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Tony Wilson

Reference letters can invite lawsuits from former employees Add to ...

What obligations do you have to a former employee who requests a reference to give to a prospective employer, especially when the employee was problematic and was fired?

A great example of this legal issue was front and centre in this season's penultimate episode of HBO’s The Newsroom, and if you haven’t seen it yet, there are spoilers here.

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One of this year's nastier characters, Jerry Dantana, stopped at nothing to further his journalistic career. He creatively edited a TV interview that appeared to substantiate the use of sarin nerve gas in Pakistan by U.S. forces – a war crime that if true could have brought down the administration.

But it wasn’t true. When his fabrication was discovered – and after the story had gone to air – the fictional network’s news team had to retract it, at great embarrassment and risk to their own careers. Jerry was fired for falsifying the evidence in the edit room, but he’s now suing the network for wrongful termination. Go figure.

The unemployed Jerry is also suing one of the other fictional producers, “Don,” for $20-million for giving him a bad job reference, after Jerry subsequently applied for a position and used Don as a reference. Don despised Jerry, and Jerry knew full well that Don would explode if asked to give him a reference. True to form, someone at the company phoned Don, and Don said: “If you need a hard-working sociopath, he's your man.”

Of course, Jerry set Don up knowing full well that Don would say something like that.

Don is told by a lawyer that because he is not a psychologist, telling a possible employer that a former employee was a sociopath is, among other things, defamatory, and that he’d better get a second mortgage on his house to cover the legals.

The lesson here is that if you're asked to give a reference for a fired employee, can you say he or she was a sociopath? Or lazy? Or toxic with other employees? What are the legal obligations and the dangers employers face when giving references?

“This goes back to first principles – if you can't say anything nice, don't say anything at all,” says one of my colleagues, Elizabeth Reid, who’s an employment lawyer.

She adds that an intemperate or inaccurate reference can create all kinds of problems for a former employer. In a worst-case scenario, a former employer could face legal action from both the employee and the new employer. Employees can claim defamation of character if they are given bad references. They could also raise privacy complaints if the references are not authorized.

In terms of liability to new employers, former employers have to be extremely careful about what they say in references. Suppose an employer gives a positive reference for a truly terrible employee. If the new employer relies on that information to hire the employee and the employee then damages the business, the former employer could be subject to a lawsuit for negligent misrepresentation. “It's unlikely", Ms. Reid says, “but why take the risk?”

Former employers walk a particularly difficult line in the case of alleged wrongful dismissals. In those circumstances, it is in the employer's best interests for the employee to get a new job right away. It may be tempting to say fabulous things about truly horrible employees because if those employees are able to limit their losses by finding new employment, there is a corresponding reduction in an employer's liability to pay severance. But employers must be careful not to misrepresent employees to new employers.

Richard Charney, a Toronto employment lawyer at Norton Rose Fulbright, echoes that advice. He says it may seem safer for a former employer not to give a letter of reference, but this can be a dangerous strategy in Canada where there is no American-style “employment at will.” Employers may wish to help former employees get jobs to minimize potential severance liability and to avoid any allegation of bad faith.

Mr. Charney says that if references are given, they should be accurate, but there is a public interest in the free exchange of information. This is sometimes referred to as qualified privilege. Employers can be honest as long as they are acting in good faith. But they cannot be negligent about the information they provide.

If they believe something to be true, but that belief is based on sloppy information gathering, then the employer may be inviting a lawsuit. So there is the risk of a lawsuit from a new employer against the former employer if the reference is misleading and amounts to a “negligent misstatement.”

“What about those extreme cases in which an employee is potentially violent?” Mr. Charney points out. “Is there a duty to warn? The law could use some clarity for sure, especially since countervailing privacy issues could arise. And even if a former employer has the right to comment, is it really worth the headache?”

So unless you are very confident in an employee's abilities, the safest course of action when dealing with a former employee who was problematic (and fired) is to provide a letter confirming dates of employment and job duties and that's all.

And no, you shouldn't call someone who used to work in your office a sociopath, even if you are a licensed psychologist. Unless, of course, you want to get a second mortgage to pay for the legals.

Tony Wilson is a franchising, licensing and intellectual property lawyer at Boughton Law Corp. in Vancouver, he is an adjunct professor at Simon Fraser University (SFU), and he is the author of two books: Manage Your Online Reputation, and Buying a Franchise in Canada. His opinions do not reflect those of the Law Society of British Columbia, SFU or any other organization.

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