Is there a duty to disclose in employment references? (Honesty is the Best Policy).

Employers are under increasing pressure to disclose more information in response to reference requests. Several recent court cases and new legislation challenge the acceptability of a neutral or minimal-disclosure reference policy. Past employers have potential liability if they misrepresent or simply withhold information regarding the nature of a prior employee's work history. These changes affect prospective and past employers as well as the employees under consideration. As a result, companies should be aware of the trends in this area of employment law and review their policies accordingly.

Prospective employers often have difficulty obtaining useful and accurate references for job applicants. The reluctance of past employers to disclose anything more than superficial information is an increasing problem for companies committed to employing a quality workforce. A related concern is the legal implication of hiring a person who may expose the company to future loss or litigation.

Employers are under heightened pressure from the courts and state legislatures to be more open in response to reference requests. Furthermore, a liability for negligent referral may exist if employers do not fully and accurately describe the behavior or skills of former employees. This trend could significantly change the obligations of employers and require modifications to the policies and procedures of many companies.

This article explores the concerns of the various parties involved-employees, former and future employers, coworkers and other third parties-and discusses practical, legal, and ethical considerations, Possible approaches for those currently wrestling with these issues will be suggested. At the very least, an increased awareness of potential problems may serve as an incentive for employers to adopt policies that are commercially and socially responsible. Of course, managers should consult legal counsel when faced with situations that could give rise to potential liability.

The Need for References

A company collects initial information about a prospective employee from the application or resume and from inter views with that person. The clear problem, of course, is that this data comes from only one individual's perspective--and that person is hardly an objective, disinterested party. Therefore, employers often want information from additional sources, particularly reports based on prior work experience.

A prospective employer may want evidence of the applicant's capabilities, skills, and technical knowledge. Hiring and placement decisions may be influenced by knowledge of the person's interpersonal relationships, attitudes, and work habits. In some instances salary is determined by the person's former track record. References can also be used to corroborate the applicant's statements regarding business successes, promotional history, and reasons for leaving prior employment. The possibility also exists of raising negative factors about an applicant, ranging from minor "chemistry" problems with a supervisor to major issues, such as dishonesty or violent tendencies.

Many complex issues are involved in determining whether references are a valid source of information and what weight they should carry in the assessment process. However, if used appropriately, references can be an invaluable source to indicate how the employee performed in an actual work environment, supplement information given by the applicant, provide information that is not entirely "applicant-biased," contradict or confirm data given by the applicant, or indicate the need for additional queries in certain areas.

Problems with References

The potential problems with references must be considered as well. The person who gives the reference is also speaking from one perspective only, and may be no more objective than the applicant. It is possible that the information supplied is inaccurate or based on subjective, unreliable measures. Even worse is the chance of intentionally inaccurate information being conveyed because it is self-serving in some way to the former employer, such as negative references in retaliation against a whistle blower or positive references to facilitate the departure of a poor employee. Also, the applicant's performance in the previous position may have little or nothing to do with how the person would perform in the position currently being sought. Practical considerations include the time involved for both parties to do a thorough reference check, and the resulting documentation required.

From the perspective of the person asked to give a reference, the foremost concern is being sued if a negative reference allegedly costs the applicant a future job. Second, references are time consuming if they go beyond the name, rank, and serial number" level. Third, supplying more complete references may require maintaining additional documentation. Fourth, there is a desire to help past employees who were good performers, while at the same time not wanting to do the same for marginal or poor employees. Fifth, the issue is a double-edged sword, as employers find themselves on both sides of the process.

From the employee's standpoint, there are also concerns worth noting. A good employee has a stake in assuring the information given in a reference is accurate and relatively complete. A poor employee would prefer a minimal disclosure policy. All employees share the problem that it is extremely difficult to find out (let alone prove) who said what and to whom, to say nothing of how it was interpreted and ultimately used. An additional issue is proving the reference was truly the cause of the final employment decision, as opposed to other factors.

Liability Issues for the Prospective Employer

One of the legal trends that heightens the importance of conducting diligent background checks is the growth of litigation regarding the negligent hiring and retention doctrines, that expand liability beyond the traditional respondeat superior theory of agency-principal relationships. Under these doctrines, an employer is liable for negligent or intentional acts of an employee if the employer knew or should have known of a potentially dangerous tendency on the part of that employee. The rationale behind these cases is that employers have a duty to reasonably investigate the background and skills of their employees to ensure their suitability for the positions being filled. Furthermore, after hiring, the employer has a continuing duty to monitor the behavior of employees and take proper disciplinary action if violations of policy or inappropriate conduct occur. Under both doctrines, the effort to obtain references from prior employers is a critical element in whether or not the courts hold a company liable for the actions of its employees.

In an often-cited case, the manager of an apartment complex entered a woman's apartment and raped her. The owner of the complex was found guilty of negligent hiring, because they had not checked the manager's job references or pursued explanations for other irregularities in his employment application. The court felt that the manager's prior felony convictions would have been discovered through a reasonable inquiry, and that the nature of the job demanded such an effort. (1)

In contrast, employers have won cases in which they contacted references and did background investigations, even when the employee's later actions resulted in harm. A 1993 Texas case is typical. In that case, a school district hired a bus driver who was accused of sexually molesting students. When the school district was sued for negligent hiring, the court found in favor of the employer, as the district had checked the bus driver's driving record, in addition to contacting his references before hiring him. The court specifically noted that the school district was not required to run a more thorough background check because it had no indication that the driver had a history of molesting children. (2)

Another consideration for the hiring employer is the responsible, judicious, and common sense use of information received through reference checks. A company must insure that it does not use any information in an illegally discriminatory way, that it verifies negative data as much as possible, and that it guards against the possibility of transmitting or relying on inaccurate information. Companies should therefore cast their reference inquiries to a reasonably broad spectrum of people in order to reconcile or confirm any apparent concerns about an individual.

Liability Issues for the Previous Employer

Because employers fear being sued for negative references, most companies have policies dictating minimal disclosure in response to reference queries, on the theory that "no one can sue you for something you didn't say." This may be a dangerous policy, and is at the heart of the controversy explored in this article.

The employer's fears may be unfounded, due to several misconceptions about this area of law. A claim by a former employee would most likely center on defamation. Briefly, defamation is anything published or publicly spoken that causes injury to another's good name, reputation, or character. (3)

First of all, truth is a complete defense to defamation, meaning the employer would prevail in any such case if the information conveyed was, in fact, true. (4) This is the case no matter how harmful, embarrassing, or costly it may be to the employee in question. Of course in certain instances proving the truth of the statements in court may be another issue. Therefore, maintaining adequate documentation and using care in phrasing the reference are important. For example, if an employer is convinced that a former bookkeeper embezzled money, but charges were never brought and no hard evidence exists, then saying the person was discharged for stealing poses a problem. Saying the person was terminated for consistently failing to balance cash would be more defensible.

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