Reference letters not so risky

Many employers are afraid to say too much, but nobody’s ever been successfully sued in Canada for a bad reference

Stuart Rudner

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 either not to provide anything at all or just to provide a confirmation of employment — commonly known as the “name, rank and serial number” letter.

Typically, the employer’s concern is based upon a 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 hiring the individual. While it is conceivable a new employer could allege a misrepresentation was made in a reference letter which it relied upon to its detriment, there does not appear to be a single instance in which a successful claim has been made on that basis in Canada.

The other basis upon which opposition to letters of reference has been defended is the fear of a lawsuit brought by the subject of the reference letter, in the event they are unhappy with its content. It is extremely unlikely such a claim would succeed, unless the author made comments that were not only inaccurate but also malicious. Otherwise, reference letters have generally been perceived to be privileged communication that will not be subject to liability as long as they are written in good faith and with the belief the contents are accurate.

Benefits to writing reference letters

What most of those who oppose writing positive letters of reference fail to acknowledge are the potential benefits of doing so. Generally, the organization will have an interest in seeing the dismissed individual obtain new employment quickly. A positive letter of reference will assist in that regard, whereas the lack of one, or the provision of nothing more than a confirmation of employment, may impede the individual’s ability to find a new job. Particularly in a difficult market where jobs are relatively scarce, those who have positive references will generally make it to the top of the pile of applications.

If the 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 either come to an end or decrease when the individual finds a new job. In some cases, this can result in a substantial savings to the employer. For example, consider the situation of an employee entitled to a notice period of 18 months. If she obtains comparable new employment after only four months, the notice obligations will, in most cases, come to an end and the employer will save 14 months’ compensation. For that reason, it is almost always beneficial to assist the individual in finding new employment. A letter of reference is one way to do so. Another is to provide outplacement counselling services through a reputable organization. While there is no legal obligation to do either, it will make good business sense in most cases.

Furthermore, 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 damages by finding new employment if the employer did not even provide a letter of reference. As well, courts are entitled to consider all relevant factors in assessing reasonable notice. One factor that can be considered is the failure or refusal to provide a reference letter.

No reference letter could be seen as bad faith

It is also possible a court will find an employer’s failure to provide a letter of reference amounted to bad faith in the course of dismissal. In the pre-Keays era, there were a number of decisions in which Canadian courts extended the notice period as a result of such perceived bad faith. In light of recent changes to the law, including the “damages formerly known as Wallace,” it is questionable whether or not damages would be awarded in such circumstances. In a scenario where the individual could prove she suffered actual damages as a result of the failure to provide a letter of reference, a damage award is plausible. This is an issue that has not yet been addressed by the courts since the decision in the Keays v. Honda Canada case.

Benefits outweigh risks

The policies against providing letters of reference are typically based upon fear of potential liability, which is not borne out by the jurisprudence. However, the potential benefits of providing a letter of reference are not typically considered. Balancing the risks and benefits, it is advisable to provide letters of reference in dismissals without just cause.

Letters of reference should not be drafted in a haphazard manner. 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. In almost all cases, it is possible to come up with some positive attributes that can be referenced.

Obviously, any comments that are inaccurate, negligent or malicious should be avoided in letters or verbal references.

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 verbal and written references are consistent. For that reason, anyone who is authorized to provide verbal references should ensure she is aware of the contents of any letter of reference before providing comments. It is often advisable to advise the individual seeking the reference that her call will be returned once the individual providing the reference has the opportunity to review the file.

Stuart Rudner is a partner in Miller Thomson LLP’s Labour and Employment Group in Toronto. He can be reached at (416) 595-8672 or srudner @millerthomson.com.

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