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How can employers protect themselves from liability when giving references?

While there are no federal laws addressing this topic, many states have recognized the reluctance of employers to disclose this type of information about former employees and have passed legislation known as "job reference immunity" laws. These immunity laws will not protect an employer that knowingly gives out false or misleading information, but they will protect employers that give truthful, good-faith references to other employers.

For example, employers may be liable if they provide a negative reference for unlawful discriminatory reasons or in retaliation for the former employee complaining of an illegal activity. Employers also may be liable if they give a defamatory reference or disclose confidential facts that constitute an invasion of privacy. Defamation occurs when one person makes false written or oral statements that harm another person's reputation.

Defamation takes two forms: libel and slander. Libel occurs when the defamatory statements are written; slander when the defamatory statements are spoken. For a former employee to prove a defamation case, that employee must prove that false statements were made. The individual must also prove that the false statements were communicated to a third party, usually to a prospective employer or to a background-checking agency. Finally, the person must prove that injury occurred as a result of the false statements. Injury in employment reference cases usually takes the form of the former employee being refused a job based on the allegedly defamatory statements.

To protect your company from defamation suits, the most conservative approach is to give no references at all. But this can backfire in the form of negligent referral lawsuits that can be brought by the former employee's future employer if you withhold important negative information about that former employee. It also prevents the company from helping a valued former employee to advance in his or her career.

Another approach is to provide limited references. In giving even limited references, the truth is the best defense against defamation allegations. Ways to limit possible liability in disclosing reference information include:

  • Providing only information that can be documented, such as dates of employment and title.
  • Requiring a signed release, including what information your company is allowed to disclose, from the former employee.
  • Training managers and supervisors on how to provide references.
  • Requiring all managers and supervisors to refer requests for references to the human resource department.
  • Developing a policy and communicating it to managers and supervisors.
  • Providing only truthful information that is job-related.