A matter of opinion

Anyone involved in hiring or firing staff should be alert to the pitfalls of giving references. However, with regulation, the area of reference giving becomes even more crucial. Systems are essential to regulate the content of references; who references are given to; and who can give references. There also needs to be record-keeping at every stage

The first complaint that springs to an aggrieved employee's mind when they consider they have been given an unfair reference is that it must be defamatory. Few claims are brought on this basis because of the expense, but in any case most would be defeated by the qualified privilege defence.

This arises where the maker of the statement has an interest or duty in giving the statement and the recipient has a duty or interest in receiving it.

Malicious falsehood
Provided the employer can show they honestly believe in the truth of the statement, then there will be no liability unless the employee can show that the employer was acting maliciously in giving the reference.

An alternative claim for malicious falsehood could be made but to prove this the employee must show both that the employer was acting maliciously and that the statement made is untrue, which makes it very difficult to establish.

Apart from the possibility of claims of defamation or malicious falsehood, great care must be taken with regard to the content of any reference given to avoid liability for negligence or deceit. The extent of liability for the content of references was most recently discussed in Spring v Guardian Assurance (1994) when it was confirmed that employers owe a duty of care to employees when writing references.

It is essential to ensure references are accurate to avoid liability to employees, but the duty goes beyond mere accuracy. The reference must present the facts in such a way as to give a fair overall impression of the employee.

This was established in the case of Bartholomew v London Borough of Hackney (1999) where an employee who settled a claim of race discrimination on terms that it was agreed that he left voluntarily, before allegations of gross misconduct were resolved.

Hackney gave a reference that disclosed the fact that there had been such allegations and that disciplinary proceedings had been started, but did not mention the claim or the settlement. The Court of Appeal held that the reference must not give an unfair or misleading impression. However, Kidd v AXA Equity and Law Life Assurance (2000) makes it clear that the duty does not extend to providing a full and comprehensive reference.

Unfavourable information
Problems arise where an employee leaves under an unsubstantiated cloud. In this case, the employer should make sure he not only believes the information in the reference is true, but that he has reasonable grounds for that belief, based on a reasonable investigation as in Cox v SunAlliance Life (2001).

Apart from the risk of claims by ex-employees, employers must take care they are not risking liability to a new employer who relies on the reference if they do not take sufficient care. If it is untrue or misleading, the new employer could make a claim for damages. "Misleading" could include missing out unfavourable information while mentioning favourable points. If the employer is more than just careless, but knowingly makes a false statement intending that a new employer should rely on it, then there will also be a claim for deceit.

In view of the risks of giving a reference, is it best just to have a policy of not giving any at all? This would not be wise, particularly in the financial services sector where references are essential.

Mutual trust
First, it seems there is at least a moral obligation to provide a reference (see the judgment of the House of Lords in Spring v Guardian Assurance 1994). Refusal to give a reference could lead to liability for breach of the implied term of mutual trust and confidence.

Following Coote v Granada Hospitality (1999), refusal to give a reference could lead to liability for victimisation under the Sex Discrimination Act, although the same does not at the moment apply to race discrimination.

Consider these steps to control the flow of references and thus potential liability: