Pet peeve: Employers refusing to provide references for dismissed employees
Those that have heard me speak on the topic of terminations will be aware of one of my pet peeves: The refusal of many organizations to provide letters of reference or verbal references for any dismissed employee, even if they were dismissed for reasons entirely unrelated to them personally.
A connection on LinkedIn recently sent a message inquiring about the potential for liability arising out of negative comments that are made in the context of reference check, and I thank her for giving me this opportunity to repeat an important point: In a dismissal without cause, there is no reason for the employer to refuse to provide references, and in many cases, it will be in their best interests to do so.
"I love reading your LinkedIn updates and was wondering if you could touch on "references." In my industry, we do a lot of them, and so many companies are now just "verifying employment dates." If a candidate has given consent and a contact for a reference, can that reference be held liable for anything they say that is negative or viewed as the reason the person did not get the job? Just curious."
As I have often advised our employer clients, they should not be concerned about potential liability if they respond to reference checks honestly and in good faith. Obviously, that means they should not exaggerate the faults of the employee, act maliciously or in an effort to prevent them from obtaining employment. Or (and I would hope this would go without saying) make up false reasons for the decision to dismiss the employee in question. Doing any of those things could expose the employer to potential liability for their conduct, which include "The Damages Formerly Known as Wallace."
As readers will know, since the Supreme Court of Canada's decision in Wallace about 15 years ago, employers have been held to a duty of good faith in the course of dismissal. Providing false or malicious responses to reference checks could easily be seen as bad faith conduct resulting in damages over and above any awards relating to the "usual" damages arising out of wrongful dismissal.
As set out above, employers should not be concerned about negative comments to reference checks if they act honestly and in good faith. What often surprises me, however, is that the current trend is not to provide any subject or comments, be they positive or negative, out of fear of liability.
As has been explained to me, there is a concern that if the former employer provides a positive reference, the individual is then hired, and the new employer is unsatisfied with the employee, they will be able to bring a claim against the former employer for having misrepresented the individual's qualifications and caused the new employer to hire the individual. This appears to be a completely unfounded concern, as I am not aware of any successful claim on that basis in Canada.
While I see no downside to providing positive references, I do see a benefit. Unless a severance agreement has been entered into that is completely unaffected by the individual's ability to find new work, it will be in the former employer's best interests to help the dismissed employee find new employment quickly. At common law, this will reduce their potential liability for wrongful dismissal damages.
Furthermore, a severance agreement can be structured to include salary and benefit continuance with a "clawback" provision that limits the employer's obligation to pay if the individual find new employment. As a result, I encourage employers to provide positive references and consider providing outplacement counseling or other services to help the individual find a new job quickly. In many cases, I have worked with employers clients to actively research job opportunities for previous employees and encourage them to apply.
In short, employers should not be concerned about negative comments that are made honestly and in good faith. Furthermore, unless the individual was dismissed for cause, they should provide positive references. While not all employees are perfect, it should almost always be possible to think of some positive comments that can be made about a former employee. As in the context of negative comments, employers should not lie when doing so, but think of positive comments that they can make honestly and in good faith. Doing so will not lead to liability, and can reduce the employer's obligations to their former employee.
Stuart Rudner is an HR lawyer and a founding partner of Rudner MacDonald LLP, a Toronto-based firm specializing in Canadian 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 firstname.lastname@example.org. You can also follow him on Twitter @CanadianHRLaw and join his Canadian HR Law Group on LinkedIn.