Employers or former employers are in general under no legal obligation to provide a reference but where they do caution must be exercised. The glowing or not so glowing reference must be true, fair and accurate and not misleading through exclusion, or implication. The potential for claims from disgruntled former employees and new employers is well documented, and most employers simply provide confirmation, of the actual employment, namely dated of employment, job title, and salary.
There are circumstances where regulatory references or an extended reference may be required. The recent case of Hincks v Sense Network Ltd, illustrates the issues and provides timely reminders and guidance for those tasked with providing references in general if the reference goes beyond the commonplace standard factual reference.
Mr Hincks, an IFA, was terminated as an IFA, through a particular network, for misconduct. The misconduct involved his failure to seek preapproval before transacting sales or giving specific advice. The network accepted an initial breach of this requirement as an administrative error and misunderstanding of the process. When Mr Hincks failed a second time to comply with the preapproval requirement following an investigation he was terminated. He applied but following references from the network was not able to secure employment as an IFA. The reference contained negative statements and opinions, it also referred to his suspension, that compensation was offered to certain clients and that a review that had been conducted of his activities.
Mr Hincks position was that elements of the reference were neither true nor accurate, it gave an overall misleading impression. He further took exception to the internal investigation which he claimed to be "an inadequate sham". His view was that there had been no fair and reasonable investigation conducted, as the investigator could not have reached the conclusions nor given the opinions detailed in the reference had such an investigation been carried out.
The High Court dismissed his claim of damages for negligent misstatement, rejecting the argument that the failure of the reference writer to consider the procedural fairness of an earlier investigation amounted to negligent misstatement.
While cases of this type are rare the court gave useful broad guidance of the standard of care to be exercised by the “reasonable reference writer.” The court was reluctant to prescribe a specific level of care as this will vary as dependent on the facts of the case. Common factors applicable to all were identified as:-
- conduct an objective and rigorous appraisal of facts and opinion, particularly negative opinion, whether those facts and opinions emerged from earlier investigations or otherwise;
- take reasonable care to be satisfied that the facts set out in the reference were accurate and true and that, where an opinion was expressed, there was a proper and legitimate basis for the opinion;
- where an opinion was derived from an earlier investigation, to take reasonable care in considering and reviewing the underlying material so that the reference writer was able to understand the basis for the opinion and be satisfied that there was a proper and legitimate basis for it;
- take reasonable care to ensure that the reference was not misleading either by reason of what is not included or by implication, nuance or innuendo.
Applying the above analysis to any reference should give some comfort to employers supplying extended references that it is neither inaccurate nor misleading.