Do you have to give a reference?
Employers are concerned about their liabilities so often refuse to give a reference to avoid any pitfalls but there are the following problems with that approach;
- Discrimination. The Equality Act 2010 expressly prohibits discrimination on the grounds of the protected characteristics (sex, race, disability etc.) if the discrimination arises out of and is closely connected to a relationship with an ex-employee, so if the refusal would, if it occurred during the relationship, contravene the Equality Act, then a refusal to give a reference after employment was over would also fall foul of the Equality Act
- Victimisation. Despite initial uncertainty because of a drafting mistake in the Equality Act 2010 it is now established an employee can complain that failure to give a reference is an act of victimisation on the grounds that he has brought discrimination proceedings against the employer, given evidence or information in connection with such proceedings, made an allegation of unlawful discrimination or done anything else under or by reference to the discrimination legislation
- Financial Services Authority. Additional duties apply in this area to give and obtain specific information
- Contractual. Apart from a promise in a Settlement Agreement an obligation may arise from custom and practice and a failure to give a reference may be a breach of the duty of trust and confidence
A duty to give a reference may now exist because:
- various cases have established a duty of care in respect of the economic wellbeing of an employee
- when an employee is recruited an employer will seek a reference and expect to be provided with one so an employer should reciprocate
- employees entering into employment subject to references expect they will be provided with one on exit
- most new employment will be subject to a reference so a refusal would harm the employee and in some employment where security is important such as aviation an application will not be considered without a reference
What claims can a new employer bring?
- Breach of the duty of care which is owed to them if they rely on the reference and suffer loss but this claim can be avoided by a properly worded disclaimer which stops this duty arising.
- Deceit. If you knowingly include false information knowing the new employer will rely on it then you are liable to them for deceit.
What claims can an employee or ex-employee bring on a reference?
- Breach of contract. Sometimes there will be an implied term that you will take all reasonable care when preparing a reference in respect of an employee, even after the employee has left employment. For current employees breach may give rise to a constructive unfair dismissal claim
- Discrimination and victimisation. Comments concerning capability, sickness or absence can easily give rise to disability discrimination claims
- Defamation. While a statement may be defamatory of someone’s reputation a defence may be available to you called “qualified privilege” provided you did not know or have reason to believe the statement was untrue or were recklessly indifferent as to its truth
- Malicious falsehood. This is where you give a reference knowing the words were untrue or were recklessly indifferent as to their truth). This remedy is designed to protect economic interests.
- Negligence. An accurate reference must be provided. You need to show that a reasonably prudent employer would have stated the views in the reference and make sure the facts underlying the views were accurate. An employer was not negligent in a reference when it referred to disciplinary proceedings before terms for leaving were agreed because it had to be true, accurate and fair and not present matters to give an impression which was misleading overall. By the same token it would be wrong to refer to misconduct unless an investigation had been done and you had reasonable grounds for believing that the misconduct had taken place. As when you are dealing with a misconduct dismissal you need to show:
- you had a genuine belief in the employee's guilt;
- it was reasonable for you to hold that belief; and
- that belief was reached after you had carried out a reasonable investigation.
Interestingly, there was no negligence where a reference referring to allegations was given but it was emphasised no investigation had been carried out. This is a case which needs careful judgment to apply especially where the allegations will have a material impact such as an allegation against a car salesman of making false commission claims or a worker dealing with children that they have had a sexual relationship with a child. If one of your employees is unwise enough to make careless comments about an employee many years later whether 6 years, as in one case, or more, which causes the employee’s foreseeable termination then an employee can come back to haunt you.
What do I do in respect of Data Protection Issues?
Giving a reference will usually result in the processing of personal data and sometimes sensitive personal data. Regard should be had to the Data Protection Act 1998 and the Information Commissioner's Employment Practices Code. You must process personal data in accordance with the 8 data protection principle and process it fairly and lawfully. Also you must ensure that one of the provisions in Schedule 2 is satisfied, for example an employee consents to the processing.
Part two of the Employment Practices Code’s recommendations include:
- Having a policy as to who can provide references and in what circumstances
- Not giving references without their consent.
You will not be liable for data protection breaches where employee give references in a personal capacity. References must be securely kept and disposed of.
Information about injury or sickness is sensitive personal data so the stricter Schedule 3 conditions must be satisfied with explicit consent being the most appropriate. The number of day’s absence from work an employee has had could be revealed without disclosing sensitive personal data. Where the reason is requested and you are minded to provide it then you should get the employee’s written approval of what you wish to say.
Can an employee or ex-employee stop you giving a bad reference?
If the subject of a reference wishes to prevent the referee including sensitive information in the reference, they can potentially rely on section 10(1) of the DPA 1998. The employee should write to their previous employer (as a data controller) requesting that they cease or not begin processing (by disclosing the information in the reference), on the basis that to do so will cause, or is likely to cause, substantial damage or substantial distress and that damage or distress is, or would, be unwarranted. A data controller must respond within twenty-one days with a decision. Under section 10(4), where a data controller declines to comply with a section 10(1) notice, the issue falls to a court to decide.
In one case the court was asked to consider whether an employee could prevent their previous employer sending a reference disclosing information of their previous sickness absence (sensitive information) and the outstanding disciplinary charges against them. The High Court in that case noted that the Information Commissioner’s guidance states: "although this may give the impression that an individual can simply demand that an organisation stops processing personal data about them, or stops processing it in a particular way, the right is often overstated. In practice, it is much more limited."
The court commented that there is a need to balance the reasons for the processing, such as the rights and interests of the data controller, third parties and the public against the individual's grounds of objection. In the case before it, the substantial damage to the employee was obvious, as disclosure of the information in the reference was likely to cause him to lose his new job. It would also cause him distress for the same reason and because he would need to explain the background to the situation and to disclose his sexuality. Taking into account all of the circumstances, the court decided that the disclosure would be unwarranted
What do I do about outstanding disciplinary matters in a reference?
In some cases, it is difficult for a referee to balance its duties to both the recipient and the subject of a reference. In one case it was decided that that an employer was not in breach of its duty of care to an employee when it provided a reference giving details of disciplinary proceedings which were pending against the employee when they left its employment. The court held that if the employer had not included details of the disciplinary proceedings, it would have failed in its duty to the prospective employer to provide a reference that was not unfair or misleading.
A similar decision was reached where a reference referred to issues with the former employee's performance that had never been investigated, since they had only been discovered after he had left. The Court held that the referee had not breached its duty to the employee as the reference was true, accurate and fair.
In another case the new employer of a former senior police officer requested details of the number of days he had been absent in the last 12 months of his employment, his reason for leaving and for "any further comments you may feel relevant." However, the standard reference provided by the police force did not refer to the fact that the officer had resigned from his employment while there were gross misconduct allegations outstanding against him, or that he had been absent on an extended period of sick leave in the last year of his employment. When a more senior employee became aware of the standard reference provided by a more junior colleague, he considered that it was misleading and decided that he had a duty to send a second reference to the new employer providing the missing information. While the High Court agreed that the first reference was misleading, it held that in the particular circumstances of the case, the second reference should not be sent. This was because:
- The contained a clear disclaimer and so no duty of care to the recipient of the reference arose.
- The DPA 1998 requires any disclosure of disciplinary matters to be fair and lawful and in compliance with a condition in schedule 2.
- The employee concerned had received an assurance from the employer that only a standard factual reference would be provided and he had relied on this undertaking, resigning his position and requesting that the disciplinary proceedings be discontinued, thereby giving up the opportunity to clear his name. At the time that the employer wished to send the second reference, the officer had already started work for the new employer.
Are disclaimers in a reference effective?
If a clear disclaimer is used, no duty of care to the recipient of the reference arises. A disclaimer should be effective in respect of any claim of negligent misstatement by the recipient of the reference. However, to avoid liability to the subject of the reference, the employer would need to get their prior agreement to a reference being given on this basis which would seem unlikely save in a settlement agreement.
In any event, the Unfair Contract Terms Act 1977 means that such a disclaimer will only be effective so far as it is reasonable. In view of the importance of the reference to the employee and the fact that the information being provided is within the employer's knowledge, a court may not be sympathetic to an employer who seeks to hide behind a disclaimer. Public sector employers should also bear in mind that their public duties to act with honesty and integrity cannot be circumvented by using a disclaimer in a reference.
What do I do?
Introduce a written policy to exclude or limit your liabilities including the following terms:
- The employee shall have no contractual right or expectation of a reference being provided whether during or after employment
- You shall only give the [INSERT TITLE] from time to time’s name as a referee and must not give any other employee’s or former employee’s name as a referee in respect of your employment with the Company
- You must immediately confirm you have done this to the [INSERT TITLE] from time to time with the name and contact details of the Company which you wish the Company to give a reference to and consent to the processing of any personal data and sensitive personal data to comply with this policy and the request for a reference which is received.
- If in our discretion we give a reference it shall be in the form set out at Schedule 1 subject to:
- our legal obligations to the recipient including our obligation to the recipient that it is not inaccurate or misleading;
- any relevant information in relation to you including information discovered after you cease employment.
- The reference is consistent with the real reason for any dismissal and any written reasons provided.
- The reference does not contain inaccurate statements.
- The reference provides a balanced overview of the employee, although it does not need to be full and comprehensive.
- The overall picture the reference gives is not misleading and does not unfairly present a poor image of the employee.
- The employee was aware of any complaints or performance concerns that are referred to in the reference.
- Any information about absence complies with the employer's obligations under the DPA 1998.
- Any comments about performance or absence are not related to a disability.
- Comments on suitability for a new job are given with care because they may be less easy to justify objectively.
- The reference is marked "Private and confidential for the addressee only".