Who would be a referee?

All employers, at some point, will have received a reference from other businesses asking them to provide a reference on former employees.  Do you have to respond and, if you decide to do so, what do you say?

The recent case of Hincks –v – Sense Network Limited [2018] is an example of how providing a reference can cause employers lots of difficulties.

Generally, there is no legal obligation on an employer to provide a reference on a former employee.  The exceptions to this rule are where the employer is under a contractual obligation to do so, usually imposed in a Settlement Agreement when the employee has left the business.  In that situation, a Settlement Agreement will usually have a specimen form of reference attached to it which has been agreed by the employer and employee. There are also some very limited cases where there are statutory obligations to provide a reference e.g. in the financial services sector for FCA regulated jobs.

If an employer decides to provide a reference, then it needs to be very careful in what it says.  If something is stated in the reference which is untrue, derogatory or misleading in some way, the former employee may be able to bring a claim for negligent misstatement and seek compensation from the reference maker.  One way of avoiding that risk is to give purely factual information and that is a very popular option for many employers.  It can lead though to long serving employees being disgruntled at only receiving a one line reference when they leave after having devoted many years of service to the business.  But that may be preferable to saying more than should be said. In the case of Hincks, it demonstrated that if an employer wishes to provide more information on a former employee it needs to exercise extreme care in what it says.

In that particular case, the employee, Mr Hincks, was dismissed for breach of compliance procedures in an FCA regulated business.  When he asked for a reference, it contained negative opinions, Mr Hincks brought a claim for negligent misstatement and argued that where negative opinions were based on an investigation and conclusions of that investigation, it was incumbent on the referee to be satisfied that the investigation was reasonably conducted, procedurally fair and of a standard to be expected of a reasonable employer.

Mr Hincks claim was dismissed as it would pose too high a burden on an employer who would be under a duty to revisit disciplinary proceedings against the employee in order to to check that a fair investigation had been carried out. For more practical purposes that could be very difficult potentially several years after the people concerned had left.  In that case the employer managed to escape liability, but only after having been taken to trial at the High Court.  It would probably have been easier and saved them less angst and cost to have said nothing or to have provided purely factual information.