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Employers must provide exiting staff with a reference

Employment laws generate a lot of comment. Hardly a day goes by without the media reporting scare stories about the employment rights of UK employees, which are depicted as being anti competitive, unduly restrictive and in many cases overly generous.     

Each month, we are exposing some of the most common employment law myths and explaining the reality behind them. We are not pretending that employment law is easy – it isn’t, but generally it should not be difficult to get the basics right.

So far we have tackled the following myths:

1. In order to dismiss an employee, you must follow a particular procedure and if you do so, you can safely dismiss.
2. It’s not possible to retire employees anymore.
3. You can’t make a woman on maternity leave redundant.
4. Parents have the right to work part time.
5. An employer has to accept an employee’s resignation before it will take effect.

If you missed these, click on the links for the answers.

This month we tackle references.


Employers must provide exiting staff with a reference


Unless your business is regulated by the Financial Services Authority, generally there is no legal obligation on an employer to provide a reference for an employee or ex-employee and you are entitled to refuse to provide one. However, unless you have a policy of not providing a reference to anyone, this is rarely a sensible option. 

If you do provide a reference, you owe two duties: the first of these is owed to both the individual and the prospective employer and requires you to take reasonable care to ensure the information contained in the reference is true, accurate and fair and the other to the individual alone, not to make defamatory statements. This means that you must not compile the reference maliciously or negligently, and thereby give an impression which is either too negative or misleadingly positive. So if the individual was a poor performer, or regularly turned up for work late, and you have evidence of this, you can say so. Similarly, if the employee was sacked for gross misconduct, if you provide a reason for dismissal you must not invent another reason, such as redundancy in a misguided attempt to help the employee to get another job or to obtain state benefits.

If you do give an inaccurate reference, your former employee could bring a claim in for damages in negligence for lost earnings if he can show that it was your reference (as opposed to, say, his own lack of skills or poor interview performance) which costs him the job. Also, the prospective employer can claim against you for its wasted recruitment costs and damages, if it can show that without your misleadingly positive reference it would not have hired your former employee.

With these risks in mind, many employers prefer to provide brief references which say very little beyond setting out the employee’s job title, role, salary and dates of employment etc. Although the prospective employer can check this information against that provided by the candidate, references such as these are fairly worthless as they do not tell the prospective employer what the candidate is really like.  Often a prospective employer in receipt of a noncommittal reference will attempt to obtain more information by speaking to the candidate’s former line manager. Any information given verbally in response to such a request is subject to the same duties. 

It is worthwhile developing a policy for dealing with references, including identifying who within your organisation can give a reference on behalf of the company. This will help you to respond to requests consistently and should avoid allegations by disgruntled former employees that you have acted unfairly or unlawfully. For example, if you normally provide brief, factual references, but on one occasion choose to provide detailed information about the candidate’s lamentable performance, the key question will be why you have done so.  If there is a suspicion that you are doing so because of the candidate’s sex, race, age (or other protected characteristic), or because he made a previous discrimination complaint then you are likely to face a discrimination or victimisation claim.

It is also worth remembering that even if you expressly state that your reference is given in confidence and must not be disclosed to anyone else (including your former employee), he may still be able to see the reference you have written. You are not obliged to give a copy of the reference to your former employee, but he can ask the recipient for it under the Data Protection Act and ultimately you have no control over whether a copy is provided. Plus, if the individual brings a claim, a court or tribunal will order that the reference is disclosed. It is therefore safer to assume that the subject will ultimately get to see any reference you write.

We therefore recommend that you provide only brief, factual details and include a statement that it is your company’s policy to only provide basic details and that is should not be taken to be disparaging of the employee in any way. You should then refuse to comment further.

Finally, if you agree a form of reference as part of a settlement agreement, it is important to ensure that you do not deviate from this, by agreeing and sticking to a controlled process of who gives the reference and how he/she will do so.