Security managers displaying negligence when writing a reference for an ex-employee could find that their company is liable for paying substantial damages if the person concerned misses out when applying for a new job. Paul Callegari explains why there's more to writing references than meets the eye.
Imagine the scenario. A security officer who has wreaked havoc in your company in the past through his gross incompetence has resigned – only to go and wreak havoc in someone else's organisation.

All concerned at the 'point of exit' breathe a collective sigh of relief. The managing director is delighted to have rid himself of someone who was never of much use to the business, and the Human Resources Department has avoided having to begin a capability or disciplinary procedure which would probably not have resulted in much improvement.

Very quickly, then, the officer in question is forgotten. But not quite. "The above named individual has listed your company as a referee. Please complete the sections below..." reads the fax sent to the security manager just as the champagne corks are being cleared away.

Indeed, several recent cases highlight the difficulties employers face when giving references in situations like this.

In the case of Cox versus Sun Alliance Life Limited (2001), Mr Cox was employed by Sun Alliance Life as a branch manager. Difficulties arose between Mr Cox and other employees at his branch, as a result of which employer and employee decided to negotiate a settlement package dealing with the termination of Mr Cox's employment.

As events transpired, Mr Cox was due to receive a lump sum of £25,000 in return for his resignation when Sun Alliance received information to the effect that Mr Cox had been party to improper payments. These allegations were never investigated or discussed with Mr Cox, although he was informed of the gist of the allegations. There was an audit of his files which showed no evidence of fraudulent activity. Mr Cox was not accused of dishonesty, nor did Sun Alliance ever reach the point of deciding to dismiss him on the grounds of those allegations.

Following renegotiation of his severance terms, Mr Cox tendered his resignation and received £15,000 tax free, together with an undertaking by Sun Alliance to provide him with an agreed reference in which any questions relating to the reason for Mr Cox's departure would be answered by simply saying that he'd resigned. In addition, any request for the employer's "impression" of the employee would be answered in accordance with an agreed and favourable resume of his career which would make no reference to the dispute leading to his departure. This agreement was reached on a standard ACAS COT3 form.

Despite the undertaking which it had given, Sun Alliance Life provided a reference to a new employer of Mr Cox saying that he had been suspended pending investigations into allegations of dishonesty, and that he would have been dismissed but was allowed to resign. Not surprisingly, Mr Cox's new employer terminated his employment as a result.

Mr Cox then commenced proceedings against Sun Alliance Life claiming negligence. The County Court and Court of Appeal both agreed that Sun Alliance Life had been negligent for failing to ensure the reference it provided was both accurate and fair.

Where the employer’s normal practice is to provide a reference, any refusal to do so in respect of an employee who has brought a sex discrimination claim has been held to be victimisation – giving the employee a further course of action against the employ

Defeating claims of negligence
This particular judgement provides useful guidelines for security professionals who are providing references. To defeat a claim for negligence, an employer who has given a reference will have to show that his/her company has complied with its duty to provide an accurate and fair reference. An employer will comply with this duty by making a reasonable enquiry into the factual basis of statements made in the reference. Unfavourable statements about an employee should be restricted to those matters which the employer has investigated, and has reasonable grounds for believing to be true.

The analogy which the Court drew in this judgement was to the kind of investigation which a reasonable employer would undertake into allegations of misconduct before dismissing for the same. In this case, Sun Alliance should have confined its unfavourable comments to matters investigated before the resignation. Since the company went further than this, it was in breach of its duty.

The Court of Appeal also suggested that where the parties agree that a reference will be supplied in either a Compromise Agreement or an ACAS COT3 form, the parties involved should ensure that the exact wording of a fair and accurate reference is fully discussed, agreed and recorded along with all the other severance terms. In most cases, an employee will be keen to incorporate the exact wording of the agreed reference anyway, but the Court of Appeal's judgement in this case serves as a useful reminder that all employers need to be on their guard wherever the exact wording of the reference is not agreed.

In another case, this time involving Mr Spring versus Guardian Assurance Plc and Ors (1994), the House of Lords held that employers are under a duty to take reasonable care and skill to ensure the accuracy of any facts provided in a reference, and the accuracy of facts from which the employer expresses adverse opinions of the employee.

The employer was in breach of its duty in this case by providing a reference which included such damaging and unfounded statements as: "His former superior further stated that he is a man of little or no integrity, and could not be regarded as honest...There have been other cases where there has been bad advice, but there is no current evidence to indicate whether it was deliberate or as a result of sheer ignorance".

This duty was expanded in the case involving Bartholomew versus the London Borough of Hackney (1999) by the Court of Appeal, which held that even if the facts which are given are accurate, they should not be presented in such a way as to give the reader an unfair or misleading overall impression of the employee. Here, a reference referring to disciplinary action which lapsed upon the employee's departure was held not to be unfair, inaccurate or false – even if it "might have been improved upon in some respects".

In the case of Kidd versus Axa Equity & Law Life Assurance Society Plc & Anr (2000), the High Court held that employers should ensure that information provided in references is not misleading, whether by unfairly selecting and omitting certain information or by the inclusion of certain facts in such a way that somebody reading the reference may 'read between the lines' to the employee's detriment. However, employers will be relieved to learn that the Court did not go so far as to impose an additional duty on employers to ensure that references are fair, full and comprehensive.

Obligation to provide a reference
So what have we learned from the cases discussed here? Security managers must ensure that the person responsible for dealing with requests for references is aware of the duties which an employer owes to both the subject and the recipient of a given reference. You must then make sure that that person is the only person who provides references. Managers should also consider implementing a procedure whereby all references are dealt with consistently under the supervision of a very small number of senior employees.

If it’s the case that a full reference is to be given, ensure that any unfavourable comments have been properly investigated and any acts contained in the reference are accurate. Ask a colleague to read the reference through to check that the facts do not

Consider, also, whether or not you should actually provide a reference. As a general rule, employers are not under an obligation to provide a reference. In addition, where the employer's normal practice is to provide a reference, any refusal to do so in respect of an employee who has brought a sex discrimination claim has been held to be victimisation – giving the employee a further course of action against the employer.

If a reference is going to be provided, think about whether or not it might be worth adopting a 'de minimis' policy of simply providing dates of employment and the job title of the employee, sometimes with a standard... "We have no reason to doubt the integrity or honesty..."-type statement tagged on.

If it's the case that a full reference is to be given, ensure that any unfavourable comments have been properly investigated and any acts contained in the reference are accurate. Ask a colleague to read the reference through to check that the facts do not present a misleading impression. It's also worth including a disclaimer of any liability which arises out of the reference.

Always bear in mind the cost of getting it wrong. If the employer's negligence causes the ex-employee difficulties in obtaining new employment, the employer will be liable in damages for the employee's losses during that period of unemployment. Needless to say, this could become an expensive business.

Employers can be forgiven for thinking that references are more trouble than they are worth, but it's important to bear in mind that they can be a powerful tool when negotiating severances or settlement of employment tribunal claims. Often, an employee who is the subject of disciplinary proceedings may see the writing on the wall, and will tender his or her resignation in return for a reference which doesn't refer to those proceedings in order to preserve future career prospects.

Employees who do bring claims know that they will not receive a reference from the tribunal, nor – in all likelihood – from the employer if the claim progresses to a full hearing and that claim is successful.

Hopefully, security managers will be alive to the issues so that references as unfairly damning as that given for Mr Spring will be a thing of the past.