Employment Verifications: Less May No Longer Be More!

by Rob Thomson

One of the primary tenets of the Fair Credit Reporting Act (FCRA), which governs consumer reporting for employment purposes, is that each job candidate should be evaluated fairly and objectively, taking into account the unique set of skills and experiences an individual has to offer to a given position. Verifying previous periods of employment should be considered a mandatory component of an effective employment screening strategy, since there is simply no better source of information than someone who has directly observed, or been a stakeholder in, an individual’s work performance.

In a perfect world, hiring managers would obtain a detailed and comprehensive performance profile of each candidate directly from former supervisors. However, they empathize with the reluctance of many organizations to part with the very information that would be considered most useful. This includes information such as: Was this individual considered a high-level performer? Does this person have a history of aggressive behavior or personality conflicts? Were there attendance or punctuality issues? What was the reason they left the company? Would you rehire this individual?

The Emergence of the Defamation Claim

Years ago, employment verifications were provided openly and with little restraint. Details on job performance, attitude, and other qualitative factors were commonplace. In the 1980s and 1990s, courts began upholding defamation lawsuits based on negative employer references that could not be established as fact. Fear of a defamation lawsuit from a former employee who received a less-than-positive reference led employers to scale back the amount of information they made available. The “neutral” (dates/title only) employment verification became commonplace.

The neutral reference policy places both prospective employers and top job candidates at a disadvantage, while potentially rewarding candidates who are marginal performers, or worse, outright threats to your company, customers, employees, and business assets. The effectiveness is essentially limited to confirming that someone was employed by a particular company, and to identify gaps in employment or exaggerated job titles. Candidates may be eliminated from consideration for dishonesty if these discrepancies are revealed by the neutral verification. If the discrepancy is minor, the hiring manager may explore the issue with the candidate to see if there is a satisfactory explanation, allowing the candidate to remain under consideration. However, the neutral verification, by design, provides no real information to predict future performance, risk, or ‘fit’ for the organization.

Defamation is no longer the only litigation risk

Playing it safe with a blanket neutral reference policy no longer precludes an employer from litigation risk. In recent years courts have begun to uphold the theory of “negligent referral.” Negligent referral is defined as “the failure of an employer to disclose complete and factual information about a former or current employee to another employer.” For example, suppose a former employee causes damage or harm at the new workplace that might have been predicted based on prior behavior that was known, but not disclosed, in a neutral employment verification by the former employer. This may also be considered negligence, even if the employer has a documented neutral reference verification policy.

The theory of negligent referral has been established under several misrepresentation scenarios:

• False negative reference – In Robinson v. Shell Oil, it was found that former employees, as well as current employees, are covered under Title VII of the Civil Rights Act of 1964, and a negative reference was given in retaliation for an earlier claim of racial discrimination, rather than based on factual, documented information

• False positive reference – a student alleged sexual molestation by a teacher and was permitted by the California Supreme Court to sue the teacher’s former employer because that employer had provided a positive and unconditional recommendation while failing to mention complaints of sexual harassment and improper touching during the teacher’s tenure there

• Neutral reference – In Jerner v. Allstate Insurance Co. an employee who worked at Allstate for nine months exhibited notably bizarre behavior and was ultimately terminated when found to be carrying a gun in his briefcase. Allstate wrote a letter of recommendation stating the employee had voluntarily resigned, despite a company policy against recommendation letters. The individual was subsequently hired based on the recommendation letter by another company in the same industry, then killed three people in a shooting rampage after he was fired by the second company. The families of those killed then sued Allstate for providing a reference and misrepresenting his history to the second company, settling for an undisclosed sum

Job Reference Immunity Statutes

In recent years many states have enacted “job reference immunity statutes” which presumably provide protection for employers that choose to provide more in-depth information about former employees. The consensus of these statutes in the legal community is that while they codify immunity for employers providing employment references, in practice they may not provide a significant upgrade in protection over existing employment laws. Job reference immunity statutes generally establish a presumption of good faith on the part of the former employer, meaning that it must be shown that the employer knowingly provided false information, or acted with malice, depending on the statute, to establish negligence.

Employers still have to defend against lawsuits for defamation or negligent referral, even in states that have enacted job reference immunity statutes. Employers have generally not been found negligent if the principle of ‘qualified privilege’ can be established. This principle recognizes the importance of employers being able to share relevant and truthful reference information about former employees. Qualified privilege generally requires only that the reference information was provided in good faith and without malice, meaning that the employer believed the reference to be truthful, it served a legitimate business need (employment reference), and was provided to an individual with a legitimate use for the information (prospective employer).

Honesty is the Best Defense (that and a dash of diligent documentation!)

Sticking to factual information and being able to establish those facts with documentation is the simplest defense to a defamation or negligent referral lawsuit: truth is generally considered absolute. This is also a key element in establishing qualified privilege, whether or not your state has enacted a job reference immunity statute. Securing a signed release from the former employee, authorizing you to provide the employment reference, is another best practice in providing employment references.

Best Practice Tips for Giving Employment References

• Consult your legal council in developing a written policy – the information in this article is not legal advice, it is a discussion of general terms and concepts. Your organization’s employment reference policy should be formulated with the advice of attorneys familiar with your industry and the legal framework in the states in which you conduct business

• Obtain a signed release from the former employee that authorizes the reference before giving it – in the event of litigation, this is a brick in your wall of legal defense

• Provide only relevant and factually accurate information – remember truth is an absolute defense

• Conduct regular performance reviews and be meticulous about documenting both positive and negative performance – documentation can be key in establishing truth and/or factual accuracy

• Always conduct employer reference/verification checks on your own candidates, whether internally or through a Consumer Reporting Agency (CRA); even a neutral reference can identify relevant or disqualifying discrepancies. Ignorance is not a negligent hiring defense if there is adverse information out there and you made no attempt to find it

Rob Thomson is Communications Manager and Senior Account Executive for Cleveland-based employeescreenIQ, a best practices provider of pre-employment screening services throughout the U.S. and worldwide. Rob can be reached at (800) 235-3954 ext. 438 or by email at rthomson@employeescreen.com.

Playing it safe with a blanket neutral reference policy no longer precludes an employer from litigation risk. -->