An employer that provides a reference for a former employee can be sued for negligent misstatement if the reference is found to be inaccurate.
Duty of care
The duty of care which employers owe to employees when preparing references is to exercise reasonable skill and care and to provide a reference which is true, accurate and fair. The author must take reasonable care to ensure that the reference is not misleading either by reason of what is left out, or by including facts which, although accurate when viewed discretely, either through nuance or innuendo generate a misleading picture when considered overall.
In Hincks v Sense Network, the UK High Court dismissed a claim made by Mr Hincks that his former employer had been negligent when providing a reference for him. The case itself is unusual, given how comprehensive the reference was. It referred to Mr Hincks’s suspension and that his employer had to offer compensation to clients for losses incurred on transactions Mr Hincks had been involved in. It also stated that he had been placed on a rehabilitation programme and that Mr Hincks had “knowingly and deliberately circumvented” the pre-approval process when making financial transactions on behalf of clients.
The High Court dismissed the claim holding that on a careful and rigorous review of the material involved in an internal investigation, the statements made in the reference, including the negative opinion expressed, were more than amply supported. However, the Court did set out certain common features of the duty of care which an employer must consider when giving a reference. These were:
- To conduct an objective and rigorous appraisal of facts and opinion, particularly negative opinion, whether those facts and opinions emerged from earlier investigations or otherwise.
- To take reasonable care to be satisfied that the facts set out in the reference were accurate and true and that, where an opinion was expressed, there was a proper and legitimate basis for the opinion.
- Where an opinion was derived from an earlier investigation, to take reasonable care in considering and reviewing the underlying material so that the reference writer was able to understand the basis for the opinion and be satisfied that there was a proper and legitimate basis for it.
For obvious reasons, many employers choose to limit references to a brief factual reference including dates of employment and the post(s) held by the employee. This approach mitigates the risk that the reference omits something material. If employers provide such a reference, they should explain that it is their policy to provide a reference only in this format.
However, where an employer goes beyond this, a referee must be able to justify and support any comments made in a reference and show either that they are true, or that they honestly believe that they are true.
Employers should be particularly careful when giving a reference under regulatory requirements and should ensure that adequate documentation is retained to support any opinions offered in a reference.
For more guidance on providing references, contact a member of our Employment & Benefits team.