Are departing employees entitled to a reference?

In an era of algorithmic hiring and artificial intelligence screening, one of the most consequential steps in the employment process remains stubbornly human: the reference call.

At a time when resumes are parsed by software and interviews are conducted by video — sometimes asynchronously — the reference call is often the only moment when one human being speaks candidly to another about a candidate. No branding. No LinkedIn polish. Just opinion.

Let us begin with a question employees frequently ask: Are they entitled to a reference?

The answer, in law, is no.

An employer is generally under no obligation to provide a reference, glowing or otherwise. Many organizations, guided by risk-averse counsel, have adopted what is colloquially known as the “tombstone” reference: confirmation of dates of employment, position held and salary — nothing more. It is the corporate equivalent of name, rank and serial number.

But here is the twist. While there is no freestanding legal entitlement to a reference, courts have occasionally treated the absence of one as a factor in assessing reasonable notice ie the amount of severance, in wrongful dismissal cases.

If an employee’s ability to secure new employment is impaired because an employer refuses to assist at all, that can lengthen the notice period. Employers who believe silence is the safest course should understand: it is not always cost-free.

In one recent Ontario Superior Court decision, Carroll v. Oracle Canada, the courts increased the notice/wrongful dismissal damages because the employer provided a deserving employee with only a tombstone reference. It is a warning to Canadian employers everywhere, as that is the most common type of reference provided.

For employees, references have become even more critical in industries such as banking and securities, where offers are routinely conditional on satisfactory references. No good reference, no job. A single phone call can determine whether a career advances or stalls.

There are risks on both sides of the reference equation.

Consider first the “false positive.” An employer, eager to be rid of a problematic employee but lacking airtight cause for dismissal, provides an undeservedly glowing reference. The individual secures a new role — perhaps in finance — and proceeds to commit the very misconduct suspected at the prior firm.

Can the new employer pursue the former one for negligent misrepresentation?

The answer is yes, at least in theory. Canadian courts have recognized that an employer who provides a reference owes a duty of care to the recipient. If the reference is materially misleading and the new employer relies upon it to its detriment, liability can follow. The temptation to “be nice and move on” may later prove expensive. It can be misleading through non-disclosure.