Reference risk: could ex-employees sue?

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Sometimes the only truthful answer when asked about a former employee is to say they performed badly – but can that come back to bite you?

Canadian courts have confirmed the qualified privilege for employers giving references so any honest feedback should be safe, but employees have taken action against former managers on the grounds that the referee was being malicious.

The other area of concern is the idea of negligence. Precedent in the United Kingdom has shown employers can be held liable for damages cause to employees by negligently prepared references. While courts have yet to test the issue here, House of Lords decisions hold a lot of weight in Canadian courts.

In 2008 a British law firm settled with a former employee to the tune of £42,500 ($68,000) to avoid going to court. Ontario employment and labour lawyer Gary Bennett said local companies often settled out of court to avoid the lengthy legal process, so the issue had yet to be tested in Canadian courts.

“Employers shy away from it because the damages could be substantial – they could be looking at six figure sums,” he said. “Because you’re dealing with someone’s livelihood and the potential for that person to be sidelined in that industry courts are not likely to look at this activity in a friendly manner.”

Referees should find something truthful and positive to say, Bennett said.

A final concern is “whitewashing” a bad employee. If they cause problems for their new employer, your company could be found liable for damages if it’s proven the reference was inaccurate.

This doesn’t mean you need to resort to either giving no reference, or a vague description of role and service, but it is worth taking some precautions:

  • Have a designated central person who is authorized to give references.
  • When approached for a reference ask to call the contact back after you have checked some details.
  • Develop a checklist of steps for referees to follow.
  • Record the contents of references and file them.
  • Support negative references with evidence from personnel files.

 

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