Small Business Questions & Answers


Filed under Office & HR

Ask About Employee References -- Part 1

by Tentative in Tennessee | May 26, 2012

Subject :Human Resources

Dear Toolkit,

A local businessman called me this morning to check references on one of my former employees. I am at a loss to respond to his perfectly reasonable and sensible request. If I tell him why the individual is no longer in my employ, I could probably be sued by the former employee alleging defamation of character or whatever. If I don't disclose the reason, I could probably also be sued, in this case by the new employer who might suffer severe consequences if the person, for example, runs over hapless pedestrians while driving the company delivery truck--just as he came close to doing on several occasions with our van.

What do I do about giving out references on former employees? Looks like I can't win either way.

Tentative in Tennessee

Dear Tentative,

You are wise to be cautious. Giving out information about former employees, particularly those who you may have invited to leave your employ, is fraught with peril. Then again, as you astutely point out, not giving out information is also risky. But somewhere between your sainted grandmother's advice about "if you can't say anything nice about someone, don't say anything at all," and the quip "if you can't say anything nice about someone, come sit next to me," is a happy medium that your lawyer can live with.

Let's examine some of the most common errors employers make in the defamation arena. Defamation is, by the way, commonly referred to as "slander" if the communication is oral and as "libel" if the communication is written.

The good news: If you give an unfavorable reference which leads to job rejections, a former employee may claim the reference is false, damaging to their reputation and therefore defamatory. But a successful defamation claim requires more than merely showing that an employer provided an unfavorable employment reference.

Because employment references play an important role in hiring decisions, the law usually protects an employer who in good faith discloses information that the employer believes is true to a prospective employer or other person who has a legitimate interest in receiving the information.

The bad news: This protection may be lost, however, if the information is not limited in scope to the inquiry being made, is disclosed at an improper time, or is disclosed in an improper manner. While "truth" may be the best defense in theory, your lawyer will want to have you serve up the truth in a particular way.

Here are some things to avoid when giving employment references:

  • Accusations frequently form the basis for defamation lawsuits. Employers have been liable for defamation for making statements to the effect that a former employee was a thief, used illegal drugs, or made "improper" advances. If you fired an employee because you suspected that the employee engaged in illegal or improper conduct, and you feel compelled to state the reason for the firing, then restrict the statement to your suspicion ("Employee was fired because he was suspected of taking company property," not "Employee was fired because he stole company property"). However, don't even state a suspicion unless you can support it with objective evidence.
  • Employers can also get into trouble by exaggerating an employee's misconduct. For example, a statement that an employee was fired for "gross insubordination" was defamatory when the employee's only alleged misconduct was the refusal to adjust expense accounts.

The general protection extended to employers giving employment references requires that the statements be made in good faith. An employer's statements are not made in good faith if the employer knows they are untrue or if the employer makes no effort to determine if they are untrue.

The general protection extended to employers giving employment references also requires that the statements be made only to persons having a legitimate business interest in the information disclosed.

In Part 2 of this series, we'll give you some suggestions to minimize the risk of defamation claims.