Reference Letters and Employer Risk

It is common for those who are leaving their jobs and seeking new employment to ask their former employer to provide a reference letter. Ideally, these letters will set out their strengths, qualifications and experience in the former position to make it easier for that person to secure new employment. However, not everyone gets the reference letter they want. Some employers might decline to write one. Other employers might write one, but might say less than positive things.

Employers should be careful with what they put in a reference letter. Reference letters do not come without risks.

Obligation to Write Reference Letters?

For the most part, employers are under no obligation to write a departing employee a reference letter. This obligation does not exist at common law. Where a workplace is governed either by a collective agreement or the Canada Labour Code, it is possible that an arbitrator might order an employer to provide a reference letter. Generally this will not be the case.

However, it may be in the employer’s best interests to supply their departing employee with a reference letter. In wrongful dismissal cases, terminated employees have the obligation to mitigate their losses. This means they have to search for new employment. The quicker they find new employment (i.e. the quicker they mitigate their losses), the less the former employer will be liable for as wrongful dismissal damages. Therefore, an employer is incentivized to provide a positive reference letter to enable their terminated employee to find new employment as easily as possible.

The Risk of Defamation

Some employers will be more than happy to provide reference letters to potential new employers. However, not all of these employers will be happy to provide a positive reference. Some employers might provide a negative reference. This can be dangerous. A former employee might bring an action against the former employer for defamation.

To prove defamation, the former employee would have to show, on a balance of probabilities:

• 1) That the words in the reference were defamatory, such that they would tend to lower the employee’s reputation in the eyes of a reasonable person;
• 2) That those words in fact referred to the employee; and
• 3) That the words were published, meaning they were communicated to at least one person other than the employee (i.e., the prospective employer).

If the employee can show these three elements, then the former employer has the burden of justifying their comments by, for example, arguing that the comments are truthful and therefore justified.  If an employer provides a negative reference that they genuinely believe to be true, it will be hard for the employee to prove defamation.

The Risk of Misrepresentation

Aside from the risk of providing negative references, there may also be a risk in providing positive references. That is, positive references that do not accurately reflect the true qualities and capabilities of the employee being discussed. A former employer might be liable for the tort of negligent misrepresentation if they provide a positive but untruthful reference to a prospective employer who ultimately relies on the falsely positive reference to hire the employee. To sue for negligent misrepresentation, the subsequent employer would have to prove:

1. That the information provided in the reference was inaccurate;
2. That the former employer knew the information was inaccurate; and
3. That the inaccurate information motivated the subsequent employer to hire the employee and, thus, it suffered damages.

For this reason, employers providing reference letters must ensure they are being truthful at all times. An untruthful negative reference letter could lead to a defamation action, whereas an untruthful positive reference letter could lead to an action for negligent misrepresentation.

Reference Letters and Termination for Cause

On a final note, employers should be careful when providing letters of reference to employees they say were terminated for cause. It would be hard to argue, for instance, that the employee was incompetent and therefore deserving of summary dismissal while simultaneously suggesting in a letter of reference that the employee is a competent individual.