Failing to provide reference can increase the amount of notice required
Let’s begin with a key point: In the vast majority of cases, there is absolutely no reason for an employer not to provide a positive letter of reference for a dismissed employee, despite the fact many organizations have official or unofficial policies against doing so. In many cases, the policy is to either not provide anything at all or just provide a confirmation of employment — the name, rank and serial number reference.
Typically, the employer’s concern is based on the fear a prospective employer might rely upon the reference letter, hire the individual in question and subsequently sue because the content was inaccurate and the new employer suffered damages as a result of the hiring. While it is conceivable a new employer could allege a misrepresentation was made in a reference letter, there does not appear to be a single instance in which a successful claim has been made on that basis in Canada.
There is also the fear a lawsuit will be brought by the subject of the reference letter, in the event she is unhappy with its content. It is extremely unlikely such a claim would succeed, unless the author made comments that were not only inaccurate but malicious. Otherwise, a reference letter is generally perceived as privileged communication that is not subject to liability as long as it is written in good faith and with the belief the contents are accurate.
Most of those who oppose writing positive letters of reference fail to acknowledge the potential benefits. Generally, an organization will have an interest in seeing a dismissed individual obtain new employment quickly. A positive reference will assist in that regard, whereas the lack of one, or the provision of nothing more than a confirmation of employment, may hinder a job search.
If an individual is in the midst of a working notice or a period of salary continuance that will end — or be reduced — if she finds new employment, the former employer’s obligations to provide notice or pay in lieu thereof will come to an end or decrease when she finds a new job.
Consider the situation of an employee entitled to a notice period of 18 months. If she obtains comparable employment after only four months, the notice obligations will, in most cases, come to an end and the employer will save 14 months’ worth of compensation. For that reason, it is almost always beneficial to assist an individual in finding new employment. A letter of reference is one way to do so. Another is to provide outplacement counselling services.
Failing to provide a reference letter can directly or indirectly increase the amount of notice required. If a wrongful dismissal claim goes to court, an employer will be hard-pressed to argue the individual failed to make reasonable efforts to mitigate her damages by finding new employment if it did not provide a letter of reference. As well, courts are entitled to consider all relevant factors in assessing reasonable notice, including the failure or refusal to provide a reference.
It is also possible a court will find an employer’s failure to provide a reference to be bad faith in the course of dismissal. In the pre-Honda Canada v. Keays era, a number of decisions in Canadian courts extended the notice period as a result of such perceived bad faith.
In light of recent changes to the law, including the bad-faith or Wallace damages, it is questionable whether damages would be awarded in such circumstances. If an individual can prove she suffered actual damages as a result of the failure to provide a reference, a damage award is plausible. This is an issue that has not yet been addressed by the courts since the decision in Honda Canada v. Keays.
Balancing the risks and benefits, it is advisable to provide letters of reference in dismissals without just cause. Authors of reference letters, and those providing verbal references, should strive to portray the individual as positively as possible while ensuring the comments are honest and accurate. Any comments that are inaccurate, negligent or malicious should be avoided.
Organizations should have a policy with respect to who provides letters of reference and also to whom requests for verbal references should be directed. Care should be taken to ensure references are consistent. For that reason, a person who is authorized to provide verbal references should ensure she is aware of the contents of any letter of reference before commenting. It is a good idea to advise the individual seeking the reference that her call will be returned once the referee has had the opportunity to review the file.
Stuart Rudner is a partner in Miller Thomson’s labour and employment group in Toronto. He can be reached at (416) 595-8672 or firstname.lastname@example.org.