When silence is golden - providing employment references

Nation's Business, July, 1991 by Ross H. Fishman

The personnel director of a nearby company tells you she wants to know about Jones, a former employee of yours who has applied to her for a job.

Jones gave you a pretty hard time, and you want to protect another employer from the same experience. So you are as frank as possible. You tell her that Jones was a chronic griper who skipped work for dubious reasons and that you always felt that he was a bit of a lush who wobbled back from long lunches. When you have finished, you might think that you have done her company a big favor.

But your well-intentioned warning could wind up costing your own firm big dollars. In increasing numbers, job seekers who believe their employment chances have been hurt by former bosses are bringing defamation suits.

Generally, defamation is defined as an injury to the reputation or good name of another that tends to bring that person into disrepute. It can be divided into two categories, with similar elements of proof: libel, which is defamatory written communication; and slander, which is defamatory speech.

Employers can be held liable for defamation in two general areas: in providing written or oral job references to prospective employers; and in disseminating information, including the reason for discharge, to those who do not need to have this information.

During a libel or slander trial, the employee--the plaintiff--will attempt to prove that his or her reputation has been injured by a defamatory statement made by the employer.

According to Gregory J. Malovance, an employment-relations attorney at Winston & Strawn, a national law firm based in Chicago, the employer--the defendant--can defend by trying to prove that the alleged statement:

* was not made;

* was true;

* was not defamatory;

* was made with the employee's consent;

* or was made by someone acting outside his or her authority and thus only that person is liable for any adverse judgment.

In most states, an employer is protected by a "qualified privilege," Malovance explains. "This means that the employer can avoid liability if he acted in good faith, had an interest or duty to disseminate the information, and did so in a proper manner and to proper parties only." In many instances, however, these types of questions can only be decided by a judge or jury at trial.

"Moreover, even where you have established all of these points," says Malovance, "the employee can rebut this privilege by claiming that the employer abused the privilege or made the statement with 'actual malice.' Therefore, the employer still assumes a significant cost in defending his actions" and risks an unfavorable outcome.

The law also protects the right of the employer to express his personal opinion--as distinguished from statements of fact--regarding the employee, provided the opinion was clearly designated as such, was given without intent to harm, or otherwise may be given an innocent construction. Malovance admits that it is hard to predict how a jury will evaluate intent.

So, given the costs and uncertainties of litigation, Carey M. Stein, vice president and general counsel of Hartmarx, the Chicago-based manufacturer of men's clothing, is representative of most executives concerned with this issue when he says, "it is better that your personnel procedures help you avoid lawsuits rather than win them." Stein advises Hartmarx's human-relations division on personnel-related issues.

As an employer, you can reduce potential liability for defamation actions by instituting strict and consistent company policies.

It is widely believed that the safest and most conservative position is to refuse to provide references. (If there is no specific agreement with the employees that says you have to provide references, there is generally no legal requirement to provide information, regardless of the circumstances surrounding the employee's termination or resignation.) However, even this course of action is not risk-free because employers may now be held liable under an emerging theory of "negligent referral" by failing to disclose certain types of information.

Malovance says that if you choose to respond to such inquiries, the following strategies may prove helpful:

* Designate one person or department to respond, and advise all other employees that any comments they might make could subject them to personal liability.

* Insist that all inquiries and responses be made in writing, so there can be no dispute as to the exact language used, and keep file copies.

* Discuss the employee's termination or resignation with the employee in an exit interview, with another designated person present. Obtain the employee's consent to tape the conversation. If necessary, draft a mutually acceptable reference, and have the employee agree in writing to its accuracy and to its distribution in response to requests. If you cannot obtain such employee cooperation, limit the reference to facts you can prove without explanation.

* To any request for additional information, state only that company policy forbids additional disclosures.