An employer's guide to references

Requesting a reference

Although there is generally no requirement to do so, subject to certain exceptions, e.g., in the financial services industry, it is usual for potential employers to request references from one or more former employers when recruiting an individual into the organisation. If a potential employer is requesting a reference and is particular as to who this should come from, e.g., last two employers then this should be clearly stated in the application form or the request for referee contacts.

Where one or more references are requested, it makes sense for the potential employer to make any offer of employment conditional on these references being satisfactory. Care should be taken with the wording to make it clear that the offer is conditional on the references being satisfactory to that potential employer. If the offer is not made conditional on the reference and the reference turns out to be unsatisfactory, then if the potential employer withdraws the reference this would be a breach of contract. Care should be taken not to discriminate against an individual when deciding a reference is unsatisfactory. Discrimination may occur if the candidate is treated less favourably because of a protected characteristic, e.g., they were rejected because of an unsatisfactory absence record and the absence was on account of a disability.

If there is some discrepancy between what the candidate has told you and what is provided in the reference, the Information Commissioner’s Employment Practices Data Protection Code recommends that you should seek further information and speak with the candidate and provide them with the opportunity to explain any information where a discrepancy arises.

Providing a reference

Are employers obliged to provide a reference?

There is no general legal obligation for employers to provide their employees or ex-employees with a reference. Indeed, some employers have a policy that they will not provide a reference or will only provide a brief factual reference confirming the employee’s dates of employment and job title. There are some narrow exceptions to this general rule: in settlement agreements, it is not uncommon for there to be a term of the agreement that the employer will provide a reference, with the wording of the reference usually being agreed as part of the terms. Within the financial services sector there are specific requirements to provide information to the Financial Services Authority.

It is important that employers have a consistent approach to the circumstances when and how references are provided. If the policy is not to provide references, this should be complied with at all times. If the policy is to provide references, careful consideration should be given in refusing to provide a reference as declining to do so could result in a discrimination or victimisation claim in the Employment Tribunal or other Civil Courts.

Types of reference

The most common type of reference is that given by an individual’s present or former employer to a prospective employer, but references may be provided in other circumstances, e.g., a financial reference to a mortgage lender. References can be provided in a personal capacity or on behalf of an employer. The employer is legally liable for any reference made on its behalf and it may not always be clear when a reference is being given in a personal capacity or on behalf of the employer.

If a line manager gives what he considers to be a personal reference, this may leave the employer liable as personal references are more likely to stray from hard fact into opinion. This can be a particular problem if the reference is on company letter heading. Many organisations have a policy or clause in their handbook about providing references, making clear who within an organisation is permitted to provide a reference.

References can be verbal or in writing but both carry the same weight, subject to the potential for dispute as to what was actually said in relation to a verbal reference.

What should an employer consider in relation to the content of a reference?

References may be provided by either an individual in a personal capacity or on behalf of the employer as a corporate reference. A corporate reference will usually be on the employer’s letter heading and the employer will be potentially liable for the contents of the reference.

If an employer has a policy for the provision of references (see above comments), this should also set out the format of the reference and give guidance as its content. Many employers restrict references to purely factual matters, e.g., dates of employment, job title and will not include personal opinions as to the individual’s abilities or personal qualities. Care must be taken to ensure that the information provided is factually correct.

Employers are not liable for a personal reference given by an individual in their personal capacity. However, there is always a danger that a personal reference may is taken to be a corporate reference. If it is given on the employer's headed notepaper or with the referee's job title it is likely to be seen as a corporate reference. Any policy should make it clear that personal references may not be given on the employer’s letter heading and should make it clear that the reference is being made in a personal capacity.

Although the employer may have a policy dealing with what will be provided in a reference, from time to time, reference requests may come in as a template form to be completed, and asking questions that go beyond those the employer would normally answer. The employer is not under any obligation to answer these questions. It may chose to answer all the questions but if it does not, then it is best to respond by making it clear that all or a number of the questions have not been answered because the organisation’s policy is only to provide specific factual information.  

Liability for references

The subject of the reference could make the following claims against the referee: 

• Breach of contract/constructive dismissal, if they remain in employment;
• Discrimination;
• Defamation;
• Malicious falsehood; and
• Negligent misstatement.

Breach of contract

It is an implied term of a contract of employment that an employer will take all reasonable care in preparing a reference for an employee. This applies even when the employment has ceased. This claim could either be a free standing breach of contract claim or, if the subject of the reference remains an employee, it could amount to a fundamental breach entitling the employee to resign and claim constructive dismissal. A refusal to provide a reference might also amount to a breach of contract. This will depend on the circumstances. If the employer has a policy not to provide references, it is not likely there will be a breach. If, however, it is the practice to provide a reference – refusal to do so might amount to a breach of contract.

Discrimination

It would be possible to bring a claim under the Equality Act 2010 in relation to an inaccurate reference. The aggrieved employee or ex-employee would have to show that the reference was inaccurate because the claimant had a protected characteristic. Similarly, a refusal to provide a reference because the claimant had a protected characteristic would be discriminatory. The employee will first have to show they have a protected characteristic. These are: age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion and belief, sex or sexual orientation. If the claimant can establish this, the employer will have to show that the refusal to provide a reference was not because of the protected characteristic; or that the wording of the reference was factually correct or that any disputed wording in the reference was not because of the claimant’s protected characteristic.

Further, tribunals are entitled, in the absence of clear cut evidence of discrimination, to draw inferences from the primary facts that there has been discrimination. If the tribunal concludes a reference is inaccurate and detrimental to the claimant and the employer cannot establish this was for a reason unconnected with the protected characteristic, the tribunal can conclude without direct evidence that the reason for the inaccurate reference was discrimination

Defamation

Defamation is an untrue statement that disparages the reputation of a person in the estimation of right thinking members of society. Where the statement is in a permanent form (for example, in a written reference) it would be libel and where it is in a transitory form (for example, in an oral reference), it would be slander. Referees must, therefore, be able to justify and support any comments made in a reference and show either that they are true or that they honestly believe that the contents of a reference are true.

The law in relation to defamation is complex and for this reason, claims of this type are rare.

Malicious falsehood

An individual may also have a claim for malicious falsehood against a referee if they can show that the reference contains untrue words that were published maliciously. Malice in this context means that the referee either knew that the statements were untrue or was reckless as to whether they were true or not. The primary difference between malicious falsehood and defamation is that defamation compensates the claimant for loss of reputation and malicious falsehood compensates for economic/financial loss. In this context, this is likely to relate from financial loss arising from a job offer being withdrawn because of the nature of the references. It would be possible to bring both claims simultaneously.

Negligent misstatement

When an employer provides an inaccurate reference, it can be sued for negligence.

An employer who provides a reference owes its employee, or former employee, a duty to take reasonable care in the preparation of the reference, a failure to do so would make the employer liable if the employee suffered damage as a result of the reference. The duty extends to ensuring the accuracy of the facts upon which any opinion expressed in the reference is based. The court must ask itself whether a reasonably prudent employer would have expressed the opinions which are stated in that particular reference.

Many of the cases relating to negligent misstatement relate to references that contain information about disciplinary proceedings that were incomplete when the employee left the business, sometimes by mutual consent, sometimes by resignation. There are conflicting decisions, in Bartholomew v London Borough of Hackney [1999] IRLR 246; the court held that the employer was not negligent when it provided a reference containing details of disciplinary proceedings which were pending when the employee accepted voluntary severance terms. It held that an employer is under a duty of care to provide a reference that is true, accurate and fair and does not present facts so as to give a misleading impression overall. If the employer had not included details of the disciplinary proceedings, it would have failed in its duty to the prospective employer to provide a reference that was not unfair or misleading.

However, in Cox v Sun Alliance Life Ltd [2001] IRLR 448, the Court of Appeal held that an employer would be negligent in providing a reference that alluded to an employee's misconduct unless the employer had carried out an investigation and had reasonable grounds for believing that the misconduct had taken place.

If you are considering referring in a reference to disciplinary proceedings which were not completed when the employee left the business, we suggest you contact your HR Rely advisor before completing the reference.

In negligent misstatement, the employer also has a duty to the person or organisation to which it provides a reference. If an employer provides incorrect information in a reference and the prospective employer relies on it and suffers a loss because of this, the employer providing the reference can be liable for this.

It is possible to include a disclaimer in a reference to avoid liability to the recipient of the reference, although whether this is effective will always depend on the fact. Here is some example disclaimer wording:

“This reference is given to the addressee in confidence and only for the purposes for which it was requested. It is given in good faith, and on the basis of the information available to the employer at the time it is given, but neither the writer nor [NAME OF EMPLOYER] accepts any responsibility or liability for any loss or damage caused to the addressee or any third party as a result of any reliance being placed on it.”

How does Data Protection apply to the giving of references?

Data Protection legislation applies to references provided by an employer. The provision of a reference is subject to the eight data protection principles. These can be found in our Data Protection Guide.

Part 2 of the information Commissioner’s Employment Practices Code states that employers should:

• Draw up and publicise a clear policy regarding which employees can provide corporate references and in what circumstances;
• Not provide confidential references about a worker unless the employer is sure that the worker consents to this course of action; and
• Care should be taken in providing information about an employee’s sickness record as information regarding an individual’s health is sensitive personal data. To disclose this type of information specific consent is required from the employee concerned. If an employer is requested to disclose the number of day’s absence that an employees has had, this is unlikely to be considered sensitive personal data, but any request that required providing information about medical conditions certainly would be and would require consent.

Requests from Authorised Officers of Jobcentre Plus  

A Job Seekers Plus Authorised Officer may make a written request for specified information relating to an applicant's previous employment under section 1) of the Social Security Administration Act 1992. This provides that the previous employer is under a legal obligation to provide the information requested by the deadline specified. It is a criminal offence to delay or obstruct this process.