Employee References - Speak The Truth? Speak No Evil? Speak Nothing?

Providing Negative References: Providing negative references about former employees may lead to defamation suits. For example, in Kass v. Great Coastal Express, Inc., 152 N.J. 353, 704 A.2d 1293 (N.J. 1998), the plaintiff alleged that his former employer had provided prospective employers with defamatory information about his employment record. The New Jersey Supreme Court made clear that the former employer had a qualified privilege. In other words, as long as the employer responded to reference inquiries in good faith and did not (1) speak in reckless disregard of the truth; (2) purposely try to injure the employee for a reason not connected to any business purpose; or (3) publish (tell others besides the specific party inquiring) excessively, it could not be held liable. Yet, the court reversed the verdict, ruling that the jury had not properly considered whether the employer exceeded its qualified privilege.

Happily, at least 27 states have statutes providing at least some protection (usually a qualified privilege similar to that discussed in Kass) to employers who give opinions about former employees to third parties: Alaska, Arizona, California, Colorado, Delaware, Florida, Georgia, Idaho, Illinois, Indiana, Kansas, Louisiana, Maine, Maryland, Michigan, New Mexico, North Dakota, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Wisconsin, and Wyoming. It is important to note that, although these statutes offer a qualified privilege similar to that discussed in the Kass, case, each is different; some, for example, are specific to industries like health or childcare.

Providing Positive References But Failing To Disclose Negative Facts: Can an employment reference be too positive? In one case, Neptuno Treuand-und Verwaltungsgesellschaft MBH, a German company, hired Tom Farrell to trade security futures on its behalf, after receiving a positive reference from Patrick Arbor, the chairman of the Chicago Board of Trade. Arbor described Farrell as intelligent, industrious and innovative. But Arbor did not disclose that Farrell had been barred from trading by the Chicago Futures Trading Commission and that his broker's registration had been revoked. Two days into his employment with Neptuno, Farrell's supervisor left him alone for just two hours. During this brief period, he disregarded his supervisor's express instructions and lost five million dollars. The Illinois Appellate Court rejected Neptuno's claims against Arbor for several reasons. Neptuno v. Arbor, 295 Ill. App. 3d 597, 692 N.E.2d 812 (1st Dist. 1998). First, Arbor's opinion that Farrell was intelligent, industrious and innovative were statements of opinion, not fact. Second, Arbor simply had no special relationship with Neptuno that would require Arbor to disclose such information.

Other state courts - in California, Texas, and Florida - have imposed liability upon employers who gave positive references for former employees they knew might pose a physical threat to others. For example, in Randi W. v. Muroc Joint Unified School District, 929 P.2d 582 (Cal. App. Ct. 1997), the plaintiff, who was sexually molested by her vice principal, sued the three schools that had recommended him even though he had been accused of sexually molesting students at all three schools. In Allstate Insurance Co. v. Jerner, 650 So.2d 997 (Fla. Dist. Ct. App. 1995)(denying cert.), the plaintiffs successfully sued Allstate after their husbands were murdered by coworker Paul Calden. Allstate provided Calden with a neutral reference which failed to disclose that the Calden was fired for bringing a gun to work and threatening his coworkers.

Compelled Self Defamation: A minority of states (e.g., Colorado, Iowa, and Minnesota) has found that a former employee may state a viable claim of defamation arising from "compelled self-publication" to third persons. In other words, if an employee was discharged for dishonesty and he (as opposed to his former employer) tells prospective employers as much, he may have a cause of action against his former employer for "compelled self-defamation." In such jurisdictions, there is little more precaution an employer can take other than to convey a truthful reason to the employee for his discharge - truth is an absolute defense to any defamation action. Likewise, in the states where available, the qualified privilege discussed above (both statutory and common law) also applies.