Limiting Employment Reference Risks

Employers who provide employment references may find themselves being sued for defamation or similar claims such as invasion of privacy.

Given the potential lawsuit risks, many employers have adopted a policy of giving out no references at all or of giving out only basic employment data such as dates of employment, job titles, and wage rates.

However, such a restricted policy does not foreclose your risk of being sued. For example, if you make exceptions to the policy by giving references for deserving employees, you may open the door to claims of discrimination or unfair treatment. Also, if your refusal to give references compels fired employees to disclose why they left your business, you may become liable for defamation if their disclosures reveal any defamatory comments that you may have made when firing them. Apart from your liability risk, you may even have an incentive to provide references for fired employees, who will be less likely to sue you for claims related to their firing if you help them find new jobs.

Accordingly, it's usually in your best interests to have a policy that permits some limited disclosures about employees' work performance. If you should elect to go this route, your next step should be to become familiar with the general types of information that you can safely disclose and with the circumstances under which the disclosure is proper. See guarding against defamatory statements. In addition, you should consider adopting the practice of securing from your former employees written releases that authorize your disclosure of information in employment references.

Using releases. Your best protection against reference-related lawsuits is to obtain in advance the employee's permission to your disclosure of employment information. You can save yourself a lot of potential future headaches if you make it a practice to discuss with an employee who is leaving your business, either voluntarily or involuntarily, what you are willing to say in response to employment reference inquiries. You should then try to document the employee's consent to your providing information in response to reference requests by having the employee sign a written release authorizing your disclosure.

Business Tools

The Business Tools area contains a sample release form that may be used as a guide in preparing a release by which a former employee consents to disclosure of employment-related information to a prospective employer.

To ensure that any release you obtain will stand up in court, you want to avoid any signs that you forced the former employee to sign the release. Don't try to rush the employee into signing the document. A signed release will serve its purpose as long as you get it back before you provide the reference.

You should also consider adopting a policy of providing detailed references for former employees who have signed written releases and restricted references of only basic employment data for former employees who have not signed releases. This type of flexible policy will help show that the employee had a real choice in deciding whether or not to sign the release.

Finally, you should view a signed release as an insurance policy that will limit your exposure to liability if you accidentally make statements that are incomplete or misleading or that otherwise may be construed as being defamatory. Don't view the release as being a license to say whatever you want without any risk of being held accountable for your statements. Even if you have obtained a written release, your interests are best served if your employment references are made on the basis of true and objective facts that are relevant to a former employee's job-performance abilities and that you are prepared to substantiate if necessary.