Employment References and Negligent Referrals

It looks as if you're damned if you do and damned if you don't.  Are you wondering what I'm talking about?

Today, many organizations conduct reference checks on prospective new hires.  The organization typically calls a few references of the prospective hire, who are familiar with his/her work performance.  In many organizations, this task is relegated to Human Resources.

Oftentimes, when you call the new hire's previous employers, they will provide you with a 'neutral reference', i.e., the former employee's position title, dates of employment, and, if the former employee authorizes it, his/her salary.  Some organizations simply state, "It's against our policy to provide references."

What is negligent referral?

Herein lies the rub.  If this former employee was terminated for harassment, violence, stealing, and any other serious reason he could conceivably repeat with their new employer, doesn't the former employer have an obligation to inform the prospective employer?  If the prospective employer asked you for a reference on this person, they would expect you to disclose this important information.  If you didn't, they could hold you, the former employer, liable for this person's actions under the theory of 'negligent referral'. 

So, the next question becomes, Why wouldn't the former employer disclose this information when asked for a reference on this person by the prospective employer?  The answer is that organizations do not wish to be held liable for the information they provide about former employees.  

Employers Have Protected Privilege

According to 'Prior Employment Verification - Defamation vs Negligent Referral' by James P. Randisi, Randisi & Associates, Inc., "No cause of action arises by a former employee if the communication is truthful.  This type of communication enjoys a general qualified privilege."  So, if this is the case, why do so many organizations only provide neutral references or none at all?

One of the reasons is that in some organizations untrained individuals may be asked to provide a reference and the negative information they provide is not all truthful.  Organizations seeking references often contact first-line supervisors to circumvent neutral reference policies and obtain candid information about applicants.  Here's an example of a possible reference: "Yes, Jim worked for me and I think he is a no good drunk."  Most organizations mitigate this risk by having all references funneled through Human Resources.  Randisi adds, "In every case in which an employer has been found liable for statements made during a reference check, the statements were false, or made with malice, or made by someone lacking sufficient knowledge of the plaintiff's employment."

In my own state of Virginia, we do not recognize negligent referral as a valid cause of action.  We have a statute that insulates employers from liability for providing a good faith reference on a past employee even if it causes or contributes to the denial of a job.  Interestingly, even with this protection, plenty of organizations still only provide a neutral reference.

Steps To Consider Taking

• Develop a policy on references and ensure that managers and supervisors understand it.
• Only provide truthful information that is job-related.
• Consider obtaining signed releases from employees who leave your organization.
• Train your managers and supervisors on how to provide references or
• Ensure all references are handled by Human Resources.
• Check for criminal records in addition to calling former employers and references.

The Bottom Line

Employers need to be aware that reference checkers can be shrewd.  According to Allen Smith, J.D., Job References Can Be Misleading, "Reference checkers might try adopting approaches similar to those used in games of strategy such as chess.  A reference checker may ask an employer, "What if it weren't against policy?"  If the employer is silent, the checker might say, "You sound like I do when I do not want to stick out my neck and give a bad reference."  Sometimes an employer will laugh, like he or she has been caught.  

Do your hiring due diligence and obtain employment references.  Though they are not foolproof, they can prevent some bad hires and result in some great hires.  As employers we have both a moral and a social responsibility.  When we do have negative information to pass along, and we're satisfied that it's truthful, it's helpful to obtain some advice from general counsel as to how best to handle it. 

Good luck.

Principled HR Consulting, LLC

Endnotes

Prior Employment Verification - Defamation vs Negligent Referral, by James P. Randisi, Randisi & Associates, Inc., January 28, 2016

Background Checks: How can employers protect themselves from liability when giving references?  by Society for Human Resource Management (SHRM), December 2, 2015

Job References Can Be Misleading, by Allen Smith, J.D., Society for Human Resource Management (SHRM), February 5, 2018