Pros and Cons of Providing Employment Reference Checks

SESCO Blog Logo
Special Thanks to SESCO for Providing This Blog
Should you, or shouldn’t you? Whether employers should provide references for former employees is debated among HR professionals. Prospective employers are wise to conduct reference checks of applicants. Unfortunately, when asked to supply a reference for a former employee, a company is often hesitant to provide any information beyond the individual’s previous position and length of employment.
Companies benefit from providing references. Supplying references offers several benefits to the former employer, including:
  • Rewarding good employees, which in today’s word-of-mouth work environment will help increase the morale and productivity of remaining employees;
  • Creating business networks in which people freely exchange accurate information concerning applicants;
  • Assisting a company’s outplacement efforts if employees have been let go due to downsizing or mergers, resulting in higher morale of remaining employees and lowered unemployment rates as displaced employees become re-employed.

Additional reasons why employers are wise to check an applicant’s references:
  • To verify applicants’ truthfulness;
  • To check their past work performance and determine overall competence to do the job;
  • To reduce potential legal liability; and to prevent problems often caused by poor hiring decisions, such as absenteeism, high turnover, discipline problems, and theft.

Barriers to successful reference checking.
Why don’t employers provide references? The biggest fear of individuals asked to provide references is that the information they provide will come back to haunt them in the form of a defamation or invasion of privacy lawsuit.

What is defamation?
The traditional defamation claim occurs when an employer discloses false statements to third parties that ultimately result in damage to an employee’s reputation. A form of defamation gaining recognition by some courts, “compelled self-publication” occurs when an employer gives an employee a false and fabricated reason for the termination, and as a result, the employee is compelled to communicate that false reason to a prospective employer.

What is invasion of privacy?
An employer is found to have unlawfully invaded an employee’s privacy when it publicly discloses private facts relating to a former employee that a reasonable person would find objectionable. Private facts may include sexual relationships, sexual orientation and medical conditions.

Unlike defamation, even if the publicized facts are true, an employer may be liable for invasion of privacy if the information it discloses should have been kept secret. However, facts that are public record (e.g., criminal records), or facts the employee disclosed to several people will not be protected.

What are an employer’s defenses?
Employers will not be liable for defamation or invasion of privacy if they are able to raise one of the available defenses. In addition, several states have enacted laws specifically protecting employers who provide references. In general, employer defenses available include:

An employer who makes a true statement cannot be held liable for defamation. In order to ensure that it can successfully bring this defense, an employer should have persuasive, factual information supporting the statement it claims to be truthful. Also, while truth protects an employer in a defamation claim, it is not necessarily a defense against an invasion of privacy claim.

“Qualified privilege.”
Most courts hold that an employer has a qualified privilege to respond to a legitimate inquiry (e.g., from a prospective employer), with truthful, job-related information, provided it lacks malice (e.g., does not know the statement to be false, or that it may be false).

Employee consent.
An employer will be protected from liability for statements it makes concerning a former employee’s performance if the employee previously consented to the discussion. It is recommended that management ask a separating employee to sign a form authorizing management to discuss his or her performance with prospective employers. If the employee refuses, the company should inform a prospective employer that it is unable to provide a reference because the former employee has not authorized it to do so.

State reference-checking laws.
Several states have enacted laws that protect employers who provide employment references. While these laws are not uniform, they generally provide civil immunity to an employer who provides good faith, truthful disclosures about former employees to prospective employees.

Legal consequences.
To complicate the issue further, employers may also be found liable for failing to provide a reference under circumstances in which the employer:
  • knew of a former employee’s dangerous propensities, and
  • failed to truthfully and fully disclose this information to a prospective employer.

Cases that have addressed this issue have not imposed a blanket affirmative duty on employers to disclose an employee’s bad traits. Rather, the employers were held potentially liable for having given solely favorable references for employees known to have dangerous propensities. Therefore, it is suggested that once a company decides to provide a reference for an employee known to have a dangerous propensity-it must tell the whole story.