-employee in respect of references. There was no dispute that the statement in the reference had been true, simply that it had been misleading. The Court of Appeal dismissed Mr Bartholomew's claim and held that Hackney had not breached the duty of care it owed to him because the reference as a whole was not unfair, inaccurate or false.

In TSB Bank plc -v- Harris(2000) the employer gave details in a reference of eight separate complaints from customers about the employee. They were required to give this information to any prospective employer by their regulatory body. The problem was that the employee was only aware of two of the complaints and had never been given the opportunity to defend herself against the rest. By listing the complaints and failing to give the employee the opportunity to provide an explanation the employer had effectively destroyed the employee's chances of a career in the financial services industry and they were therefore in breach of the duty of mutual trust and confidence. All employers should be careful of revealing details from the employee's personnel file if the individual is unaware of their existence.

The case of Kidd -v- Axa Equity & Law (2000) also involved the financial services industry. Kidd was employed by Axa Equity & Law (E & L) as a sales representative promoting a particular type of investment package. In addition to an internal investigation of customer complaints against Kidd, the regulatory body LAUTRO were also concerned about the package he was selling and were carrying out a review to ensure he was serving his clients' best interests.

Kidd applied for a position with another company who requested a reference from E&L in the form of a questionnaire. E&L left blank the questions "Have you any reason to doubt the honesty of the applicant?" and "Does there appear to have been any sustained pattern of the applicant failing to give investors best advice?". However, they sent a covering letter indicating that as they were currently undertaking an investigation they were unable to answer those questions. Kidd failed to get the job on the basis of the reference and claimed that it was misleading as E&L had omitted to mention his various successes at work and the fact that the complaints and the concerns of LAUTRO were partly with the type of package he was selling and did not necessarily reflect badly on him.

The Court set out a three-stage test which an employee would have to satisfy in order to succeed with a claim against a former employer. He or she would have to show that

• the information given in the reference was misleading
• this was likely to have a significant effect on the mind of the person receiving the reference to the disadvantage of the employee, and
• the ex-employer was negligent in providing such a reference.

In Kidd's case they did not feel the failure to answer certain questions was misleading because this had been explained by the covering letter. It was also not misleading to omit to mention that the LAUTRO investigation included consideration of the investment package because his selling practices were also being scrutinised and it was this which any prospective employer would be more concerned with.

In the case of Cox v Sun Alliance Ltd 2000 (SAL), C a branch manager with SAL was suspended from work in November 1989 due to a rift between him and his staff. C entered into negotiations with SAL with a view to reaching a settlement under which he would resign in exchange for a compensation payment. Whilst C was suspended, one of SAL's tied agents M claimed C had accepted irregular payments. C was interviewed regarding the allegation where he refused to offer an explanation for the payment because SAL refused to provide a copy of M's statement. No further investigation was undertaken and C resigned his position in March 1990. C received compensation for loss of office and an undertaking by SAL that they would provide a reference.

C secured employment with Hambro Guardian Ltd (HG ltd) in 1990 and they requested a reference from SAL's personnel services manager J. J informed HG Ltd over the telephone that C had left under the shadow of disciplinary proceedings and that issues relating to financial impropriety were involved. In fact the allegations of impropriety had never been proven or even the subject of a proper investigation. As a result of J's comments HG ltd asked C to resign. In February 1991 C secured an appointment with Windsor Life ltd (WL ltd) and upon requesting a reference from SAL, J repeated the same information he had disclosed to HG ltd. WL ltd confirmed C's appointment.

C brought a claim against SAL ltd on the grounds that SAL had acted negligently in providing a reference which had caused him difficulties in securing employment. C also brought a breach of contract claim that the references provided were in breach of the termination agreement.

The Court of Appeal in reaching a decision held that before an employer provides an unfavourable reference, an employer should believe that the information is true, have reasonable grounds for that belief and have carried out as much investigation into the matter as was reasonable in the circumstances. The Court of Appeal went on to add that in order to avoid claims in respect of an agreed reference, the parties should ensure that the exact working of the reference is agreed and recorded in writing.

6. Possible Methods of Protection

Employers may include an express provision in the reference excluding any liability for the content of the reference. This can act as a deterrent against an action in negligence, either by a future employer who subsequently suffers financial loss after reliance on a favourable reference or where an employee loses an opportunity for employment as a result of an adverse reference. However, the enforceability of such a provision cannot be guaranteed.

7. Employee's right to see references - Data protection considerations

Although an employee has no general right to see a reference given about him or her it must not be assumed that references will remain confidential. The Data Protection Act 1998 has created the right for an employee to request sight of information, including written references about him/her, which an employer keeps on file. However the individual giving the reference also has the right not to have their personal data revealed without their consent. Therefore upon such a request an employer will have to balance any duty of confidentiality it has towards the giver of the reference as against the duty to provide to an employee/worker information held on file about him or her. Provided that the identity of the giver of the reference is obscured the employer is unlikely to breach its duty of confidentiality to the referee. However if the referee has not consented to the disclosure of the reference or it is not possible to keep the referee's identity confidential, for instance by blanking out names and other identifying information, this may be grounds for refusing to disclose the reference.

8. Job Offers - "Subject to References"

The issue of whether references are satisfactory is one for the potential employer, subject to a requirement to act in good faith. Most job offers will be made "subject to references" and it is vital that if a potential employer would withdraw an offer of employment upon receipt of unsatisfactory references that offers are made subject to references. Failure to make a job offer "subject to references" could result in an action for breach of contract being brought against the potential future employer if bad references mean that a job offer previously made unconditionally is then withdrawn.

9. Temporary workers and candidates for short term placements

As already stated above there is no obligation in law to provide references. In addition references, when they are given, are usually given in confidence and the recipient must protect that confidentiality.

Employment businesses supplying temporary workers to their clients will wish to reference check those workers before sending them out on assignment. Many find that they are unable to do so because employment businesses that have previously used the services of the worker in question will not provide references.

References obtained from other employment businesses may not, of course, give first hand information about a particular temporary worker's performance, time keeping or attitude. They are limited in their scope and often do little more than confirm the dates a particular worker has worked and whether satisfactory reports or otherwise have been received back from clients. Provided that the information given is factual, correct and accurate, employment businesses have little to fear from giving such references.

While there is no legal requirement to give references, REC expects that its own members would not stand in the way of temporary workers finding work through other employment businesses by refusing to give references. Besides inhibiting those workers' freedom to move about the market place such refusal might also prove detrimental to the employment businesses in question. If a negative inference is drawn from a refusal to give a reference and the worker in question can show that the refusal is either malicious or negligent, s/he may have a claim against the potential referee.

Some employment businesses and employment agencies supply short-term relief staff of a type where references are vital. In these cases they will often seek references, not only from other recruitment companies the workers have used but also from previous employers. While previous employers may not have a large number of requests for references and may therefore be more willing to provide them, recruitment companies using those references should be aware of their limitations. As stated above, references are generally given in confidence. Many will be marked private and confidential. It is therefore a breach of confidence to pass the contents of that reference on to a third party without first obtaining express permission to do so from the referee.

Where references are obtained and recruitment companies wish to pass the contents of those references on they must make the referee aware of this fact. If the referee agrees, that agreement should be obtained in writing and only then can the contents of that reference be passed on to clients. If the referee refuses to allow the recruitment company to pass the reference on, the recruitment company will have to make a judgement based on the contents of that reference, as to whether the worker in question should be supplied or introduced to clients. If the recruitment company decides that the worker should be supplied or introduced, it should inform its clients that confidential references have been obtained, that the referee has not given permission to pass the contents on and that they should therefore apply direct to the referee if they wish to use the services of the worker in question.

It is important that any failure to obtain references or any refusal on the part of a referee to allow the recruitment company to pass on the contents of a reference to clients, are made clear to clients in writing. This will avoid any later claims by clients that the recruitment company has failed to properly inform them about the status of the reference checks carried out on particular workers. This is perhaps particularly but not exclusively relevant to the placement of nurses, care workers, short-term nannies, locum doctors and locum teachers.

10. Permanent candidates and clients

The REC Model Terms of Business for the Introduction of Candidates by an Employment Agency place the onus on you, the client to take up references and satisfy yourselves as to the candidate's suitability. Even if a client requests us , the consultancy, to take up references we advise you, the client to verify the truth of any references obtained, this is to ensure we avoid liability for any loss suffered by you, the client as a result of a false or misleading reference.