UK: Employer References

Last Updated: 25 February 2002

You do not necessarily have to provide a reference for a former employee but, if you do, it must be fair, accurate, not misleading and produced with reasonable care. If it is not, you may be liable to the employee or his prospective employer for damages if the reference causes him a loss. This article gives advice on the preparation of references in the light of recent case law, including Cox v. Sun Alliance Life.

What is "a reference"?

A reference encompasses a formal letter of reference provided by a manager or Human Resources department and subsequent correspondence, emails or telephone calls about the employee in question. It is important to bear in mind that the duties that go with providing a reference are continuing and cannot be circumvented by supposedly "off the record" telephone conversations – see the discussion of the Cox case below.

Do you have to give a reference?

There is no general legal obligation to provide a reference to a former employee or to a prospective employer of one of your former employees. However, you may have assumed an express obligation to provide a reference if:

  • you have agreed to do so as part of the settlement of a claim by the employee;
  • a regulatory body requires that references be provided for former employees (but see further below);
  • the employee’s contract of employment contains a promise to provide one.

Whether or not an employer is under an obligation to give a reference, most do so. Despite the trend towards giving relatively brief and unenlightening references, they still play an important part in the recruitment process and indeed can still be crucial for an employee in obtaining a new job. Because of the clear duties the Courts have imposed on employers, care must be taken before making oral or written comments about ex-employees.

The legal obligations when giving a reference

The recent cases have established that in giving a reference an employer has two similar overlapping legal obligations:

  • firstly, a duty of care in negligence to the employee and to any prospective employer to give a true, accurate reference which does not mislead or give an unfair impression of the employee - breach of this duty would amount to negligence
  • secondly, an implied contractual obligation to ensure that it is true, accurate, fair and produced with reasonable care and skill.

Breach of either obligation will expose you to a liability to pay damages to the employee if the breach results in him suffering a loss e.g. because a job offer is withdrawn or if his provisional employment is not confirmed because his references are unsatisfactory. The liability to pay damages to a prospective employer would arise if a misleading reference resulted in the employer suffering a loss.

The obligations in practice

Behind the contractual and tortious labels given to the employer’s obligations are the following essential elements:

"true and accurate" - what this means in practice is that the employer must take care to ensure that any facts given in the reference are true and accurate, especially if the facts are of the kind that could cause the recipient of the reference to form an adverse opinion of the employee.

"fair and not misleading" - the overall picture given by the reference must not be misleading i.e. what it says must be a balanced representation of the employee’s record and must be weighed balanced against what it does not say about the employee.

These elements can operate at several levels, as the cases demonstrate:

Spring v. Guardian Assurance plc1 - the employer said in Mr Spring’s reference that he had acted dishonestly in selling a certain insurance policy. Not surprisingly, a new employer refused to take him on because of this. The High Court found that Mr Spring had not in fact acted dishonestly and therefore the reference was inaccurate and misleading. The House of Lords had to decide whether the employer’s failing had breached any legal duty. It held that it had - there was a duty on the employer to take reasonable care in the preparation of the reference and, if it failed to do so, it would be liable for damages to the employee and also the new employer if it had suffered any loss.

Bartholomew v. London Borough of Hackney2 - the employer stated in a written reference that the employee had faced allegations of gross misconduct which had been dropped when he agreed terms for a voluntary termination of employment. All of this was true and factually accurate - the question was whether by mentioning it the employer was giving a misleading impression of Mr Bartholomew’s employment record. The Court of Appeal decided that in the circumstances, and bearing in mind the wording of the reference as a whole, it was not. However, it emphasised that an employer does not discharge its duty just by putting together a set of factually accurate statements. The reference must be looked at as a whole for whether it is misleading or not or gives an unfair impression of the employee.

Cox v. Sun Alliance Life3 - Mr Cox received a fairly bland written reference from Sun Alliance Life as part of an agreed severance deal and got a new job with Hambro Life. It emerged that one of his former Sun Alliance managers had subsequently told Hambro Life on the telephone that allegations of financial impropriety had been made against Mr Cox before he left Sun Alliance. The manager represented that there had been a proper investigation into the allegations and that Mr Cox had had the opportunity to answer them. In fact, details of the allegations had never been put to Mr Cox by Sun Alliance, they had not been properly investigated and had certainly not been proven. As a result of the manager’s remarks, Hambro Life had concerns about Mr Cox’s fitness to work in the financial services industry and required him to leave their employment, which he did.

The remarks the Sun Alliance manager made on the telephone were found to be inaccurate, unfair and careless and caused Mr Cox to lose his new job. Sun Alliance were held to be liable to pay damages for his loss.

Regulatory rules about giving references

In both Cox v. Sun Alliance Life and Spring v. Guardian Assurance4 and also in another High Court case of Kidd v. Axa Equity & Law Life Assurance the employer was, at the time the reference was given, regulated by LAUTRO. The LAUTRO compliance regulations required employers to give:

"full and frank disclosure … of all relevant matters which [the employer] believes or has reasonable grounds for believing are true".

However, the Court of Appeal in Cox was quite clear that a requirement to be "full and frank" does not justify carelessness or inaccuracy of any sort and certainly not the sort displayed by the Sun Alliance manager who made comments about Mr Cox. Equally, where a rule requires disclosure of matters which the employer "has reasonable grounds for believing to be true", the belief must be genuine and based on proper investigation rather than personal opinion.

The FSA regime

Employers previously regulated by LAUTRO and other regulatory bodies are now, post N2, regulated by the Financial Services Authority ("FSA"). Under the FSA regime they are obliged to provide detailed references where an employee has demonstrated incompetence in a regulated activity. These employers should bear in mind the clear thrust of the Court’s decision in Cox v. Sun Alliance Life which is that a regulatory obligation will not excuse the employer from its general obligations regarding references. When describing an area in which the competence of a former employee was questionable, they should be careful to ensure that it is accurately described and set in context - was it trivial or significant; was it chronic or a one-off; did the employee improve; was it mere incompetence or more sinister and, if the latter, was it properly investigated and put to the employee?

Duty to the prospective employer

The House of Lords in Spring confirmed that the duty not to be negligent in giving a reference extended not only to the employee who is subject of it but to the prospective employer who requests it. Thus, if you are tempted to write glowingly of a mediocre employee, his new employer could sue you when he turns out to be the wrong person for the job and it has to go to the expense of recruiting a replacement. Even if the reference is merely careless rather than deliberately exaggerated, you may be liable to the new employer for any loss it suffers as a result.

Difficult scenarios

Giving references for employees who are poor performers, difficult personalities or who are suspected of or guilty of misconduct poses problems. Our suggestions for dealing with them are as follows:

  • do not mention in the reference any issue of conduct or performance which has not yet been put to the employee following a proper investigation. If he left part way through an investigation or a disciplinary hearing, only consider mentioning issues already investigated and put to him before he left;
  • if any performance or conduct issues have been taken up with the employee, think carefully about whether it is necessary to mention them at all (were they, for example, in the fairly distant past, relatively minor or not related to the areas about which the new employer is enquiring). If you consider it necessary to mention them, ensure that what you say about them is true and accurate and that they do not assume an exaggerated importance which could result in the reference as a whole giving an unfair or misleading impression to the reader;
  • ensure that the reference undergoes scrutiny by someone other than the writer before it goes out;
  • ensure that those who give references are aware of their obligations and that these apply when expressing views in writing or orally;
  • ensure that those who receive oral enquiries about employees follow set procedures for referring them as appropriate or taking careful notes of what is said.

Disclaimers

You could consider adding a disclaimer to written references such as the following:

"The above information is given in confidence and in good faith. No responsibility, however, can be accepted for any errors, omissions or inaccuracies in the information or for any loss or damage that may result from reliance being placed upon it."

The effectiveness of disclaimers such as this has not been tested in the Courts in the context of employer references and their effect may be limited. One way to ensure their effectiveness as far as prospective employers are concerned would be to reply to an enquiry from a prospective employer by saying that you only give references on the basis that your liability is limited by the disclaimer and that only if the prospective employer accepts this will you provide a reference. However, this would not head off a claim by the employee himself. The best way of attempting to bind the employee by the disclaimer is to include as part of his contract of employment a term that you will give a reference only on the basis of limited liability. This is becoming increasingly common.

However, it must be borne in mind that public policy considerations were what led the House of Lords to acknowledge the existence of the old employer’s duties towards the ex-employee and the new employer and, if the effectiveness of disclaimers comes to be tested, similar considerations may make the Courts disinclined to allow employers to escape those duties by means of relatively simplistic disclaimers. They would certainly not save the referee from liability for knowingly giving false information.

Can you refuse to give a reference in order to avoid the potential pitfalls?

In other words, can silence get you into just as much trouble? Possibly yes is the answer:

  • firstly, a clear element of the employer’s duty is to be fair and not to mislead – the impression that is created by a refusal to give a reference (assuming that it is general policy to provide them) could be just as damning as giving a poor or misleadingly unbalanced reference. For this reason the brief "dates of employment and position held" type of reference, which is increasingly common, could in theory be misleading if it fails to mention some key fact e.g. that a full and proper disciplinary procedure found the employee guilty of a dishonest act but that he was allowed to resign rather than be dismissed.
  • secondly, if the employee has already brought any kind of discrimination claim, not giving him a reference while he is still employed may be interpreted as singling him out for further "different" treatment and thus may amount to an act of victimisation against him. This will depend very much on what the genuine motivation was of the person(s) who decided not to provide a reference. In Khan v. Chief Constable of West Yorkshire5 a genuine desire not to give a reference in order not to prejudice the Chief Constable’s position in ongoing litigation was held to be justified and did not constitute an act of victimisation.
  • finally, even after the employment has ended, a failure to give a reference can amount to an act of unlawful victimisation if the reason is that the employee has brought a sex discrimination claim (but not, as the law currently stands, a race or disability claim).

Agreed form references

A partial solution is to agree a form of written reference with the employee (this will usually be as part of an agreed severance deal). At least by doing that the employee cannot complain about what you have said about him in writing. However, as the Cox case shows, the real damage can be done by oral comments. Therefore, managers or HR personnel who are likely to receive follow-up enquiries from new employers, whether on the telephone or on email, should:

  • EITHER be told to explain that it is the company’s policy not to elaborate further on written references and therefore there is nothing they can add
  • OR receive strict instructions that anything they say must be true, accurate and fair (and of course in line with the written reference!).

1 1994 ICR 596

2 [1999] IRLR 246

3 [2001] IRLR 448

4 [2000] IRLR 301

5 [2001] WLR 1947

"© Herbert Smith 2002

The content of this article does not constitute legal advice and should not be relied on as such. Specific advice should be sought about your specific circumstances.

For more information on this or other Herbert Smith publications, please email us."

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