There are many myths regarding employment references, despite their importance in differentiating a candidate from others in securing new employment. I will dispel five myths here that seem to be shared by both employers and former employees, but have no basis in law.
This is almost never the case. Even if an employer said horrible things about an employee and the employee lost a job opportunity as result, the employer still could not be sued for defamation unless that reference was provided in bad faith and untrue. That is because the courts provide a “qualified privilege” for reference checks.
Of course, an employer can be sued for negligence, quite apart from defamation, if the employer was entirely careless in providing the reference. But that can easily be avoided. The employer need merely check the employee’s file (if not already familiar with it) and speak to those who worked with the employee to avoid any claim for negligence, libel or slander. But short of that, if the employee was a poor worker, there is no liability created by saying so. Similarly, if you are asked whether that employee would be rehired and they would not be, an employer can freely say so and explain why.
This is not the case for the reasons provided in Myth 2.
But there is another issue. If you only say positive things and leave out something that is obvious and highly damaging, the employer could then be sued for negligent non-disclosure. But it would have to be something major that should have obviously been disclosed and not mentioning it would imply that no such problem existed.
If, for example, Billy was fired for theft but had been a great worker before that, it would be negligent to tell a prospective employer all the wonderful things about Billy while neglecting to mention his wrongdoing. If Billy went on to steal from the new employer, that new employer could sue you for negligent non-disclosure. To be clear, if Billy did steal, you could not be sued successfully for saying so to the new employer in a reference check.
Myth 4: If a company is being sued, it should not provide a reference as it could damage their case.
Of course, if the employee was fired for cause, that may well be the case. But 99 per cent of dismissals, or more, are not for legal cause and the best way to limit your damages in a wrongful dismissal case is for the employee to find other work. Whatever you can do to assist them, you should. In fact, when acting for employers, I have them perform a parallel job search to determine what jobs are available and then forward some of those to the employee (while holding others back to compare to their job search). If they don’t apply for those jobs, their case is weakened for failure to mitigate.
Myth 5: References don’t matter once you are hired.
On the contrary, a bad reference coming in after your employment commences may still result in the employer reconsidering your employment and terminating you. If there is a valid probationary clause, or even a valid termination clause thereafter, the severance could be minimal.