References - What Duty Does an Employer Owe to an Employee When Expressing a Negative Opinion in a Reference?
In a recent case, the High Court has provided clarification on the duty of an employer whose reference went beyond statements of fact and included negative statements of opinion based on a previous internal investigation.
This case is helpful in considering the duty of care needed when an employer expresses an opinion in a reference.
Hincks v Sense Network Ltd
Mr Hincks was an independent financial adviser, and was the subject of a number of investigations into his conduct during his employment with Sense Network Ltd. He subsequently sought a reference from his former employers. The reference provided referred to a finding of an internal investigation which was critical of Mr Hincks' conduct, including the finding that he had "knowingly and deliberately" circumvented processes that required him to seek pre-approval before giving advice and making transactions.
He brought a claim against his former employer for negligent misstatement on the basis the reference had given a misleading impression of him as those opinions were based on a sham investigation. He argued that where a referee expresses a negative opinion that is based on the findings of an internal investigation, they were required to satisfy themselves that the investigation in question was both procedurally and substantively fair.
The Decision
The High Court dismissed his claim.
The Court noted that there would be "formidable difficulties" if reference writers were obliged to inquire into the fairness of previous investigations. Not only might this not always be possible, but it would also place a considerable burden on the reference writer.
The Court held that it was difficult to prescribe the standard of care to be exercised by a reasonable reference writer and that ultimately the nature of the duty would depend upon the specific facts of the case. However it identified the following certain common features of the duty:
- To conduct an objective and rigorous appraisal of facts and opinion, particularly negative opinion, whether those facts and opinions emerged from earlier investigations or otherwise.
- To take reasonable care to be satisfied that the facts set out in the reference were accurate and true and that, where an opinion was expressed, there was a proper and legitimate basis for the opinion.
- Where an opinion was derived from an earlier investigation, to take reasonable care in considering and reviewing the underlying material so that the reference writer was 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 not misleading either by reason of what is not included or by implication, nuance or innuendo.
Using the analysis above, the court held that there was evidence to support the statements made by Sense Network Ltd and therefore the reference was neither inaccurate nor misleading.
Best Practice
- It is increasingly common practice for employers to provide standard factual references limited to dates of employment, job title and salary.
- In general there is no legal duty on employers to provide a reference, but where they are provided employers must take reasonable care to ensure that they are true, accurate and fair.
- Employers should make sure that any references given are in line with any workplace policy on whether or not to give references and the information to be included. References should be consistent to avoid the risk of allegations of discrimination or breach of the implied term of trust and confidence.
- Where a reference will contain negative opinions, employers should make sure that there is an objective basis for holding those opinions and may well involve the reference writer reviewing relevant documents. For example, in Mr Hinks' case the Court suggested that relevant documents included the statements prepared by the parties during investigation, a record of the investigatory meeting, the termination letter, and any appeal and appeal decision. What is relevant will vary from case to case.
- The Court noted that unless the relevant materials identified a "red flag" which necessitated further inquiry, there was no duty to examine the procedural fairness of the investigation in question.
- Please note that the provision of references may be affected by statutory regulation in certain industries and sectors (for example the financial industry and education)