Defamation (References)

Your risk in providing employment references to prospective employers is that former employees may sue you if your references are unfavorable and lead to job rejections. The claim that former employees are most likely to assert is that the references are false and damaging to their reputations and, therefore, defamatory.

An employer may be liable to a former employee for defamation if the employer communicates to a prospective employer or other person a false statement that results in damage to the former employee’s reputation. Defamation is commonly referred to as slander if the communication is verbal and as libel if the communication is written.

Awards in successful defamation suits may include damages for lost earnings, mental anguish, or pain and suffering and, if the former employer’s conduct was sufficiently egregious, punitive damages.

A successful defamation claim requires more than merely showing that an employer provided an unfavorable employment reference. The law usually protects an employer who in good faith discloses information believed to be true to a prospective employer or other person who has a legitimate interest in asking for the information. This protection may be lost, however, if the information isn't limited in scope to the inquiry being made, is disclosed at an improper time, or is disclosed in an improper manner.

The following are examples of the types of statements that you should avoid in giving employment references:

Accusations. Defamation suits often arise out of accusations that an employee engaged in illegal or improper conduct. Employers have been liable for defamation for making statements to the effect that a former employee was a thief, used illegal drugs, or made improper advances to women. If you fired an employee because you suspected that the employee engaged in illegal or improper conduct and you feel compelled to state the reason for the firing, then restrict the statement to your suspicion ("Employee was fired because he was suspected of taking company property," not "Employee was fired because he stole company property"). However, don't state a suspicion unless you can support it with objective evidence.
Exaggerations. Employers can also get into trouble by exaggerating an employee’s misconduct. For example, a statement that employees were fired for gross insubordination was defamatory when the employees’ only alleged misconduct was their refusal to adjust their expense accounts.
Statements not made in good faith. The general protection extended to employers giving employment references requires that the statements be made in good faith. An employer’s statements aren't made in good faith if the employer knows they are untrue or if the employer makes no effort to determine if they are untrue.
Statements made to improper parties. Employers giving employment references are protected only if the statements are made to persons having a legitimate business interest in the information disclosed. For example, you can probably tell an inquiring employer that an employee was fired because the employee was suspected of stealing business property, provided there are objective facts to support your suspicion. In contrast, expressing your suspicion to others, such as other employees or friends who have no real reasons for knowing the specific details why the employee was fired, may be defamatory.

When giving employment references, you can reduce your risk of being sued for defamation if you keep in mind the following key points:

Be truthful. If your statements are true, they aren't defamatory. For this reason, refrain from making any statements that you aren't prepared to back up and substantiate if you are sued. Provide information or opinions and conclusions that you can support with objective facts, rather than mere allegations, speculation, or gossip. For example, you can safely state that an employee was fired for missing too many days of work. Don't speculate why the absences occurred.
Be clear and unambiguous. Keep in mind that statements that are technically true may still be defamatory if they are incomplete or misleading. For example, an employer stated that an employee was fired for drug use but neglected to state that the employee’s refusal to hire a supervisor’s relative also contributed to the firing decision. The incomplete statement was defamatory because it unduly emphasized the employee’s improper conduct. If you should decide to discuss why an employee left your business, state the reasons in objective and specific terms. Refrain from stating that an employee was terminated "for cause," "insubordination," "unsatisfactory performance," or other nonspecific reason, because such phrases may be defamatory by implication.
Be objective. The tone of your statement is also important. Your references should not sound petty, vindictive, or accusatory. No matter how trying your relationship with the former employee may have been, you should try to discuss the facts in an objective, nonmalicious way.
Be responsive. References should be limited in scope to information that the inquiring employer requests. Don't feel compelled to provide all requested information. Rather, the notion here is that you should not volunteer any unfavorable information that isn't requested.
Stick to job-related facts. Do not provide any information that is irrelevant to the employee’s performance or behavior in the workplace. Comments about an employee’s personal life are especially hazardous, because even if the comments are true, they may raise invasion of privacy issues.
Be selective in choosing your audience. Limit your disclosure of employee information to those persons who have a legitimate interest in that information.
Limit telephone references. Because you need to be sure that a person to whom you are providing an employment reference has a real business interest in receiving the information, you should use care in providing references over the phone. Unless you are going to limit your references to basic employment data, at a minimum you should arrange to provide the information in a return call. This will give you an opportunity to verify who the caller is. The better alternative is to have the caller make the reference request in writing.
Get signed releases or consents. Your best protection against defamation and other claims that may arise from giving employment references is to get the former employee to consent to your release of information.
Invasion of privacy claims. Employers who disclose information about an employee’s personal life open the door to being sued for invasion of privacy. Accordingly, you should refrain from disclosing information about an employee’s private life unless you are absolutely certain that the disclosure will serve legitimate business purposes.
Equal employment opportunity claims. Employers who refuse to provide references or who provide unjustifiably negative references have lost lawsuits because their actions damaged the ex-employees’ equal employment opportunities guaranteed by federal or state fair employment laws.
Interference with prospective employment claims. In several states, a former employee can sue an employer who gives false information to prospective employers with the intention of interfering with the former employee’s prospects for employment. This type of claim differs slightly from defamation in that it focuses primarily on the employer’s intent in providing the unfavorable reference.
Blacklisting claims. In a majority of the states, an employer’s "blacklisting" of a former employee is a crime. These blacklisting laws are generally broad enough to cover any communications that are designed to prevent former employees from securing employment.
In addition to defamation, there are other potential claims that should give you further incentive to limit any job references to true and objective facts that are relevant to a former employee’s job-performance abilities.

Given the potential lawsuit risks, many employers give no references at all, or provide only basic employment data such as employment dates, job titles, and wage rates. However, such a restrictive policy doesn't preclude your risk of being sued. For example, if you make exceptions to the policy by giving references for deserving employees, you may open the door to claims of discrimination or unfair treatment. Also, if your refusal to give references compels fired employees to disclose why they left your business, you may become liable for defamation if their disclosures reveal any defamatory comments that you may have made when firing them. Apart from your liability risk, you may even have an incentive to provide references for fired employees, who will be less likely to sue you for claims related to their firing if you help them find new jobs. Accordingly, it’s usually in your best interests to have a policy that permits some limited disclosures about employees’ work performance.

Using releases. Your best protection against reference-related lawsuits is to obtain in advance the employee’s permission to disclose employment information. Make it a practice to discuss with an employee who is leaving your business, either voluntarily or involuntarily, what you are willing to say in response to employment reference inquiries. You should then try to document the employee’s consent by having the employee sign a written release authorizing your disclosure.

Here's a sample employment reference release.

To ensure that any release you obtain will stand up in court, you want to avoid any signs that you forced the former employee to sign the release. Don't try to rush the employee into signing the document. A signed release will serve its purpose as long as you get it back before you provide the reference.

You should also consider adopting a policy of providing detailed references for former employees who have signed written releases and restricted references of only basic employment data for former employees who have not signed releases. This type of flexible policy will help show that the employee had a real choice in deciding whether or not to sign the release.

Finally, you should view a signed release as an insurance policy that will limit your exposure to liability if you accidentally make statements that are incomplete or misleading or that otherwise may be construed as being defamatory. Don't view the release as being a license to say whatever you want without any risk of being held accountable for your statements. Even if you have obtained a written release, your interests are best served if your employment references are made on the basis of true and objective facts that are relevant to a former employee’s job-performance abilities and that you are prepared to substantiate if necessary.