Charities and non-profit organizations that provide reference letters to departing and former employees need to ensure that they are aware of the possible legal implications that such letters entail.

An inaccurate or defamatory employment reference could be the subject of legal action against an employer and/or the individual author of the letter. Such legal action could be brought by the subject of the reference letter, to whom employers have been found to owe a duty of care. Where the author of an employment reference letter is proven to have been negligent regarding any statements made, the subject of the reference does not have to prove an “actual loss” of employment, but only that he or she lost a “reasonable chance” of employment.

A duty of care may also be owed to an employer receiving the reference letter.  An employer acting in reliance upon a reference may be able to sue the individual author and/or their organization for damages, if the information contained in the reference is inaccurate or misleading, thereby having encouraged them to act in a manner (such as hiring the ex-employee) to their detriment. If the ex-employee proves not to have the skills/qualities set out in the reference letter, recourse for any resulting loss could be taken against the provider of the reference. Likewise, liability could arise from inaccuracies in references provided to financial institutions.

Recent case law also indicates that in certain limited circumstances, there could also be a legal obligation on a current or recent employer to provide a reference when asked to do so, as a refusal to provide a reference may hinder the individual’s opportunity of gaining employment. Given the potential for liability, a manager or supervisor who has a concern about writing a reference is well advised to contact their Human Resource Department and potentially legal counsel for advice.

There are two principal reasons for an employer to request a reference on a prospective employee:

  1. To confirm the accuracy of statements made in the prospective employee’s application; and
  2. To provide opinions as to the candidate’s suitability for the position in question and his/her potential for the future.

In responding to a reference request made by a potential employer, the facts about an individual’s employment history and any opinion as to their ability to undertake the employment should not be confused. If an opinion is offered regarding an individual’s abilities, the reasoning for such a view should be made clear. If challenged, the author of the reference letter would need to provide evidence to support their view. Unsupported opinions should never be part of a reference letter. The contents of a reference letter, if inaccurate or maliciously prepared so as to defame an individual, could expose an employer to an increased notice period in a wrongful dismissal action, or to tort claims in defamation or negligence.

Guidelines to Follow in Providing Reference Letters

  1. General

Generally, all information given in a reference should be based on fact or be capable of independent verification. Caution should be taken about giving any subjective opinion about an individual’s performance, conduct or suitability that cannot be substantiated with factual evidence.

As noted, the author of a reference may be liable for negligence if loss is caused as a result of the employer’s failure to exercise reasonable care in the preparation of the reference. Since liability may come about through carelessness, either as to matter of fact or in the formulation of opinion, there is a duty for employers to:

  1. Take reasonable skill and care to ensure the accuracy of a reference;
  2. Provide a reference which is in substance true, accurate and fair; and
  3. Not give an unfair or misleading impression overall, even if the components are factually correct.

In cases where it is alleged that an author has provided a misleading reference, for a claim to be successful it would have to be established that:

  1. the information provided in the reference was misleading;
  2. the provision of such misleading information was likely to have a material effect upon the mind of a reasonable recipient of the reference to the detriment of the claimant; and
  3. the defendant was negligent in providing such a reference.

An employer will not generally be liable for references that are not comprehensive, unless the omission of information is intended to give a misleading impression of the employee. There is no liability for libel provided the employer believes the information in the reference is correct and it is given without malice.

  1. Telephone References

If possible, such requests should be declined other than in exceptional circumstances since information given in this way could easily be subject to misinterpretation. Where telephone references are given, statements should not be made that you would not be willing to make in writing; the information should be based on fact or be capable of independent verification and the response followed up immediately with a written reference.

  1. Record-Keeping

A copy of the reference should be placed on the individual’s employment file.

  1. Liability and Disclaimers

A reference letter should contain a disclaimer in its final paragraph along the lines of:

“In accordance with the normal practice of [Name of Organization], this reference is given in good faith and in confidence, without legal liability on behalf of the author or of [Name of Organization]”.

As there is no guarantee that a disclaimer within a reference letter will be successful if challenged in court, due care must be exercised when preparing a reference.  In the event that a staff member is challenged over the content of a reference which they have provided, he or she should not be drawn into a discussion of the issue of liability, but should refer the matter immediately to their manager to address. In the event of such a challenge, Senior Management might find it prudent to contact legal counsel prior to offering a response.

Given the potential liabilities that may arise from the provision of, or failure to provide, a reference letter to a departing employee, charities should consider drafting a policy to govern this issue. Such a policy can set out guidelines and procedures that will assist staff in avoiding the potential pitfalls in what might seem a routine part of ending the employment relationship.