Fear of lawsuits appears to be unfounded and there's an upside to helping a former employee find a new job
By Stuart Rudner
Despite widespread fear, there is almost never a good reason not to provide a letter of reference for a dismissed employee (unless, of course, the dismissal was for cause). However, many organizations have adopted policies prohibiting all but “confirmation of employment” letters even when the dismissal was a result of downsizing and entirely unrelated to the employee.
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 due to a bad hire. While it’s 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 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 counseling services.
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. Inaccurate, negligent or malicious comments 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.
I encourage employers to abandon their bans on providing references and supply them in almost all situations.
Stuart Rudner is a partner with Miller Thomson LLP in Ontario, specializing in employment law. He provides clients with strategic advice regarding all aspects of the employment relationship, and represents them before courts, mediators and tribunals. He is author of You’re Fired: Just Cause for Dismissal in Canada, published by Carswell. He can be reached at (905) 415-6767 or firstname.lastname@example.org. You can also follow him on Twitter @CanadianHRLaw, join his Canadian Employment Law Group on LinkedIn, and connect with him on Google+.