Most job offers require the individual to provide satisfactory references.

We outline below employers’ legal obligations regarding references and some best practice advice to protect your business from the risk of potential claims.

Do employers have to give a reference?

Generally, there is no obligation on you to provide existing or former employees with a reference.

Whether you provide a reference is ultimately a business decision in most cases.

However, you will be required to provide a reference if you are subject to a:

  • Contractual requirement; or
  • Sector-specific requirement.

Contractual requirement

If you are contractually required to provide the employee with a reference, such as a clause in the contract of employment, you should comply with this.

If you fail to provide a reference in these circumstances, this will be a breach of contract, and the employee can claim compensation for any resulting loss, for example, if their job offer is rescinded.

You may also be contractually required to provide a reference if this is included within a settlement agreement with a former employee.

It is common practice for the wording of a reference to be agreed upon in a settlement agreement.

If you refuse to provide this reference or deviate from the agreed wording, the settlement agreement in its entirety will be void.

This will have serious consequences for your business; the employee will be unrestricted in bringing any claims the agreement was intended to prevent, such as discrimination or unfair dismissal, as well as breach of contract.    

Sector-specific requirement

In regulated industries, such as financial services, specific regulations require employers to provide prescriptive references for all current and former employees.

Can I refuse to provide a reference?

Provided you are not subject to a contractual or sector-specific requirement as outlined above, you can refuse to provide a reference upon request.

However, the prospective employer is likely to question your reasons for refusal, and it may reflect negatively upon the employee in question.

If your business operates a policy of not providing references, you should clearly state this in response to avoid speculation.

You must ensure that such a policy is applied consistently, as failing to give an employee a reference when you have done so for previous employees could give rise to claims of discrimination or victimisation.

What should a reference include?

Subject to any contractual or sector-specific requirements, you are free to provide whatever form of reference you deem suitable, provided it is accurate and fair and not in any way misleading.

Content and format

There are two main types of reference:

  1. Factual reference

Many employers only provide factual references which set out the employee’s start and end date and relevant job title(s).

  1. Detailed reference

Some employers prefer to offer a more comprehensive reference that goes into the employee’s job responsibilities, disciplinary record, and reason for leaving.

It is advisable to provide all references in written form to reduce the scope for potential future disputes.

We also recommend identifying the email or letter addressed to the prospective employer who requested the reference as “strictly private and confidential”.

This is important in terms of data protection requirements and protecting your business from potential claims from the employee in question.

Duty of care to employee

You owe a duty of care to the employee who is the subject of a reference.

This means that you must take reasonable care and skill to ensure that the reference is accurate and fair by:

  • writing the reference objectively rather than giving any personal opinions
  • ensuring the reference is factually correct
  • avoiding any ambiguity or statements that could be misinterpreted

Duty of care to a prospective employer

Your duty of care to the employee, as outlined above, must be balanced against the duty you owe to the person who has requested the reference.

Suppose you provide a misleading reference that gives a false impression of the employee’s conduct or performance. In that case, the recipient may claim compensation if they have relied on its content to their detriment. 

For example, if you provide a glowing reference for an employee who was dismissed for gross misconduct because they stole company property and the individual then steals from the new employer, you may be liable for negligent misstatement.

Data protection considerations 

Providing a reference involves the processing of personal data and therefore gives rise to data protection obligations.

To process personal data, you must have a legitimate reason for doing so.

With references, the employee will almost always have given consent by agreeing to supply a prospective employer with work references and providing them with your contact details.

However, you must obtain an employee’s explicit consent to disclose and process sensitive personal data, including their health and criminal record information. 

We generally advise against including this type of information in a reference, particularly if it relates to a protected characteristic such as disability or sex, unless you are under a legal obligation to disclose it.

Liability disclaimer

It is common practice for employers to add a disclaimer within the reference limiting their liability for any errors.

Whether such disclaimers are actually enforceable will depend on the specific circumstances.

In any event, it is unlikely to be effective in protecting you against simple factual errors, for example, regarding the employee’s dates of employment or job title, which you are expected to get right.

Does a reference have to be positive?

The only legal requirement is that any reference given is true, accurate and fair, therefore in certain circumstances, a negative reference can be given, as long as it is correct and not misleading.

As outlined above, you owe a duty to the prospective employer to provide an accurate reference for the individual in question.

Therefore, a reference which fails to mention significant failings on the part of the employee, such as serious conduct or performance issues, would breach this duty.

For example, the court held that a reference stating that the employee resigned whilst on suspension due to gross misconduct allegations was lawful as this information needed to be communicated and accurate.

However, you must carefully consider any criticisms you wish to make about an employee in their reference, as any disingenuous comments may result in negligence, defamation or breach of contract claims being brought against you.

Do employees have a right to see their reference?

As a general rule, employees have the right to access any information which you hold about them, under data protection legislation.

However, an exemption applies to confidential employment references, so you are not obliged to comply with employee requests to see their reference, provided you have marked it as confidential when sending it to the prospective employer.

Reference policy

It is useful to have a reference policy that clearly outlines your stance on dealing with reference requests.

This will ensure that all managers are on the same page and a fair and consistent approach is adopted across the business, reducing the likelihood of potential claims.

As a basic guideline, the policy should explain:

  • whether you provide references; and if so
  • who in the business is authorised to provide references; and
  • the type of reference that can be given (i.e. factual or detailed).

Potential claims

There is a range of potential claims that an employee or prospective employer may bring if you provide a misleading reference or unreasonably refuse to provide one; therefore it is essential that you follow our advice above.

Discrimination and victimisation 

An employee may bring a discrimination claim if you:

  • refuse to provide a reference for a reason linked to a protected characteristic, such as sex, disability or sexual orientation; or
  • fail to follow your reference policy and treat them less favourably than other employees due to their protected characteristic.

You may also be liable for disability discrimination if you mention attendance or performance issues related to the employee’s disability in the reference.

An employee may bring a claim of victimisation if you refuse to provide them with a reference or give an unfavourable reference because they have previously raised discrimination concerns.

Breach of contract

If you fail to provide a reference in line with the terms of the employment contract or a settlement agreement, you will be liable for breach of contract, and the employee will be able to claim in respect of the resulting loss.

It is also possible to breach the implied duty of ‘mutual trust and confidence’, which applies to all employment relationships if you include allegations or issues in the reference which the employee is not aware of, as this will not be considered reasonable or fair.

Negligent misstatement

If you provide an inaccurate or unfair reference due to carelessness, the employee may bring a claim for negligent misstatement and claim damages for resulting loss, for example, the loss of a job offer. 

A prospective employer may also bring this type of claim against you if they suffer a loss due to your negligence in providing an inaccurate reference.

Defamation and malicious falsehood

If you provide a false reference about an employee that seriously damages their reputation, they may bring a defamation claim against you.

However, this is a difficult and expensive claim to bring, so employees rarely claim defamation in this context.

You would have a defence to any defamation claim if you could evidence that the reference was:

  • materially accurate; or
  • made in good faith to the prospective employer who has a common interest in receiving the information.

If the employee does not suffer serious reputational harm but they can prove that the false reference was given maliciously, they may be able to bring a claim of malicious falsehood.

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About the author 

James Rowland

James is the Commercial Director at Neathouse Partners and regularly writes articles surrounding issues in HR & Employment Law. Outside of the office, James is a keen Cricketer, playing in the Cheshire League for Nantwich CC. He also loves going to watch his football team, Crewe Alexandra. Feel free to connect with James on LinkedIn.