You miss out on getting a job and later find it was due to a bad reference from the person you nominated to act as your referee.

Referees are supposed to give a prospective employer a full and frank appraisal of their former employee's work performance while they were employed by the referee. They should give a fair opinion of the applicant's ability, suitability for the type of work, and their performance in the workplace.

Can a manager give a bad reference?

If a referee isn't keen on you and wants to warn your prospective employer, they will usually damn with faint praise.

But what if you discover the referee effectively sabotaged your chances of getting the job - or financial grant or scholarship - by writing that you were incompetent, unreliable, untrustworthy, disruptive, disliked by colleagues, lacking in drive or lazy?

Can you sue for defamation, or for an unfair work practice? Is there a law which protects you from malicious statements that harm your employment prospects?

Employers giving bad reference protected under Defamation Act

Despite media reports of large payouts for defamation in the courts, providing a job reference is protected under the Defamation Act by the common law defence of "qualified privilege".

Qualified privilege applies in certain circumstances when an individual's right to protect their reputation must be subordinated to a higher interest.

Since the 19th century, providing references has been recognised in case law as necessary for the "common convenience and welfare of society".

It stems from a time when servants started suing their former masters over bad references which destroyed their livelihoods. British courts sided with a master's right to give a full and frank opinion of a servant's performance to protect the next master from a bad servant.

It was very much a product of the English class system. No doubt some masters would take vengeance against an uppity maid or servant and destroy their work prospects with a nasty reference.

Do employees have any protection from a bad reference?

Over time some safeguards have been introduced to protect workers from malicious former bosses.

There are exceptions today that can pierce the defence of qualified privilege. If the bad reference is passed to anyone who is not involved in the recruitment process, the referee becomes open to a defamation claim. The same applies if the referee makes false statements or is motivated by malice.

This could be difficult to prove. The subject of the reference has to establish malice and may need to prove the referee's state of mind when that person was giving the reference. The subject needs to prove that the referee knew the negative statements being made were false. These need to be false facts, not opinions.

On the other hand, if a referee withholds needed information, such as a history of criminal activity in the workplace by the employee, or findings of harassment or bullying, it could lead to a claim of misrepresentation against the referee by the hiring company.

The availability of qualified protection for regulatory authorities against defamation claims made against them was recently upheld in the NSW Court of Appeal in Schlaepfer v Australian Securities & Investments Commission [2021] NSWCA 129.

Tony Mitchell
Employment law
Stacks Law Firm

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.