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:

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

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.