The precarious business of providing a reference

10 Jan 2012

Providing a reference for a departing or former employee can be a tricky task.  Any negligent or deliberate errors could lead to compensation pay-outs and it is therefore crucial to strike the right balance.  If he or she was a model employee and is departing on good terms a positive reference is appropriate, although employers must be careful not to "over-egg" it.  If the employee was substandard and the employer is keen to be shot of him or her, the author has an obligation not to mislead the person to whom he is providing the reference with an inappropriately positive one.  An unfair or inaccurate reference written about any employee may lead to compensation awards by courts or tribunals.

The recent UK case of McKie v Swindon College [2011] (see below), has extended obligations beyond references to all information which is passed onto a prospective employer of a former employee. In a small business community like Jersey, where misinformation can quickly spread and cause damage to a person's reputation, it is essential that referees act with the utmost care.

Some selected case law on references
It is well established, following the House of Lords' decision in Spring v Guardian Assurance [1995], that an employer who provides a reference for a former employee is under a duty to take reasonable care in making the reference and will be liable to the employee in negligence if the reference is inaccurate and the employee suffers loss as a result.

In the subsequent case of TSB Bank Plc v Harris [2000], a reference outlined complaints about the employee of which he was unaware. The prospective employer withdrew its offer of employment as a consequence. Harris then resigned from TSB and sued for damages, claiming that TSB had breached the implied contractual duty of mutual trust and confidence. The claim was upheld: it was not reasonable to provide details of complaints against the employee of which the employee was not aware.  However, in Bartholomew v London Borough of Hackney [1999], the former employee had been subject to a disciplinary procedure for financial misconduct. This fact was stated in the reference.  Even though the employee left before the conclusion of the procedure, in this case the reference was held to be factually accurate and fair.

Similarly in Kidd v Axa Equity & Law Life Assurance Society PLC [2000], Kidd brought an action against Axa for damages for breach of duty in relation to the provision of a reference. In the reference Axa had referred to complaints received from investors. Those complaints had resulted in reviews of Kidd's work by LAUTRO, the relevant regulatory body. Additionally Axa had not answered a question about Kidd's trustworthiness. Kidd claimed that Axa was in breach of its duty of care to disclose fully all relevant matters by failing to state that the complaints had not been investigated. This resulted in Kidd, who had given in his notice to Axa after accepting an offer from a competitor subject to a reference, having this offer withdrawn. The Court held that Axa owed a duty to take reasonable care not to give misleading information about Kidd. The selective information Axa had provided could give rise to a false or mistaken inference in the mind of a reasonable recipient, with a detrimental impact on Kidd. However, Axa did not owe him a duty of care in contract or tort to provide him with a reference that was full and comprehensive; the extent of the duty contended for by Kidd would be impossible to define and would often act against the interests of employees. This was followed in Cox v Sun Alliance Life Ltd [2001] in which the court stated that provided a reference was accurate and fair, it was not necessary to report on all the material facts concerning an individual.

McKie v Swindon College
In the recent case of McKie v Swindon College [2011], the High Court held that an employer will also be liable to a former employee in tort for damages for negligent misstatement when communicating with a subsequent employer.
In this case Mr McKie, an art historian, had previously worked at Swindon College (the "College") for a number of years. When he left his job in 2002 the claimant received an excellent reference from the College. Subsequently McKie began working at the University of Bath where his duties involved him liaising with and visiting the College.

A few weeks after starting the new job, the new HR Director at the College emailed the University to say that McKie would no longer be allowed onto College premises because of "safeguarding concerns" in relation to its students and that there had been serious staff relationship problems during his time there. The Director added that McKie had left the College before any formal action could be taken. The email resulted in the claimant being dismissed by his new employer.

The judge presiding over the case was very critical of the College for the manner in which it dealt with this issue. In particular, the judge criticised its failure to carry out a proper investigation before sending an email to the University which he described as being "fallacious and untrue" and its preparation "sloppy and slapdash".

Although this case did not involve a reference, the Court held that the College owed the claimant a duty of care in passing information about him to a subsequent employer. The claim succeeded because the damage sustained was foreseeable, the relationship was sufficiently proximate, the claim fair, just and reasonable and there was a causal connection between the negligent act in question (the sending of the email) and the damage claimed.  

Data protection and discrimination
Information in a reference will include "personal data" under the data protection laws of Jersey and Guernsey and information regarding an employee's sickness absence records or criminal convictions will constitute "sensitive personal data".

An employer should consider obtaining the consent of an individual prior to releasing information in a reference, particularly when sensitive personal data is to be disclosed.

Whether or not a reference is disclosable in full to the employee in question varies, depending on whose hands the reference is in, and an employer should always assume that the individual may see the reference.

In addition, an employer must consider whether any statement made could be classified as discriminatory, for example, on grounds of sex or race. (As at the end of 2011, there is no anti-discrimination legislation in force in Jersey but it is expected to be introduced in coming years.) Avoid statements which turn on an individual's personal characteristics, save where truly relevant to the job.

To provide or not to provide?
Employers should be willing to provide factual references where asked to do so by a current or former employee, but without expressing purely personal opinions, save where they can be substantiated by evidence such as performance or disciplinary records.

Where the contract states that a reference will be provided on request there is likely to be a contractual obligation to provide one.  Although normally there is no obligation on an employer to provide a reference, in Spring (see above) the Court held that in certain limited and specific circumstances there may be an implied contractual duty on an employer to provide one.  In that case, the former employee worked as a sales director for a company that sold investment products. Under the rules of the regulatory body LAUTRO the new employer was required to seek and the outgoing employer to provide a reference, and the employee could not enter the particular type of employment sought without a reference. Here there was an implied contractual term that the employer would:
"…provide a reference from a prospective employer which was based on facts revealed after making those reasonably careful inquiries which, in the circumstances, a reasonable employer would make."

More recently in the case of Byrnell v British Telecommunications PLC [2009], the Court reiterated that there is no obligation or general duty on an employer to provide a reference, except for those industries under a regulatory scheme like LAUTRO.  Further the Court stated that short form references or "certificates of employment" that merely provide specific details such as dates of employment etc. are still to be regarded as references.  Providing such a certificate, which is increasingly common, is not to be regarded as prejudicial due to any adverse inference that might arise.

Financial Services Commission requirement
Finally, although in the UK, employers covered by the Financial Services Act 1986 may be required to provide a reference there is no equivalent obligation on employers in Jersey or Guernsey.  In relation to joiners and leavers, however, it should be noted that the Jersey Financial Services Commission (JFSC) and Guernsey Financial Services Commission (GFSC) do require companies in sectors such as insurance, banking and investment to obtain the consent of or notify JFSC/GFSC regarding key staff changes. In addition, some staff in such companies may be required to complete and return Personal Questionnaires, which ask for details of experience, qualifications and regulatory and criminal background. More information can be found at www.jerseyfsc.org and www.gfsc.gg.

Conclusion
When asked to provide a reference remember that:

  • Information you give should be true, fair, accurate and capable of objective confirmation.
  • It is always safer to provide factual information (for example, job title and length of service) than subjective views on employee performance.
  • The employee may have access to the reference.
  • Following McKie any additional information provided to a future employer must also be carefully considered.

Case List

  • Spring v Guardian Assurance [1995]
  • Bartholomew v London Borough of Hackney [1999]
  • TSB Bank plc v Harris [2000]
  • Kidd v Axa Equity & Law Life Assurance Society PLC [2000]
  • Cox v Sun Alliance Life Ltd [2001]
  • Byrnell v British Telecommunications PLC [2009]
  • McKie v Swindon College [2011]