Employment law references guide

Employers are often asked to provide employment references. Although many recognise the potential risks, they may be unsure what information they should include or avoid.

This guide covers the key issues for employers:

• Providing employment references
• References in regulated industries
• Requesting references
• Data protection considerations

Employment references guide – providing a reference

An employee may challenge a reference they consider unfair or inaccurate and, in some circumstances, bring a claim against their former employer.

No general duty to provide an employment reference

Employers are generally under no legal obligation to provide a reference for a current or former employee and can usually refuse a request. Exceptions may apply in regulated financial services, as discussed below.

When should a reference be given?

Where it is the norm

Employers should apply a consistent approach to references. Inconsistency may lead to allegations of discrimination, victimisation, breach of contract or breach of the implied duty of trust and confidence.

Employee has a contractual right

If an employment contract or settlement agreement expressly requires a reference, the employer should comply with its terms. Failure to do so may amount to a breach of contract.

Employment reference guide – clear policy

Employers are not generally required to publish a reference policy. However, internal guidelines can help ensure consistency. Employment contracts should be drafted carefully to avoid creating an unintended obligation to provide a reference.

Who should provide a reference?

A reference may be provided on behalf of the employer or in a personal capacity. Employers may be liable for corporate references, including where an employee gives one without proper authority.

A personal reference is given in an individual capacity, for example by a former line manager. To reduce the risk of it being mistaken for a corporate reference, it should not use company headed paper or imply that it represents the employer’s official view.

Balancing the duty owed to employees and to recipient employers

Employers should take reasonable care to ensure that references are accurate and not misleading. They must balance fairness to the employee with the need to provide relevant information to the prospective employer. Where concerns cannot be substantiated, it may be safer to provide a limited factual reference.

Dealing with half truths

Broad or incomplete statements can give a misleading impression. Employers should ensure that information is accurate, sufficiently clear and supported by evidence, avoiding assumptions or material omissions.

A careless reference may also expose an employer to claims from an employee who remains employed, depending on the circumstances.

Speculation on future performance

Employers should avoid unsupported predictions about how an employee will perform in a new role. References should focus on information the employer can reasonably substantiate rather than general statements such as “Y will be a great asset to any business”.

Gut feelings should not influence the reference

Employers may have concerns about an employee’s conduct but lack evidence to support them. Including unsubstantiated allegations can create risks, including claims for defamation or negligent misstatement. Employers should carefully assess what can fairly and accurately be disclosed.

Performance, attendance and sickness absences

Comments about performance, attendance or sickness absence may create discrimination or data protection risks, particularly where they relate to a disability or health information. Employers should ensure that any disclosure is relevant, accurate and handled lawfully.

No obligation to answer detailed reference questions

A prospective employer may ask detailed questions, but there is generally no obligation to answer every question. Many employers limit references to basic factual information.

References and settlement agreements

Where employment ends following conduct or performance concerns, the parties may agree a reference as part of a settlement agreement. An agreed reference can help provide certainty for both parties and support negotiations over an exit.

Simple factual references

Many employers reduce risk by providing a factual reference limited to:

• Confirmation of employment;
• Start and end dates; and
• Job title.

Employment references – the use of disclaimers

A disclaimer may help clarify the basis on which a reference is provided, but it will not necessarily exclude liability. Employers should not assume that a disclaimer removes the need to take reasonable care over the reference’s contents.

Employment references for regulated industries

Different requirements apply in parts of the financial services sector. FCA and PRA rules may require regulated firms to provide references for certain individuals performing specified roles.

Employees performing a controlled function

Regulated firms must comply with applicable regulatory reference requirements for relevant employees and former employees. These can apply to individuals performing senior or influential roles, including certain directors and those responsible for key systems and controls.

 Assessing honesty and integrity

Where regulatory reference rules apply, firms may need to provide relevant information about the individual’s fitness and propriety. Depending on the applicable requirements, this may include information concerning:

• Honesty, integrity, reputation, competence and financial soundness;
• Relevant outstanding liabilities;
• Complaints or disciplinary findings; and
• Dismissal or resignation in circumstances relevant to the regulatory assessment.

Risks for employers supplying the reference

Failure to comply with regulatory reference requirements may result in regulatory action. Firms must take reasonable care to ensure that references are accurate, fair and supported by verified information, including where they express an opinion.

Employment references guide – Requesting an employment reference

Although employers are not generally required to request references, doing so can help verify a prospective employee’s employment history and experience.

Conditional offers of employment

Where an offer depends on a satisfactory reference, this condition should be clearly stated in the offer. Employers should take care with the wording, as the contractual consequences of an unsatisfactory reference will depend on the terms of the offer and whether a contract has already been formed.

Unsatisfactory references after the employee has started work

If employment has already begun, an unsatisfactory reference does not automatically allow the employer to terminate without notice. Employers should review the employment contract and applicable notice and dismissal requirements before taking action.

Data protection and employment references

Providing a reference generally involves processing personal data. Employers must comply with applicable data protection law, including requirements concerning lawful processing, accuracy, relevance and security.

Particular care is needed when a reference includes health information, such as sickness records or reasons for absence, because this may constitute special category personal data and attract additional requirements.

Employees may have data protection rights in relation to personal information used in references, but they do not have an automatic right to prevent every disclosure. Employers should assess requests and proposed disclosures against the applicable legal requirements.

We advise employers on providing and requesting employment references, managing legal risks and complying with relevant employment and data protection obligations.