The recent downward shift in the Canadian economy has forced many employers to engage in layoffs and reductions in an attempt to cut costs and remain financially viable. This has resulted in an increasing number of individuals being faced with the difficult task of finding a job in a contracted and competitive job market.

One direct consequence is that employers must deal with more requests from former employees for post-employment reference letters. The following is a brief overview of the issues that employers should consider when determining whether to provide such letters.

Risks of Providing or Refusing to Provide Reference Letters

Employers face a two-fold concern over providing post-employment references. First, there is the risk of a defamation suit by the former employee as a result of a negative reference. Second, there is the risk of a claim for negligent misrepresentation by the subsequent employer as a result of an inaccurate or incomplete reference. While these risks should be considered (especially in regard to the content of the reference), they are generally outweighed by the risk of refusing to provide a letter of reference. In Wallace v. United Grain Growers Ltd., the Supreme Court of Canada noted that a refusal to provide a former employee with a letter of reference following the termination of his or her employment would constitute bad faith or unfair dealings in the manner of dismissal — and therefore could be used as evidence in support of a damages claim. This is particularly the case when a letter of reference is withheld as a negotiating tool or bargaining chip in exchange for acceptance of a severance package.

Further, by refusing to provide a letter of reference, an employer is arguably making it more difficult for the former employee to find new work, thereby impeding the employee’s mitigation efforts. This may result in a longer reasonable notice period.

As a result, with the exception of limited circumstances, such as a termination for cause, it is generally in the interest of a former employer to provide a letter of reference upon request. That said, it is important to (i) develop internal policies relating to the provision of references, and (ii) ensure that these policies are implemented consistently so as to avoid allegations of discrimination or bad faith from former employees who are denied more favourable treatment.

Guidelines for Letters of Reference

Here are some tips for providing reference letters:

  1. Decide whether it will be your policy and practice to give:

a) standardized letters that outline factual information only, such as the employee’s date of hire and date of termination, their job title and a description of their job duties and responsibilities (typically referred to as a “letter of employment”); or

b) descriptive letters that provide qualitative information about the employee’s performance, leadership style, initiative and so on (typically referred to as a “letter of reference”).

The advantage of the “letter of employment” is that you minimize the risk of defamation or negligent misrepresentation claims. The disadvantage is that a “bare bones” letter is unlikely to assist the former employee in finding work. The longer it takes take him or her to find work, the longer the potential reasonable notice period may be. As well, if a trend develops of employers providing only the “bare bones” letter, then this may unnecessarily cut off an important source of information about job applicants, thereby hampering an employer’s ability to ensure they have the right person for the job.

Regardless of the style you choose to use, it is important to use it consistently. For example, don’t use the letter of employment for some employees and the letter of reference for others.

  1. Decide who has the authority within your organization to draft and/or approve letters of reference. This person should also be the point of contact for any followup calls relating to the former employee. It may be appropriate to centralize the drafting of reference letters in your Human Resources Department.
  2. Ensure that you have the express consent of the former employee to provide a letter of reference and/or to answer referencerelated questions. The extent of the consent should be clear, and you should ensure that the reference and/or discussion relating to the reference do not go beyond the parameters of the consent.
  3. Ensure that the information contained in the letter of reference is factually correct, and whenever possible avoid the use of negative statements. If a negative comment is to be made, have the letter reviewed by a second person to ensure fairness and accuracy.
  4. Be consistent in the application of your reference policy to all employees and former employees.
  5. Decide whether letters of reference will be provided to employees terminated for cause. If so, restrict the content to strictly factual information such as dates of employment, job title, and job duties and responsibilities.
  6. If the letter of reference is being provided in a case involving litigation or the prospect of litigation, consider providing the letter on a “without prejudice” basis.
  7. Private sector employers in British Columbia, Alberta and Québec, as well as federally regulated employers, are subject to personal information protection legislation. Such employers are advised to take the developing privacy laws into account when providing references.
  8. When in doubt about whether to provide a letter of reference or what to include in the letter, especially in the context of a case involving litigation or the prospect of litigation, seek assistance from legal counsel.