Many employers respond to a prior employment verification by just verifying name and hire/separation dates. The reason is usually that they want to avoid a defamation lawsuit. My purpose in this article is to highlight the “other side” of the coin i.e. negligent referral.
What is negligent referral? Courts have increasingly held that employers have an obligation to provide truthful non-malicious information on a past employee that a prospective employer has a right to know. Say, for example, an applicant being considered for an accounting job was “forced” to resign from his prior employer because he was using his position as a bookkeeper to steal money from customer accounts. Let’s assume that he was charged with criminal activity but agreed to make restitution as part of a plea agreement with the state, and the criminal charges were reduced from a felony to a misdemeanor or pled nolo contendere. The applicant might only indicate to a prospective employer that he resigned and omitted the circumstances under which he resigned
If the prospective employer calls the prior employer and tells them they are thinking of hiring him for a position which would put him in a similar situation to steal, the prior employer has an obligation to inform the prospective employer of the truthful circumstances of his resignation, or risk being held liable if he steals from the new employer. Why? Because the prior employer knew, or should have known, he posed such a risk. The injured employer could hold the prior employer liable for his actions under theory of “negligent referral” if they did not disclose what they knew.
The courts are losing patience with employers concerned only with their own liability at the expense of society’s need to have access to reasonable information which prospective employers need to conduct business. This is particularly true if the former employee exhibited dangerous and aggressive behavior.
Michael Losey former president and CEO of the Society for Human Resource Management, tells of a case in which an employee was asked to resign after bringing a gun to work. His employer gave him a reference that indicated he was let go in a corporate restructuring and did not mention the gun incident. The former employee shot and killed three supervisors at his new job.
One egregious example KADLEC MEDICAL CENTER 01-2016 blog post 06-30745-CV0.wpd is a case that should cause you to reexamine the “speak no evil” approach to references. In that case, a doctor left one hospital where his performance was substandard and took up his practice at a hospital on the West Coast. The doctor’s malpractice at the second hospital left a young mother in a permanently vegetative state. After the young woman’s husband recovered a verdict against the West Coast hospital, that hospital sued his previous employer for failing to warn it about the doctor’s problems. It was proven at trial that the first hospital knew that the doctor was a substance abuser whose professional competence was seriously compromised by his addiction. But it said nothing to the person doing the reference check. The first hospital merely filled out a form confirming some basic facts of employment and declined to provide any more information, citing the volume of inquiries and the burden of responding more fully. The employer learned the hard way that the law required more. Under the circumstances, it was obligated to disclose information about the former employee’s performance problems so the prospective employer would be fully and accurately informed about him when making the hiring decision. The $4.1 million verdict against the hospital isn’t the first time an employer has been held liable for failing to disclose important information about a former employee.
Other examples of employers facing liability for references abound. County was 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.
In another case a 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.
EMPLOYERS HAVE PROTECTED PRIVILEGE
No cause of action arises by a former employee if the communication is truthful. This type of communication enjoys a general qualified privilege. The law is well established that an employer has a qualified privilege to provide information about a former employee.
Many states have enacted statutes to further protect this communication. These statutes are designed to benefit society by encouraging honest references.
Lesson one: Do your homework. You should do a thorough background check when you hire someone. Call the applicant’s references, and get as much information as you can. If the job involves tasks like working with children, the elderly, or other vulnerable populations, be especially thorough. Check for criminal records in addition to calling former employers and references.
If the West Coast hospital hadn’t tried to do a thorough background check, it wouldn’t have had a claim against the previous employer that concealed important information and would have been stuck with the verdict against it.
Lesson two: Think twice before you give the name, rank, and serial number response to an inquiry from a prospective employer. If the employee it’s asking about has a violent streak or a substance abuse problem that could present a danger to coworkers or the public, you seriously should consider passing that information along.
Of course, before revealing anything negative, double-check your information to be as certain as you can that you’re correct. Some defamation cases have merit because the employer was too quick to pass along false information.
AN EMPLOYER IS LIABLE FOR FALSE MALICIOUS
In every case in which an employer has been found liable for statements made during a reference check the statements were false, or made with malice, or made by someone lacking sufficient knowledge of the plaintiff’s employment.
Once you’re satisfied that the negative information is both accurate and important for the prospective employer to know, choose a smart way to pass it along. That may be the hardest thing to do.
An off-the-record phone call might be the best way to avoid a defamation claim by the former employee, but it won’t provide a paper trail to defend against a claim by a prospective employer that ignores your warning signals.
It’s a tough decision. If you’re in doubt about what to do, get some legal advice.
The Truth about the Defamation Threat
The reality of the threat of defamation from employer references is often well exaggerated. The reason employees seldom win these cases is because they must prove malice. In essence, they have to show not only that the statements made in the reference were defamatory and false, but also that they were unusually reckless and malicious and that the employer had no basis for making the statements at all.
Prior Employment – Giving the reference check
- Be aware of a Negligent Referral
- Don’t allow middle managers to talk to reference checkers.
- Route reference checks through Human Resources or other adequately trained department.
- Get a signed release before issuing a response
- Provide same type of information for employees at all levels. This can allow for documented dangerous behavior
- Communicate only with one who has a need to know information
- Be Truthful
- Comments should be documented
- No Malicious Information should be given
- Never give unnecessary information i.e. limit the information to job-related data
- Answer only the actual inquiry without giving an opinion or making a conjecture
- Make managers in your organization aware of the risks of giving negligent references.
- BE A MYSTERY SHOPPER i.e. call your own shop to find out how references are being handled
HOW EMPLOYERS LOSE
Those employers that are found liable for defamation in the context of giving references have usually made statements that a reasonable person would not have made .e.g. Joe worked for me and I think he is a no good drunk. I understand that there are situations in which even a reasonable and careful employer can find themselves on the wrong end of a liability judgment. Reference checking is not one of these types of situations. An employer who sets up a proper system of guidelines, training and controls is generally protected from liability.
EXAMPLE OF HOW NOT TO HANDLE PRIOR EMPLOYEE REFERENCES
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 to $1,986,267), and $993,134 in punitive damages. Neely v. Weyerhaeuser Co., Case No. 693747 (San Diego Superior Court, 11/4/1999).
JOB DETECTIVE FIRMS
Did you know there are firms that pose as a prospective employer, call a prior employer on a former employee’s behalf, and find out what the former employer is saying about the former employee? THEY DIG HARD FOR DEFAMATION. The firm may say they are an accounting firm, financial-service firm, legal services firm whatever type of industry is applicable. And they change the names of the companies every year.