Can Employers Give a Bad Reference for a Former Employee?

Some states protect employers that act in good faith

By Lisa Nagele-Piazza, SHRM-SCP, J.D.
Feb 28, 2018 - SHRM

The employment relationship doesn't always end on a positive note. So what should employers say during a reference check? Can they say that someone was fired, frequently late or a poor performer? Employers can usually be truthful during a reference check, but they should be aware of their rights and responsibilities under state law.

There are no federal laws that address what an employer can or can't say about a worker. Many states, however, have enacted legislation that gives employers a qualified immunity when providing information for a reference check. These statutes generally provide that an employer is immune from civil liability when it responds to a reference check in good faith, explained Molly Lee Kaban, an attorney with Hanson Bridgett in San Francisco. The immunity is lost, however, if it can be shown that the employer knowingly or recklessly provided false or misleading information or acted with malicious intent.

None of these statutes provides the employer with complete immunity, said Sage Knauft, an attorney with Walsworth in Orange, Calif. The employer still could face a defamation (libel or slander) lawsuit from the employee or a negligent referral lawsuit from the prospective employer if care was not taken in limiting the type of information provided and making sure that the information was given to the correct person.

States that do not have an immunity statute, including New York and Massachusetts, make it more difficult for the employer to provide reference information to prospective employers, he added.

Employers may need to be forthcoming if the reasons for separation include conduct that jeopardized the safety of a minor or vulnerable adult, noted Joan Rennekamp, a human resource consultant with Lewis Roca Rothgerber Christie in Colorado Springs, Colo.

Thus, employers should be familiar with the specific laws for the states in which they operate.

Immunity

Employers should keep in mind that the requirements for the immunity defense to a lawsuit also differ from state to state. Some states, like Hawaii, have very simple rules, Kaban said. It is presumed that the employer acted in good faith and that any job-related information (including opinions) is privileged unless it can be shown that the employer knowingly provided false or misleading information. 

Other states have more complicated statutes. For example, Arkansas' legislation provides that the employer must obtain written consent from the employee to respond to a reference check. Only certain information is protected under the immunity law in Arkansas, such as dates of employment, wage rates, job duties, details of the last performance evaluation, threats of workplace violence, and the reason for separation. Missouri applies the immunity only when an employer responds in writing to a written request for reference information, and the employer must provide a copy of the written response to the employee. 

"Obtaining written consent from the employee, whether required by law or not, is great protection," Kaban noted.

It's also a good idea for employers to require all applicants to complete an application form—in addition to or instead of a resume—and to include a release for employers and other entities from which they might request a reference, Rennekamp said.

HR's Role

Employers should maintain control of the information that their organization gives out, Rennekamp said. They might do that by putting limits on who can give a reference or what information can be provided. "However, we should all keep in mind that all employers need information about past performance and behavior in order to determine if an individual is a good fit for the position," she added. 

Knauft recommends the following practices, particularly for multistate employers, to avoid legal liability when providing job references:

• Only one person, usually a trained HR professional, should be permitted to provide job references. This person should make it a point to review the applicable state laws where the employee resides and where the prospective employer is located. Also, care should be taken to ensure that the exact same process is used for each job reference request to avoid any claims of discrimination.
  
• All disclosures should be made in writing and only upon written request from the prospective employer and with written permission from the employee.
  
• Provide only factual information, and avoid giving opinions about the employee's suitability for a new job. 
  
• Use documented evidence of the employee's job performance as the basis for the information provided to the prospective employer.
  

Employers shouldn't ask or answer questions about whether a person is eligible for rehire, Rennekamp said. "The answer you get might not indicate anything except how well the person giving the reference liked the individual and will certainly not contain enough specifics on which to base a hiring decision."