HR Management & Compliance, Recruiting

Pros and Cons of Providing Employee References

Does your organization have a policy on providing references for former employees? What conclusion have you come to on this topic? For a topic that seems straightforward on its surface, it’s actually one that has many parts to consider.reference

Right now, as many organizations have had to make the unfortunate and difficult decision to terminate a large portion of employees, it’s more important than ever to know what your organization will do in terms of employee references when these individuals apply for new roles.

Here are some benefits to providing employee references regularly:

  • Some states require employers to give information about former employees. How much information is required varies, but it may not be possible to avoid it altogether. Thus, having a policy of giving references can keep the organization legally compliant.
  • Giving a positive reference for a good employee who left amicably could be a way to keep that relationship on good terms. This could be beneficial for both the employer’s reputation and the employee’s possible future return.
  • Giving (and getting) honest references is a way for employers to conduct due diligence in their hiring practices. If you cannot get information, how can you make an informed decision? From this standpoint, it seems reasonable to expect other organizations to follow this idea and provide information that helps with the decision. This is especially relevant when the information is critical, such as a history of inappropriate or illegal behavior. If you don’t provide information that materially impacts another organization’s hiring decision, it could also result in legal action due to the withholding of critical information, such as violent or fraudulent behavior.

There are also several downsides to providing references. Here are a few:

  • If a good reference is provided for an employee who was terminated for cause, it can call the termination rationale into question because it contradicts it. This could open a can of worms in terms of the termination’s legality in some cases.
  • Giving a bad reference, even for employees who were justifiably terminated, can also increase the possibility of a defamation claim. This can be mitigated by sticking to the facts, but most people want to avoid the possibility of a lawsuit.
  • If references are given only for some employees but not all, they could appear to be discriminatory.

Choosing whether to give employee references is not a simple decision. If an employer opts not to give references or only minimal ones (i.e., legally required information only), that could actually harm people who did nothing wrong. If a potential employer is unable to get any information, that could be interpreted as a signal that negative information is being withheld, even when that is not the case.

If you do choose to give references, be sure to have a clear policy of who is allowed to give them, what information will be provided, and to whom the information will be provided. Follow the policy consistently, and be sure that employees know about it and that only those who are authorized are giving references outside of policy constraints.

Bridget Miller is a business consultant with a specialized MBA in International Economics and Management, which provides a unique perspective on business challenges. She’s been working in the corporate world for over 15 years, with experience across multiple diverse departments including HR, sales, marketing, IT, commercial development, and training.