False or Improper Employee References Could Lead to Defamation Suit

Q: How can we protect our company from defamation lawsuits when asked to give employment references?

A: This is a litigious society – there are ‘how-to’ books that instruct employees ways to successfully sue their employer.  Many people feel that they have a right to sue even if it’s just their feelings that are hurt when a reference is given that is less than glowing.  Of course, this ties into the formal performance evaluation process and the fact that most companies don’t do as good a job of truthfully explaining to employees their good points and those that need change.  The key is to know how to give a proper and professional reference and avoid lawsuits and understand how defamation claims get to court.

Defamation occurs when someone makes false written or verbal statements that harm another person’s reputation.  Libel and slander are the two types of defamation.  Libel occurs when the statements are written and slander is in spoken form.  For a former employee to prove a defamation case, that person must prove that false statements were made.  The worker must also prove that the statements were communicated to a third party, either a pre-employment reporting firm, or the prospective employer.

Finally, the person must prove that injury occurred as a result of the false statement.  Injury in employment reference cases usually takes the form of the former employee being refused a job based on the allegedly defamatory statements.

To protect your company from defamation suits many attorneys counsel clients to give no references at all.  But this can backfire in the form of negligent referral lawsuits that can be brought by the former employee’s prospective employer if you withhold important information, especially if it is negative.  It also prevents the company from helping a valued former employee to advance her career.

We know that supervisors and managers will violate the policy and give references anyway. Sometimes it’s because they feel a sense of duty to those high performing individuals, but it may also be because their integrity would be compromised by NOT revealing negative information they know about and can document.

Companies should guard against this problem because with no training or coaching from the company the reference source may be more likely to make a statement that would leave the employer open to claims of defamation.

Another approach is to provide limited references, but I do not agree with this method — it is counterproductive in today’s work environment and also becomes a de-motivator in retaining valuable staff.  Why would someone want to work hard for a company who declines to help them when they decide to leave?  Truth is always the best defense against allegations and lawsuits related to defamation.

Many states have enacted protective laws enabling companies and individuals to provide truthful, performance-related employment references without the fear of a lawsuit.  Is your state one of them?  It’s easy to find out.

Just send email to: info@coachbrian.com with Liability for References in the subject area and a listing the state(s) in which you have operations in the body of the email, as well as your personal contact information.  Although this information is constantly changing as state legislatures convene and enact new laws, we’ll provide you what we currently have on file.

Here are some of the best ways to limit your liability in disclosing reference information with or without those laws:

  • Only provide information that can be documented.
  • Require signed releases detailing what information may be disclosed.
  • Some companies refer requests to human resource representatives. (Again, we do not recommend this process.)
  • Train management and supervisors on how to provide references.
  • Provide only truthful information
  • Once the policy is developed, effectively communicate it to employees.

I coach line managers, supervisors, executives, company owners and other leaders on how to give references that assure their ability to disseminate sensitive information and guard from unwanted and unnecessary lawsuits or claims.