Follow Rules of the Road for Limited-Reference Policies

Allen Smith, J.D. By Allen Smith, J.D. June 3, 2021
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​Limited-reference policies can help employers limit liability, even though managers and co-workers sometimes ignore the policies to help colleagues get new positions. Consistent enforcement of the policies is imperative if they are to be of any value. Here are other do's and don'ts with limited-reference policies.

HR or a department manager typically provides a limited reference, confirming the employee's position and job tenure, said Eve Klein, an attorney with Duane Morris in New York City.

"Employers who choose a limited policy of this sort have made a business decision to reduce risk of defamation, disparate treatment and retaliation claims by not having to provide information about poor performers or those in a dispute with the employer, to the detriment of strong performers who would benefit from a reference regarding their job performance," she said.

Limited-reference policies differ from no-reference policies, which are rare, said Mike Stevens, an attorney with Arent Fox in Washington, D.C.

If a manager provides a favorable reference contrary to an employer's policy and that becomes well-known, the employer risks a disparate treatment or retaliation claim, particularly if the same manager refuses to provide a reference for someone of a different protected status or who has sued the company. "Also, if a manager provides a negative reference, the employer risks suit based on the reference and the fact that it is contrary to the employer's published policies. These are dual reasons in favor of an employer enforcing its reference policy," Klein said.

An employer's decision to have a no-reference or limited-reference policy depends on its workforce, location, size of its business community and risk tolerance, she added.

Challenges with Policies

"Although these policies may provide some legal protection, they can be frustrating to good employees the employer wants to help land a job and to prospective employers looking for relevant information," Stevens said.

While over 40 states have laws that provide some form of immunity to employers that give truthful information or answer in good faith in response to reference requests, that doesn't necessarily stop a disgruntled former employee from challenging the truthfulness or the good faith of the reference.

"These laws can give employers a false sense of security," cautioned Robin Shea, an attorney with Constangy, Brooks, Smith & Prophete in Winston-Salem, N.C. A manager might give a shorthand version of why an employee left, perhaps saying the worker left because of sexual harassment rather than based on a credible allegation of sexual harassment. "Nonlawyers are not always going to make these fine distinctions."

Some employers don't have a no-reference or limited-reference policy because they assume it will not be followed, Stevens said. "They may give managers and HR some general guidelines, or they may ask departing employees to sign consent and waiver forms to protect against liability," he said.

"There is no guarantee that a prospective release of a defamation claim would be valid, but if the employee acknowledges that the reference is the personal opinion of the reference, and not necessarily the opinion of the employer, that could provide some protection," he said.

"Either have [the policies] and enforce them or don't have them at all," said Donna Ballman, a plaintiffs' attorney with Donna M. Ballman law firm in Fort Lauderdale, Fla., and author of Stand Up for Yourself Without Getting Fired (Weiser 2012). Having no-reference or limited-reference policies—but allowing them to be ignored—"is worse than not having a policy at all. Failing to enforce a policy could be used as evidence of discriminatory or retaliatory intent," she said.

Jennifer Taylor, an attorney with Cozen O'Connor in Miami, said, "I would not recommend a lack of policy in this area. There is too much potential for confusion about what can be said to prospective employers. Something as simple as a friendly former manager or even a co-worker unwittingly providing information that causes an applicant to be rejected by a subsequent employer can be problematic and costly."

Klein noted that managers often ignore no-reference or limited-reference policies to help colleagues land new jobs. However, she said, "while that is not ideal, it is still better to have the policy than not have the policy for those employers concerned about defamation claims, or who do not want to feel compelled to provide a reference for certain employees."

With a policy, the employer can point to it when not providing information beyond the former employee's title and the dates the position was held, and can take the position that if someone violated the rule, the violation was not employer-sanctioned, she said.

Do's

Lauri Rasnick, an attorney with Epstein Becker Green in New York City, said employers with limited-reference policies should:

  • Identify the department or title of the person who will handle references.
  • Specify what information may be provided.
  • Consider providing confirmation of titles and dates of employment and, with authorization from the job seeker, compensation information.

Rasnick cautioned that limited-reference policies should apply to social media comments as well as conversations.

Make sure that supervisors and managers understand the rationale behind the no-reference policy, Shea said.

Understand that some settlement agreements may require that the employer give the former employee a letter of reference, she added. Ensure that the policy has enough leeway to allow for this.

Expect to make exceptions to the policy occasionally, Shea said, but be consistent with the exceptions. A positive exception would be for those who lost work through no fault of their own, such as a layoff. A negative exception would be for employees fired for serious misconduct such as theft, threats, violence or severe harassment. Consult a lawyer for these exceptional cases, she said.

Don'ts

Don't have references include subjective opinions or descriptions—only facts, Rasnick said. And don't provide extraneous information that the entity isn't seeking, she added.

With references, "less is more," said Adam Kemper, an attorney with Kelley Kronenberg in Fort Lauderdale, Fla.

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