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References Pose Risks

Employers can get themselves in trouble by giving references — good or bad — for their former employees. As the following cases illustrate, the safest response to an inquiry about a former employee is to provide the dates of employment, and nothing more.

Cases Hold Employers Liable

In May 2008, the United States Court of Appeals for the Fifth Circuit in New Orleans affirmed a jury verdict against a medical group and two of its doctors for giving glowing recommendations to a doctor who they knew had been using drugs on duty. After the doctor was hired at another hospital based on those recommendations, he committed malpractice that resulted in an $8 million loss for that hospital. While the medical group and its doctors were liable for that loss, the hospital where the problem doctor had worked was exonerated. Its response to the other hospital’s inquiry just confirmed the dates that the problem doctor had been on its active medical staff. Kadlec Medical Center v. Lakeview Anesthesia Associates, 527 F.3d 412 (5th Cir. 2008).

A few years ago, Weyerhaeuser learned the cost of a negative reference. One of its truck drivers wrote a letter about his reasons for leaving the company, which criticized his supervisors. When he applied for a job at Wal-Mart, one of those supervisors provided a negative assessment in a hostile tone. Wal-Mart turned him down, and the truck driver sued for defamation and other torts. The jury awarded $662,089 in compensatory damages (which were then trebled under California Labor Code section 1054 to $1,986,267), and $993,134 in punitive damages. Neely v. Weyerhaeuser Co., Case No. 693747 (San Diego Superior Court, 11/4/1999). Negative references can also give rise to retaliation claims under equal employment opportunity statutes, such as Title VII and the California Fair Employment and Housing Act. See, for example, Robinson v. Shell Oil Co., 519 U.S. 337 (1997).

Other examples of employers facing liability for references abound. See Davis v. Board of County Commissioners, 987 P.2d 1172 (N.M. Ct. App. 1999) (County could be held liable for sexual and physical assault by former employee at psychiatric hospital where he was hired based on a positive recommendation from the county detention center where he had worked; the recommendation did not mention that the former employee had resigned rather than face discipline for questionable conduct toward female inmates); Randi W. v. Muroc Joint Unified School Dist., 929 P.2d 582 (Cal. 1997) (victim of sexual molestation by vice principal had claim against school districts that formerly employed him, because they had recommended him without disclosing disciplinary actions for inappropriate conduct); Jerner v. Allstate Ins. Co., Case No. 93-09472 (Fla. Cir. Ct. App. 8/10/1995) (employer who said former employee resigned as part of downsizing effort could be held liable for shootings at subsequent employer’s office; he had in fact been discharged for carrying a gun); Gutzan v. Altair Airlines, Inc., 766 F.2d 135 (3d Cir. 1985) (employment agency could be held liable for rape of female employee where it knew about previous charges of rape and reassured employer that perpetrator was “not really a rapist”).

Limiting Liability

Many states have statutes that limit employer liability for communications about former employees, so long as the employer does not knowingly or recklessly distort the facts about the employment record. The California statute is Civil Code section 47, which immunizes “a communication concerning the job performance or qualifications of an applicant for employment, based upon credible evidence, made without malice, by a current or former employer of the applicant to, and upon request of, one whom the employer reasonably believes is a prospective employer of the applicant.” The problem with such statutes is that they do not stop former employees from filing lawsuits, nor jurors from concluding that there was no credible evidence to support the negative reference.

Conditioning the reference on a written release from the former employee will avoid any possibility of liability to the former employee, but will not affect claims by others who are injured by the former employee because of failure to warn about misconduct.

Silence Is Golden

The only way to avoid all liability is refrain from making positive or negative comments. The hospital absolved of liability in the Kadlec Medical Center case limited its remarks to the following: “Our records indicate that Dr. Robert L. Berry was on the Active Medical Staff of Lakeview Regional Medical Center in the field of Anesthesiology from March 04, 1997 through September 04, 2001.” Use that as a model.

Employers should adopt these additional written policies to bolster their defenses against liability: (1) Provide that all inquiries about former employees must be directed to a particular individual or department. Emphasize that no other employee of the organization is authorized to provide information about former employees. (2) Provide that all inquiries about former employees must be in writing accompanied by a signed release from the former employee. (3) Provide any responses to inquiries about former employees in writing. Do not provide any information over the phone or in person.