When employment is terminated or an employee resigns, whether or not to provide a reference can be a difficult decision. HR managers frequently question if a reference should be given and if so, what it should say. This is a difficult area, since not only can the failure to provide a reference result in liability but providing a reference could also result in liability.
An employer has no legal obligation to provide a former employee with a reference, regardless of whether the employee has resigned or was dismissed with or without cause. But refusing to provide a reference to a dismissed employee can result in an increased award of damages in a successful action for wrongful dismissal. Similarly, there have been wrongful dismissal cases in which an employer’s decision not to give a letter of reference resulted in a court ruling against a claim the employee was not entitled to damages because he failed to fulfil his legal obligation by making a reasonable effort to find other employment.
Some employers have tried to avoid liability on this basis by adopting the practice of supplying a “perfunctory letter of reference.” The perfunctory letter of reference provides only the factual details of employment such as employee name, employment dates, last position with the company and final salary.
There are two problems with providing a reference of this kind. First, some potential employers will incorrectly assume that such a letter means the former employer has nothing good to say about the person. This may result in difficulties for the employee in finding a job, reducing the employee’s chances of mitigating his losses. This is contrary to the employer’s goal, which should be to help the employee find alternate employment since any replacement income earned by the employee during the appropriate reasonable notice period will reduce the employer’s liability for damages.
The second problem is that some court cases have factored the failure to provide a meaningful letter of reference into the determination of the appropriate period of reasonable notice upon termination of employment. In these cases, this has resulted in an increase to the notice period. So, simply providing a brief perfunctory reference to employees may in fact expose an employer to liability rather than protecting it.
Other risks associated with providing a reference to a departing employee include being sued for defamation or for negligent misrepresentation, or the nullification of an employer’s claim of just cause for dismissal. An employee may commence a claim for defamation where an employer has given the employee an unfavourable reference, whether written or verbal.
Of course, there is no liability to the employer if it can demonstrate the statements were true. However, even where statements are proven to be untrue, as long as a reasonable person not motivated by malice could reasonably come to that conclusion, an employer may be able to rely on the defence of “qualified privilege.” This defence requires that any alleged defamatory statements be made to someone who has a legitimate interest in receiving them (such as a reference checker).
If the former employer gives a reference to a new employer which misrepresents important aspects of the employee’s performance (for example, the employee is likely to engage in theft), it may be vulnerable to a claim for negligent misrepresentation if this fact is withheld and the employee goes on to commit a theft.
The success of such a claim will depend on whether the new employer can establish:
a) that the information provided was untrue;
b) that it hired the employee based on the inaccurate information; and
c) that it suffered damages as a result of the hiring.
An employer’s claim that there was just cause for dismissal can also be nullified by a favourable reference. Courts have held that an employer’s offer to recommend an employee to other employers was an acknowledgement that it had not dismissed the employee for incompetence.
While an employer is under no legal obligation to give a reference to a departing employee, any decision can be fraught with legal ramifications. If litigation is pending, it is advisable an employer consult a lawyer before providing a letter of reference.
Protecting your firm
If your company has a policy on reference letters, follow it with every departing employee to avoid breaching contractual obligations. Employers should review policies to ensure they are not bound to provide references to employees whose employment is terminated with cause.
Remember that all inquiries from potential new employers should be directed to a particular individual in the organization. This will ensure that references are handled in a consistent manner and that the most up-to-date information is provided.
HR managers should use a standard form reference letter. Personal information will then be added for each employee. This will ensure the consistency required to avoid human rights and equity issues.
Where the individual has been a good employee or has made a positive contribution to the workplace, something positive about the employee’s attributes and contributions should be put into the reference. It is important to ensure descriptions are truthful and without exaggeration or overstatement.
Where an employee failed to meet the requisite standards of performance for whatever reason, the employer may not want to list the employee’s deficiencies in a reference. In such cases, an employer can outline the facts of the employee’s employment but also provide a description of the employee’s duties and responsibilities. This should be more useful to the employee than a perfunctory letter of reference, while at the same time the employer is not saying anything negative (or positive) about the performance of the less than adequate employee.
Finally, the employer must always be prepared to be contacted by a prospective new employer regarding any references it has provided. In particular, the employer should anticipate that it may be asked whether it would be willing to rehire the former employee. A ready answer should be prepared in advance.
What the courts are saying...
He deserved a letter of reference
Barakett was dismissed from his position as a preferred share specialist after four years of employment with Lévesque Beaubien Geoffrion Inc in Nova Scotia. He had been earning approximately $35,000 a month in commissions. Upon termination, he was offered four months’ pay in lieu of notice in exchange for signing a release. Barakett refused the offer and commenced legal action for damages for wrongful dismissal.
At trial, the judge held Barakett was entitled to an increase to the notice period in accordance with the Supreme Court of Canada's decision in
Wallace v. United Grain Growers
. In that case, Wallace was granted an increase to his notice period as a result of bad faith and unfair dealing in the manner of his termination. Similarly, in Barakett, the trial judge found the employer’s failure to provide Barakett with a letter of reference showed a callous disregard for his future which hurt his ability to find other employment. This, along with the employer’s high-handed manner of dismissal and total lack of forewarning for the termination, amounted to unfair dealing justifying an award of 17 months’ reasonable notice.
The Nova Scotia Court of Appeal upheld the trial judge’s decision. With respect to the letter of reference, it stated evidence showed Barakett deserved a favourable letter of recommendation and that no evidence was shown as to why one should not be given. Accordingly, the failure to provide the reference, whether deliberate or inadvertent, damaged Barakett’s ability to find alternate employment and was an indication of the employer’s indifference to Barakett’s circumstances.
Barakett v. Lévesque Beaubien Geoffrion Inc.,  N.S.J. No. 426 (N.S. C.A.).
Negative comments justified
Miller brought a claim against her previous employer for slander based on comments made during a reference check by a prospective new employer.
Miller was employed part time by an Ontario branch of the Bank of Nova Scotia as a personal banking officer. The position involved working extended hours on Thursday and Friday evenings and on Saturdays. After a few months, Miller decided she did not like working the extended hours and asked if something could be worked out so that she wouldn’t have to do them. She was reminded that she had been specifically hired to work the extended hours, but that an attempt would be made to resolve the problem. Miller was told she would have to wait until the end of the RRSP season before something could be done, and she agreed to wait.
A short time later, Miller received a conditional offer of employment from CIBC which would only require working daytime hours. Miller decided to accept this position and wrote a letter of resignation to the Bank of Nova Scotia. She did not give any notice to the bank, which was just entering its busy RRSP season. The offer from CIBC was conditional upon successful completion and receipt of background reference checks, including one from the most recent employer.
Miller’s supervisor at the Bank of Nova Scotia, Yammine, was contacted on behalf of the CIBC for the purpose of conducting an employee reference check. Yammine was surprised by the call since Miller had not informed her that she would be giving her name as a reference. When she was asked about Miller’s employment with the Bank of Nova Scotia, Yammine said she was upset about the manner in which Miller had left her employment and that she did not feel like giving a reference. When pressed further, Yammine said that although Miller had performed adequately as a trainee, she was not pleased with the manner in which Miller resigned. Yammine stated that Miller’s failure to provide notice was irresponsible, and the way she quit was cold and inappropriate.
Miller introduced the notes taken by the individual doing the reference check as evidence to support her claim of defamation. The notes said Yammine had indicated Miller was irresponsible, unreliable and very underhanded, and that she always complained, had an attitude problem, did not make her job a priority and did not co-operate with staff. The judge accepted Yammine’s testimony regarding her statements about Miller, holding that the notes could not be viewed as a reliable record of what Yammine had said. Accordingly, the court found Yammine’s comments were justified and not defamatory.
The court also held that even if the alleged statements were made, they were protected by qualified privilege. The qualified privilege can be destroyed where the statements are motivated by malice. However, the court found that there was no malice on Yammine’s part which would defeat the privilege.
Miller v. Bank of Nova Scotia,  O.J. No. 4765 (Ont. S.C.J.).
Peter Israel is counsel to Goodman and Carr LLP, a Toronto law firm. He is also head of its Human Resource Management Group and the GC Human Resources Management Training Institute. For more information contact email@example.com. The author gratefully acknowledges the contribution of Carita Pereira (of Goodman and Carr LLP) in the preparation of this article.