Should Canadian Employers Give Employment References?

By Tina Giesbrecht and Lana Jackson
McCarthy Tetrault

Employers often ask whether they should give employment references to employees and former employees. This decision can be a difficult one with possible negative consequences for either course of action. Whatever decision is made, it’s important to consistently apply one policy regarding reference letters.

Q. What are the consequences if an employer refuses to provide a letter of reference?

A. Many employers are hesitant to provide references because they fear potential defamation suits. However, recent Canadian case law indicates that in a wrongful dismissal lawsuit, refusing to provide a letter of reference may constitute an act of bad faith on the part of the employer, especially in cases where the employer has promised that a letter of reference would be provided or if an employer withholds a letter of reference as a negotiating tool in exchange for acceptance of a severance package. The result can be increased damages.

Q. What potential pitfalls arise if an employer decides to provide a reference?

A. If an employer decides to give a reference, it’s important to be aware of possible privacy issues, defamation lawsuits, and negligence lawsuits. These issues are discussed below.

Q. How does privacy legislation affect an employer’s ability to provide a reference?

A. Not all provinces have privacy laws that require private-sector employers to protect personal information. However, it’s important to understand that there is a growing privacy culture in Canada, and many former employees will expect employers to take special care with their personal information.

While consent may not be specifically required in all provinces, before providing a reference, it’s always best to err on the side of caution. Listed below are some tips on how to avoid disclosing too much information when asked to provide a reference and ways to obtain consent:

• Only disclose the information that was required to establish, manage, or terminate the employment relationship with the former employee.
• Make a reasonable effort to ensure the information provided is accurate and complete.
• When contacted to provide a reference, confirm with the former employee that he or she consents.
• Confirm the extent of the consent.
• If possible, at the time the employment relationship is terminated, seek to obtain consent from the outgoing employee regarding the employer’s scope as referee for potential employers. (Such consent can be in writing or the employer can note verbal consent in its own records.)

Q. Are employers still protected from defamation claims resulting from reference letters?

A. Generally, courts have found that references given by employers are protected by qualified privilege. The word “qualified,” however, indicates that the privilege is not absolute. If the remarks are made maliciously or exceed the scope of the privilege, qualified privilege may be lost.
The best advice is to ensure that all facts stated in the reference letter are correct and if negative statements are to be made, have a second manager sign off on it to help ensure accuracy and fairness.

Q. When providing references, can an employer be found liable under a claim other than defamation?

A. Yes. An employer can be found liable under an action for negligence. Essentially, the law states that if an employer provides a reference, even if not obligated to provide one, it has a duty of care to the former employee to exercise due care and skill in its preparation. If negative statements are made about an employee and they cause foreseeable economic harm, the reference provider can be liable.

Q. Can an employer be found liable for not obtaining a reference?

A. Yes. When hiring employees where the job carries a risk of harm to third parties, it’s important to check references. In one Ontario case, the court held a bar liable for not officially checking the background of two of the bouncers it employed. The two bouncers viciously beat a customer in the parking lot, causing him permanent brain damage and leaving him unable to manage his own affairs. The court noted that the references had not been properly checked by the bar.