I admit, it has become a pet peeve of mine: employers want references to help them select the best candidates, but many of them refuse to provide references. And they do so out of a fear of liability that is completely irrational and unfounded. If I have said it once, I have said it 100 times: there is no good reason to have an absolute policy against providing references. To the contrary, it will usually be in an organization's best interests to help a former employee find a job.
There is widespread fear that if you say something negative about a former employee, they will sue you for defamation. As I explain below, the fear is baseless if you act honestly and in good faith, but at least I can understand the logic of this one. For years, we have advised clients that this should not be a concern as long as they are not acting in bad faith, and the Superior Court of Justice confirmed this (again) last year in Papp v. Stokes Economic Consulting Inc.,  O.J. No. 2498.
As the court in Papp confirmed, employers providing references enjoy a "qualified privilege" which provides protection so long as they act in good faith, and truth is a valid defence to allegations of defamation. In that case, the court found that the reference provided was defamatory and that it had been "published" (ie. communicated to at least one person other than the plaintiff), establishing a prima facie claim. However, the defendant asserted that the comments were true and that they were made honestly and in good faith.
The plaintiff attempted to defeat the "good faith" defence by alleging that even if the defendant honestly believed what he said, it demonstrated a reckless disregard for the truth. The court disagreed, finding that the representative of the defendant took reasonable steps to confirm the veracity of the facts before repeating them. The court found that he was neither malicious nor reckless.
So, if you are going to offer negative comments about a former employee in the context of a reference check, you should not be dishonest or malicious. If you answer questions honestly, there should be no concern about liability. You do not have to automatically refuse to comment. Although if you normally provide references, a "no comment" will send a clear message without getting into detail.
In most cases, the issue is not the fear of giving a bad reference, but of liability for giving a good one. This makes no sense to me. When I have asked, I have been told that organizations are scared of liability if:
Several years ago, bewildered by this widespread fear, I asked a student to research such claims. They did not find a single successful claim of this nature in Canada.
The bottom line, again, is that reference providers should act in good faith. If they believe that the subject of the reference check was dishonest and untrustworthy, they should not suggest otherwise.
However, as we often advise clients, they should be able to find something positive to say in most cases. For example, they may have had a strong work ethic, or been an excellent communicator, or had the lowest fail rate in the plant. Employers can mention those traits and do not have to comment on other elements of the individual's performance or behaviour. It will be a rare situation where an individual is dismissed on a without cause basis and there is absolutely nothing positive that can be said about them.
Helping former employee can reduce dismissal costs
When an individual loses their job, they will usually have a duty to mitigate their damages by seeking new employment. And, if they find new work, their entitlement to "severance" will typically be reduced. That is because severance is intended to be a bridge to your next job and not a windfall. If you find new employment, then your entitlement to severance will be reduced based upon the amount of money you earn during the notice period. For example, if a court determines that the period of reasonable notice is 12 months, during which the individual would have been paid $100,000, but during that 12-month period they found new work and made $30,000, then their severance entitlement will be $70,000.
Similarly, many employers offer severance packages that are based upon salary and benefit continuance with a "clawback," which provides that the payments will be reduced or cease altogether if the individual finds new work. Either way, the employer will benefit if the individual finds new work; so why not help them do so? In some cases, it will be wise to go so far as to provide outplacement counselling and even bring relevant job opportunities to their attention.
In the vast majority of cases, there is no good reason not to provide references and/or respond to reference inquiries. Particularly where a good employee has been let go for reasons entirely beyond their control, such as corporate restructuring, it is hard to justify a refusal to do so. There is no reason to worry about liability if you provide honest commentary, and assisting the individual in their job search can reduce the dismissal costs - a true win-win. Furthermore, as our courts have confirmed, even negative references will not result in liability so long as they are provided honestly and in good faith.
So if you have a no references policy, please reconsider it. By all means, control who can provide references, but don't arbitrarily insist that all you will provide is a "confirmation of employment" in all cases. It's ill-advised, unfair and may actually result in increased dismissal costs.
This article was originally published by The Lawyer's Daily -- providing Canadian legal news, analysis and current awareness for lawyers and legal professionals who need a real-time view on the shifting legal landscape.