Being the boss means that you will have the opportunity to provide references for your former employees. Some companies ask that you just verify dates and titles and others want to question you about your former (or sometimes current) employee. Lots of companies have policies requiring people to keep their mouths shut, but others allow their managers to speak freely. Lots of people think references are illegal (they aren't). Which policy should you adopt?

I asked several labor and employment lawyers what they think. Here are their responses:

Even though there is nothing "illegal" about giving out a truthful reference (my state, Ohio, even has a statute that protects employment references--O.R.C. 4113.71), my advice to clients is to avoid the practice. It can only lead to headaches from a disgruntled ex-employee. Frankly, if an employer receives the typical "name, rank, and serial number" on a potential employee, it sends the if-you-don't-have-something-nice-to-say signal. If the lack-of-a-reference send the same message, why risk a headache by telling an employer the truth about a poor or marginal performer.

Employers can rest easier knowing that the law protects those that tell the truth, but why take the chance rankling a (maybe) disgruntled ex-employee who is no longer your headache? Why create an incentive to look for a reason to sue?

Moreover, think of the transactional costs associated with a "bad" reference. Employers will be loath to hire someone on whom they receive a bad reference. This practice will help create of cycle of perpetual unemployment for the unemployable. And, who's to say that one's bad employee won't thrive in another situation, working for different management with different peers?

It's definitely not illegal to give out a truthful recommendation. Indeed, some states give immunity to employers on references as long as they are not defamatory. It's obviously safest to give out neutral references--that is, dates of employment, job title and sometimes rate of pay. For large companies, this may be the only sensible way to go. However, many supervisors ignore company policy and give out information on employees that is glowing or extremely negative. If the employee was a good one, then it's probably a good thing for employers to give a terrific reference. Especially with a layoff, it may help them get back on their feet and get the company out from under an unemployment claim.

With bad references, though, there's a danger zone that I suggest most employers shouldn't cross into. You shouldn't lie, so it's best to give a neutral reference (and not in a squirrelly way that lets the potential employer know something is wrong). First of all, why on earth would you want to keep a former employee from getting a job? If they're unemployed, all they have to do all day is sit around and think of ways you've wronged them and start calling attorneys. Second, your unemployment rates will skyrocket. Let them move on and find a place that will appreciate them. And if a terrible employee ends up working for a competitor, you should be happy to let that happen.

There may be some times you have a legal obligation to disclose negative information. For instance, if the former employee is applying for a police position or security clearance, you should tell the truth. Just make sure that you don't slam the employee unnecessarily. Even a slight exaggeration or unsupported claim could land you in a lawsuit.

Bryan Cavanaugh
The Cavanaugh Law Firm

I recommend employers not give out substantive reviews or opinions of former employees unless they are in a fairly small community of competitors who all share similar information. For instance, nursing homes often have nurses' aides move around from one local nursing home to another. If the HR representatives in those nursing homes freely share information with each other about former employees, then I think that is helpful information for the prospective employer to have in deciding on an applicant, and I recommend an employer participate in that sharing of information.

But otherwise, there is no corresponding benefit for an employer to speak freely about a former employee, so I recommend they not do so. As you noted, most people, in my experience, believe it is illegal for an employer to disclose any opinion or assessment of a former employee. Therefore, unless there is a corresponding benefit the employer will receive (along the lines of "scratch my back and I'll scratch yours") then it's not worth riling up former employees who may learn of the disclosure, tying up HR's time responding to inquiries, and taking the risk that an HR person or manager will make an untrue factual statement (as opposed to an opinion) and thereby expose the company to liability for defamation.

Here's what happens in real life: For "good" employees, employers give recommendations. For "bad" employees, they say that they can just confirm dates of service and titles. There's a wink and a nod, and everyone is supposed to understand the code.

But some states, like Connecticut, have created a privilege for employment references of current or former employers that were solicited with the employee's consent. That means the employee can't file a suit against the employer for giving a "bad" reference. What the court said is that "the integrity of employment references not only is essential to prospective employers, but also to prospective employees, who stand to benefit from the credibility of positive recommendations". The rule is the same in at least 20 states.

So, if you're an employer in one of those states, I think the key part of this is getting consent from the current or former employee to give the recommendation. Once that is done, the employer should have a good deal of protection--even if it gives a "bad" reference. If you're not in one of those states, I would exercise some caution and seek legal counsel to figure out where the "safe" zone lies.

But even with the protection under the law, many employers will still want to subscribe to the "name, rank, serial number" theory of references. That's fine, just don't be disappointed when the employee you hire is a "dud" because another employer also subscribed to same theory.

With my employment-lawyer hat secured firmly to my head, I generally recommend that employers stick to a neutral-reference policy (e.g., dates of employment, last position held, and, sometimes, last salary).

A negative recommendation that costs the former employee future employment may result in a lawsuit. What you may see is something sounding in defamation, disparagement, tortious interference, or the like. And, while I don't practice there, I read somewhere that California has a state law specifically forbidding false or misleading statements about employees. So, even if the criticism is true (which should be an absolute defense), if the former employee believes that it is false, the former employer ends up spending $$$ and has its business interrupted to defend a meritless lawsuit.

Positive recommendations, although well intended, can result in legal trouble too. Most notably, a positive recommendation could give rise to a claim of discrimination. Amazing, right? For example, let's assume that Derrick Decision maker terminates Edith Employee for performance, but Sam Supervisor later gives Edith a positive recommendation. If Edith believes that her termination is pretextual because of her gender or, better yet, because she complained previously to the EEOC about gender discrimination, then Sam's positive recommendation letter is Exhibit A in Edith's subsequent discrimination action against her former employer.

Whatever policy the employer has regarding employee recommendations--"ad hoc" is not a policy--it should be in writing, communicated to employees and supervisors, and supported with appropriate training.

I always recommend that employers be honest, but in the majority of cases I do think it is prudent to provide a neutral reference consisting of dates of employment and positions held. This protects the employer from potential liability for defamation or "blacklisting," a practice that many states prohibit.

However, I would recommend making an exception to this general rule in cases where the employee was suspected of, or found to have engaged in, serious misconduct, such as dishonesty, severe sexual harassment, or workplace violence. In cases like these, the former employer may face liability if it does not disclose the alleged misconduct. Employers asked to provide reference information for ex-employees in this category should consult with legal counsel and comply with the laws that apply in their states before providing such "honest, negative" reference information. Just as an example as to how tricky this can be, I would not recommend saying, "Joe was terminated for sexual harassment," because Joe may claim that he didn't do it, and if the statement is false, it could give rise to a defamation claim. On the other hand, "Joe was terminated at the conclusion of an investigation into allegations of sexual harassment," would be a true statement, whether Joe was "guilty" or not. So, in this case, even if Joe tried to sue the employer for defamation, the employer should be able to assert the "truth" defense.

A positive exception to the "neutral reference" rule that I would recommend is in the case of a reduction in force or job elimination, when the employee was terminated through no fault of his or her own. In cases like this, I think it would be appropriate for the employer to provide a letter of reference stating that the employee performed satisfactorily and lost his or her job only because of the RIF or elimination.

Finally, I know that many managers "unofficially" provide positive reference letters or other information for certain individual employees. If this is routinely done, an ex-employee who does not receive a positive reference may be able to claim retaliation or discrimination. I would hate to tell managers that they can't ever provide help to good employees who are looking for employment elsewhere, but they should at least be aware of the legal risks and make sure that the Human Resources function is aware of what is going on.

Published on: Oct 2, 2014