Bad References Can Cost Big Bucks

Written by Robert G. Brody and Rebecca Goldberg on December 19, 2011

A bad reference is costing one aviation company nearly a third of a million dollars.  A jury decided Tradewinds Aviation maliciously sent a reference letter regarding former employee Jeffrey Nelson, costing him a job offer with another company.  Although Nelson, a pilot, had lost his job due to downsizing, the letter from Tradewinds said he was terminated due to poor performance and hinted he used drugs.

While Tradewinds’ conduct was clearly out of bounds, many employers wonder how much information to give when providing a reference.  A few states, like Illinois, provide immunity for references given in good faith.  But in most states, employers are stuck between a rock and a hard place.  Give negative information and face the possibility of a defamation suit; give neutral information about a problem employee and face the possibility of a negligent referral suit or maybe just a guilty conscience.

Truth is usually an absolute defense to defamation, so stick to the truth.  Also, statements of opinion cannot give rise to liability.  But take note – simply calling something an opinion is not a shield.  Saying “In my opinion, John stole a company laptop” can get you in just as much trouble as saying “John stole a company laptop” if it’s not true.  Also, can you prove that “true” statement?  You fired Johnny for coming to work under the influence but you never had him tested.  Can you prove he was drunk?

The safest route is to give only the bare facts: position held, dates of employment, and compensation.  Although your company can be sued by the new employer if you negligently withhold key information, this kind of lawsuit is rare and occurs most often when the former employer failed to disclose warning signs or history of violence.  However, if you believe a good corporate citizen should do more, you can, but check with counsel on the safest ways to do this.

The good news is employers may give as much or as little information as they please, and are usually protected if the information is true.  Employers can help protect themselves by asking the employee to sign a release before you give a reference.  In fact, some states require this, so it is a good practice.  For more complicated situations, consult with an attorney to discuss how best to handle the issue.  Employers should have a clear reference policy that defines who is allowed to give references and what will be said.

Brody and Associates regularly advises management on personnel matters, including employee reference policies and releases.  If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.965.0560.

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Related Topics: Legal Updates, Retaliation

About the Authors

Robert G. Brody is the founding member of Brody and Associates, LLC. He has been quoted and published in national publications and appears as a guest T.V. commentator on contemporary Labor and Employment issues. Learn More