State the Issues - July 2004

State the Issues

by Mary Beth Hartleb, Patrick Hicks

Question: Should employers give thorough, honest references for previous employees?

by Mary Beth Hartleb, J.D., SPHR

It is imperative that employers receive truthful, relevant information from former employers.

The Human Resources Director just received a call from a former employee who states that she is planning to sue the company. She wants to sue because a supervisor provided negative information to a future employer concerning her job performance and work history. The HR Director advised the supervisor to follow company policy directing all employment verifications to human resources, where only job title and dates of employment would be verified. The HR Director received this directive from legal counsel who advised her to provide only neutral references when contacted by prospective employers. However, counsel also advised that when checking references, she should find out as much as possible about a candidate.

The preceding scenario is a common occurrence in most organizations. Those who work in human resources and the attorneys who advise them are in a constant state of risk-versus-reward analysis. They spend days drafting policies in reaction to recent court holdings, hoping to minimize a company’s risk when – not if – they are sued in an employment action.

Immunity statutes designed to protect employers in cases where revealing information may be preferred – for example, in cases of theft, violence or sexual assault – have been passed in 30 states, Nevada included. Despite this protection, employers often believe it less risky to impose a neutral-reference policy company-wide instead of distinguishing information that should be revealed to future employers.

A self-serving tool for the risk-adverse employer, a neutral-reference policy acts as a shield to protect the former employer, while it punishes the star performer who is unable to receive a glowing recommendation. A neutral-reference policy is diametrically opposed to the needs of the future employer. The courts have addressed this issue through negligent misrepresentation claims and by imposing a duty to disclose on former employers, but the courts do not provide a cause of action against former employers if they say nothing at all. In fact, many employers have gone as far as to outsource this task through an automated service and charge a fee to prospective employers for the information.

The reference-check process is an exercise in futility having little to do with determining an applicant’s suitability for a position. Rather, it has become a paper-gathering process in an effort to shield an employer from liability.

No: The Case Against Providing Employment References

By Patrick Hicks

Do you have a neutral reference policy – one that only provides last position held, dates of employment and (sometimes) last pay rate? That is what we recommend for several reasons. First, although Nevada Revised Statute 41.755 provides some protection to employers that provide references to prospective employers, that protection is not unlimited. That statute does not protect information given by an employer if the employer acted with malice, if the employer deliberately disclosed misleading information, if the employer recklessly disclosed inaccurate information, etc.

Although it may be difficult for an employee to prove these elements in a lawsuit, why risk having to defend a lawsuit over an employment reference at all? In response to this risk, some employers turned to a policy of only providing references for employees when they had good things to say about them. However, even that policy can lead to liability. Believe it or not, former employees whom employers would not comment on, pursuant to such a policy, have brought claims alleging that the lack of a reference was by implication a bad reference if prospective employers knew that the employer had that policy. If the employer had good things to say about the former employee, they would have shared that information.

Second, giving out information about current or former employees could lead to employees bringing claims for defamation. In essence, the information given out could potentially be put on trial, giving a scorned employee a second chance at challenging an employment action. Finally, in defending hundreds of employment lawsuits, we hear over and over that one of the reasons employees bring lawsuits is that they are concerned that they will not be able to get another job unless they "clean up their file." Informing terminated employees that you have a neutral reference policy and will only provide dates of employment and job titles to prospective employers alleviates that concern and could result in less litigation.

If one of the reasons you provide references is to help good employees by providing information, why not just provide the employees with copies of their performance evaluations? Overall, the potential liability – in terms of not only adverse judgments, but also the costs involved in defending potential claims over references – weighs heavily in favor of adopting a neutral-reference policy.

Mary Beth Hartleb, Patrick Hicks
Mary Beth Hartleb, J.D., is President of the Southern Nevada Human Resource Association and has worked in the human resources field for 15 years. Patrick Hicks is the managing partner at the law firm of Littler Mendelson in Las Vegas.