References are a very important element of an employer’s obligations, and a recent case has highlighted that businesses must be mindful of the duty of care they owe to former employees to exercise reasonable skill and care in providing them. If employers do not ensure a reference is fair, true and accurate they could be subject to a claim of negative misstatement by a former employee, as in the recent case of Hincks v Sense Network Ltd.
When concerns about advice offered to clients by Hincks, an independent financial advisor, arose he was required to ensure his advice and transactions were pre-approved by his employer. Hinks breached this obligation several times resulting in internal investigation, disciplinary proceedings and the eventual termination of his employment.
Hinks later sought a reference from his former employer in which they expressed their belief that he “knowingly and deliberately circumvented” the pre-approval process and referenced his breaches and disciplinary action.
Hinks, upon learning of the negative reference, raised a claim for negligent misstatement. He argued that parts of the reference were inaccurate and untrue, that it created a misleading idea of the situation overall and that the reference writer had to be satisfied the investigation was reasonable and procedurally fair, which it was not.
The court considered that requiring the reference writer to determine the fairness of an earlier investigation was too high a burden and was impractical. They decided that this level of consideration would only be required if there were obvious errors or information putting the integrity and reliability of the investigation into question.
The court also did not set out an employer’s specific duty of care in relation to references in every case as this will always be dependent on the specifics of the case. However it did set out some key indicators for employers to be mindful of and suggested employers should:
- Conduct an objective and rigorous appraisal of facts and opinion, especially negative opinion, whether those facts and opinions emerged from earlier investigations or otherwise;
- Take reasonable care to be satisfied that the facts set out in the reference are accurate and true and that, where an opinion is expressed, there is a proper and legitimate basis for the opinion;
- Where an opinion is derived from an earlier investigation, to take reasonable care in considering and reviewing the underlying material so that the potential new employer is able to understand the basis for the opinion and be satisfied that there was a proper and legitimate basis for it
- To take reasonable care to ensure that the reference was fair and is not misleading either by reason of what is not included or by “implication, nuance or innuendo”.
In this case, the court concluded the reference writer was not required to take further steps, the conclusions, including the negative opinion, were sufficiently supported and dismissed the claim, however, the court cautioned that this ruling did not lessen the burden on employers to provide accurate references.
Reference writing, can be particularly problematic for managers and HR professionals. Taking from this case, I would suggest that employers:
- Ensure everything that has to be included in the reference is included and consider how to demonstrate it is true, accurate, fair and not misleading;
- Remember that opinions expressed in references must have a factual basis and avoid speculation and assumptions;
- Take full notes at important meetings to avoid future disputes over facts; and
- For individuals with a poor attendance, disciplinary or performance record, contact your legal manager at Law At Work for further advice.