References: giving references

Caroline Noblet of Squire Sanders Hammonds begins a series of articles on references with a look at the obligations and potential liabilities on employers when they receive reference requests. Employers need to ensure that they are consistent in whether or not they provide references and that references are accurate and fair. 

Introduction

It is best recruitment practice for employers to make job offers conditional on the receipt of satisfactory references. As a result, employers often receive requests for references about their staff from other employers. Recruiting employers may request references in writing or orally. There are a number of potential obligations and liabilities that employers need to consider when they receive a reference request.

Obligation to respond to reference requests

With the primary exception of references in relation to certain roles in the financial services sector (typically those regulated by the Financial Services Authority (FSA)), employers are under no general legal duty to provide references and are entitled to refuse requests. Irrespective of whether or not their policy is to provide references, it is important that employers take a consistent approach to this issue and treat all reference requests in the same way. An employer that usually responds to requests for references but does not do so on a particular occasion runs the risk of a discrimination (including victimisation) claim under the Equality Act 2010 being made against it. The Act provides protection against discrimination in relation not only to employees and job applicants but also to ex-employees after the contract has come to an end, provided that the discrimination arises out of the employment relationship. This would include refusing to provide a reference. (Protection against post-employment discrimination was inserted into the discrimination legislation that preceded the Equality Act 2010. Rhys-Harper v Relaxion Group plc and other appeals [2003] IRLR 484 HL, which was decided before that change, also determined that employees are protected against discrimination after employment, in relation to references.)

If the employer's chosen approach is not to give references, it should clearly state this both in its reference policy if it has one and in its response to prospective employers.

Normally, there is no contractual obligation requiring an employer to provide a reference. This does not form part of the duty of trust and confidence. However, compromise agreements or other settlement agreements such as COT3 agreements often include an express requirement that the employer provide a reference (sometimes in an agreed form) on request. An employer that breaches this requirement could be liable for claims against which the agreement is intended to protect it (for example discrimination, unfair dismissal and/or breach of contract).

Reference content and general liabilities

There is a considerable volume of case law in relation to both the provision and the content of references. Spring v Guardian Assurance plc and others [1994] IRLR 460 HL established that an employer owes a duty of care to an employee about whom it writes a reference. The employer's duty is to take reasonable care in the preparation of the reference. It will be liable to the employee if it fails to do so and the employee suffers financial loss as a result. Employers are under an obligation to take reasonable care to ensure that the information included in a reference is true and accurate, fair and not misleading (Bartholomew v London Borough of Hackney [1999] IRLR 246 CA). However, in Kidd v Axa Equity & Law Life Assurance Society plc and another [2000] IRLR 301 HC, it was held that there is no requirement for employers to give full and comprehensive references. (Employers should note that requests from regulatory bodies such as the FSA may require a fuller response.)

The employer's liability to the prospective employer

If an employer knowingly gives false information with the intention that the recipient will rely on it, the reference provider may be liable to the recipient in the tort of deceit. This tort arises when a false statement of fact is made by one person, knowingly or recklessly, with the intent that it shall be acted on by another, who suffers damages as a result. In the context of giving references, this means that the referee may be liable for a claim in damages if a loss is occasioned to the recipient (for example, loss of market opportunity if the recipient is a competitor company and is unable to pursue a new line of business because the false information in the reference meant that the job offer was withdrawn).

The employer's liability to the subject of the reference

In addition to the general liabilities described above, employers also have liabilities towards the individual who is the subject of the reference.

Discrimination: As previously mentioned, references that are provided must not be discriminatory, either by what they do or do not include. In particular, information provided in relation to an individual's performance, attendance record or sickness absences should be carefully worded to reduce the risk of claims of disability discrimination. A poor reference given in retaliation for a discrimination complaint is likely to constitute unlawful victimisation.

Defamation: Defamation is an untrue statement (whether in writing or oral) that damages the reputation of a person in the estimation of right-thinking members of society. Employees and ex-employees cannot successfully sue an employer for defamation in a reference (even if its contents are untrue) provided that:

• the employer genuinely believed that the information in the reference was correct; and
• the reference was provided without malice.

This defence arises because the employer and the prospective employer have a common interest in the statement about the employee and the statement is protected by "qualified privilege". However, this defence will be lost if the statement is not merely passed between the parties having mutuality of interest in the subject matter (ie the subject of the reference) but falls into the hands of a third party. Employers not only should be able to justify comments made in references and show that they honestly believe the contents are true, but should also mark a reference as "private and confidential - for the addressee only".

Malicious falsehood: This may arise where a reference contains untrue words that are also published maliciously; in effect the employer provides a reference and knows that the words are untrue or it is indifferent as to their truth. If this occurs, the subject of the reference will be able to sue the referee for damages to recover any economic loss incurred by him or her, for example losses relating to the consequent withdrawal of an offer of employment.

As references involve the provision of personal information, they are subject to the Data Protection Act 1998. Employees' consent is needed to process personal information, which includes providing information in a reference. Further, information that relates to an employee's sickness record or reasons for periods of absence will constitute "sensitive personal data". Employers must obtain explicit consent to share sensitive personal data. Where a reference will include sensitive personal data, the employer should ensure that the employee or ex-employee agrees to the specific content of that reference, before it sends it to the recruiting employer. The Information Commissioner's Office (ICO) has published an Employment practices data protection code (PDF format, 12MB) (on its website), which contains recommendations for employers on providing references (at part 2.9).

Employers that have provided a reference may be asked by the employee or ex-employee concerned to disclose information contained in that reference as part of a data subject access request. Employees are not entitled to see or take a copy of any reference issued by that employer or ex-employer (para.1 to sch.7 of the Data Protection Act 1998).

Avoiding liability

Employers responding to reference requests can avoid incurring some or all of the liabilities described above by ensuring that:

• they have a clear procedure that states to whom reference requests should be made and who has the power to respond to them;
• unless specifically agreed otherwise (for example, where specific wording is negotiated as part of a settlement agreement), references are in a broadly standard form;
• reference content is true, fair and accurate;
• reference responses are marked "private and confidential - for the addressee only";
• when oral references are given, a contemporaneous written record of the information provided is made and retained;
• it is clear within the procedure for giving references that, if references are provided in a personal capacity rather than on behalf of the employer, this should be made clear by the person giving the reference and the employer's letterhead or email should not be used; and
• they exercise care when providing information that is personal and/or sensitive personal data under the Data Protection Act 1998.

Next week's topic of the week article will look at references and the recruitment process and will be published on 11 July.

Caroline Noblet is a partner at Squire Sanders Hammonds (caroline.noblet@ssd.com).

Further information on Squire Sanders Hammonds can be accessed at www.ssd.com.