Most companies have a “neutral reference” policy, meaning they only confirm dates of employment and last job title for former employees. Yet many managers ignore this and provide references anyway, often to help former employees or spare other managers from hiring someone difficult.
The problem? Careless references can put a company at risk for defamation claims because a manager’s words can bind the company and create liability.
Why Does This Matter?
Defamation occurs when someone makes a false statement of fact about another person that causes harm. While truth is a defense, juries decide what’s true, making outcomes unpredictable. As seen in recent media, juries may award six or seven-figure damages in defamation cases.
If you give references, you accept some risk. A negative offhand comment that costs someone a job could be actionable. That said, if you follow these tips, you can reduce risk and support your former employees:
1. Understand Your Company’s Policy
Reference policies exist to limit defamation claims. A strong policy, combined with training and documentation, shows that the company is making good faith efforts to avoid defamatory statements. Remember, the goal is to avoid lawsuits, not silence managers. Consider this goal before agreeing to provide a reference on behalf of a questionable employee. Is the risk worth it?
2. Only Give References When Asked
If a former employee asks you directly for a reference, you can agree or decline based on your relationship and their performance. You can also discuss what you’ll say.
However, giving references in response to cold calls or emails from recruiters or hiring managers increases risk. Don’t assume that a former employee wants you to provide a reference unless they ask you directly to do so.
3. Keep It Positive but Prepare for the “Weakness” Question
Unless they are cold calling, hiring managers and recruiters expect you to provide a positive reference. If you keep it positive, the risk of a defamation suit is low. However, you may be asked directly about the candidate’s weaknesses. The safest answer is “none worth mentioning,” but if you choose to give negative feedback, keep it general and frame it as an opinion. Opinions are usually not defamatory.
4. Internal References Are Low Risk
Within your company, communications about employees enjoy qualified privilege, meaning a plaintiff must prove falsity and malice.
Malice means knowingly sharing false information or acting with reckless disregard for truth. This mostly applies to gossip, not firsthand performance observations. Internal references are generally encouraged.
5. For Companies with Low-Risk Tolerance, Get a Release
Some companies allow references only if the former employee signs a release. These are straightforward documents an employment lawyer can draft. If you follow the guidelines above, however, risk is low, and a release may not be necessary.
Conclusion
References can open doors – to new opportunities for your former employees, or lawsuits against your company. By following these steps, you can protect yourself and your company while still helping former employees succeed.
The attorneys at Flood Law LLC have years of experience helping employers and business owners handle defamation claims. Contact us at fmlaw.org/contact/.