A recent decision by the United States Court of Appeals for the Fifth Circuit provides reassurance to employers who adhere to a neutral reference policy with respect to former employees—and counsels caution to employers who do not limit themselves to a neutral reference policy.

In Kadlec Med. Ctr. v. Lakeview Anesthesia Assocs., 527 F.3d 412 (5th Cir. 2008), the employee at issue was an anesthesiologist who was fired “for cause” by his former hospital employer, Lakeview Medical Center LLC (“Lakeview Medical”), for making unauthorized withdrawals of Demerol and reporting to work in an impaired state. In response to a detailed reference request from a potential future employer, the former employer merely confirmed the anesthesiologist’s dates of employment. In contrast, doctors of the Louisiana Anesthesia Associates (the “LAA defendants”), a medical group that was the exclusive provider of anesthesia services to Lakeview Medical, submitted two reference letters to the staffing firm seeking to place the anesthesiologist, highly recommending him for employment. The anesthesiologist’s future employer relied on such reference letters, among other materials, in hiring the anesthesiologist. Approximately one year after he was hired, the anesthesiologist caused catastrophic brain damage in a patient. Following the incident, the anesthesiologist confessed that he was addicted to Demerol.

After settling with the injured patient, the anesthesiologist’s new employer brought claims against Lakeview Medical and the LAA defendants for intentional misrepresentation and negligent misrepresentation based on the reference letters’ alleged misrepresentations and omissions. The court held that the defendants did not have an affirmative duty to disclose negative information about the anesthesiologist in their reference letters. The court stated, however, that by choosing to write reference letters, the defendants assumed a duty not to make affirmative misrepresentations in the letters. Accordingly, the court dismissed the claims against Lakeview Medical—which had only confirmed the anesthesiologist’s dates of employment—but found the LAA defendants liable because they made misrepresentations about the former employee and the prospective employer detrimentally relied on such misrepresentations.

Although the facts in Kadlec Med. Ctr. may be an extreme example of the potential negative repercussions of a misleading reference letter, the decision reaffirms the wisdom of providing only a neutral reference to a former employee’s prospective employer and the dangers that may lie in providing a positive reference for an employee who has engaged in misconduct. Where an employer chooses to provide a substantive reference letter, the employer should take care to make only truthful, non-misleading statements in order to protect itself against both negligent reference and defamation claims.