by Stephen Acker and Christopher Ferguson
Letters of reference are understandably important to employees. For many employees, they are considered essential rather than a hopeful add-on to an application. A glowing letter of reference from a trusted source can sometimes tip the balance and lead to a hire. A bad or withheld letter, or one that raises questions, can have the opposite effect and even dog a job-seeker for years. A worthwhile recommendation, then, can be among the most valuable parting gifts an employer can give an employee.
Except, of course, that a letter of reference is often no gift. In many circumstances, it is an employee’s common law right.
Whether an employee is entitled to a reference letter depends largely on the reasons for termination. Where an employee is fired for cause, there is no need to give the person a letter of reference. However, the categories of just cause have been narrowing over time. Generally, it takes extremely bad behavior – stealing employer property, chronic absenteeism, or clear dishonesty – to justify termination for cause.
The story is much different where an employee is fired without cause. In that situation, withholding a reference letter may be unwise for employers. Such a small thing – refusing to give a reference letter – can actually be an invitation to a lawsuit.
Worse yet, if an employer refuses to give a letter of reference, and a court determines (as many will) that the employee was entitled to the reference letter, the employer has breached the employee’s common law right to good faith and fair dealing. And that can have a financial impact on an employer. The employee may then be entitled to damages if he or she can show financial losses flowing from difficulties caused by the lack of such a letter. In other words, if it took the employee longer to find alternate employment because he or she didn’t have a reference letter, a court may provide the employee a longer notice period or other damages.
So what should employers do? As one Canadian judge has said, consider providing reference letters “which highlight the employee’s strengths and which are honest, accurate, and not misleading.” There is no requirement to dress up the employee or his or her prospects so long as the letter is accurate.
American employers are often concerned that providing a written or verbal reference can lead to a defamation claim or other action against it. We have yet to see those types of lawsuits in Canada. And, if a prospective new employer decides to follow up on the letter of reference by asking questions, whatever is said about the job seeker may then be protected by qualified privilege in any potential defamation claim. Of course, such comments must be offered in good faith as an honest opinion and not to damage the employee’s prospects.
We recently encountered an instance where a letter of reference was carefully negotiated by the parties as part of a written severance agreement. The agreement also required the referee to strictly limit any comments made about the employee to prospective employers to the exact contents of the letter of reference. This was not an easy task as HR professionals like to probe beyond the clipped language of a carefully shaped letter of reference and ferret out potential shortcomings. But it can be done.
But be careful. While you may be prepared to be forthcoming and provide a fulsome letter of reference, situations can arise where employers must watch their words. Letters of reference and follow-up comments to prospective employers can decide an employee’s future job prospects. So employers need to be careful about what they write and say. And if a reference is part of a negotiated agreement, be sure to stay within the four corners of the agreement.