Articles

Refer Madness: The Dilemma Of Employment Reference Letters

Marshall H. Tanick
(email)
Mansfield, Tanick & Cohen, P.A.
1700 U. S. Bank Plaza South
Minneapolis, MN 55402
Tel: 612.339.4295
FAX: 612.339.3161

A pair of major judicial decisions, coupled with legislative inaction, has created a quandary for those seeking or providing employment reference letters. Both employers and employees are increasingly encountering maddening dilemmas in dealing with references.

Reference letters and oral information occasionally have fueled legal problems in the past, but employers generally have been willing to furnish reference letters or oral information on behalf of ex-employees. Employees usually find such assistance helpful in securing new employment.

But the tranquility of the process is markedly changing. The general litigious nature of society, especially manifested in workplace-related litigation, places reference letters in the maelstrom of litigation. The increasingly transient workforce, with greater turnover and, therefore, increased desire for reference letters, has also contributed to the growth in litigation. New and emerging legal doctrines, such as defamation by self-publication, add to the volatility of reference letters.¹

Cases Considered

Reference letters have customarily led to litigation when an employee receives an unfavorable reference, either orally or in writing, and then sues for defamation. The decision of the Minnesota Supreme Court in Stuempges v. Parke, Davis & Company exemplifies this pattern.² In Stuempges, a salesman resigned and was promised a good recommendation, but received an unfavorable one. Upon receiving this unfavorable reference, the salesman's employment agency refused to continue searching for potential job opportunities. Finding sufficient evidence to support a defamation claim, the Court ordered a damage award of $37,750, including punitive damages. The Court applied the general principles of common law defamation to the unflattering references, which the employment agency characterized as "the worst recommendation" it had ever received.³

Cases like Stuempges raise a number of conventional issues of slander and libel law, as well as invoking common law and statutory privileges and other defenses. But a pair of recent cases reflects the variation of litigation triggered by references.

In Robinson v. Shell Oil Company, an employee who was the subject of a negative reference letter sued for illegal retaliation under Title VII of the Federal Civil Rights Act.⁴ The employee, an African-American male, claimed that the bad reference letter was attributable to his filing of a discrimination charge before the Equal Employment Opportunity Commission (EEOC). The narrow issue presented in the case was whether the plaintiff could be described as an "employee" within the meaning of the Act since the alleged reprisal occurred after the employment relationship ended.⁵ The broader issue, however, was the employer's exposure to liability for giving a bad reference about the employee.

The Supreme Court answered the first question in the affirmative. The Court's reasoning supported the employee's retaliation claim. Finding the word "employees" in the statute to be "ambiguous," the Court stated that providing a remedy to them would be "more consistent with the broader context of Title VII and the primary purpose" of the Act.⁶

The ramifications of the Robinson case are much broader than the narrow statutory interpretation issue in the litigation. An employer who provides a negative reference, or who provides no reference at all, can be subject to suit for reprisal in violation of the many anti-reprisal statutes, ranging from the Whistleblower Act to the retaliation provision of the Human Rights Act.⁷ The Ninth Circuit recently held that a negative job reference violated the employee's civil rights because she had filed a discrimination charge shortly before the discharge and reference.⁸ Although Robinson involved an employee who had a pending charge before the EEOC, formal legal action may not be necessary to invoke the rationale behind the ruling. An employee who is asserting that discipline was the product of discrimination may be able to rely upon Robinson, even if there are no pending proceedings at the time of the adverse reference.

The Robinson ruling provides an added incentive for employers to refuse to furnish any information about ex-employees for fear of exposure to liability. If an employee was considered a poor worker, an employer might be reluctant to provide any reference at all. The employee, however, could charge discrimination or retaliation if the employer gives favorable references for others. A "no reference" policy might be invoked for all employees to avert this risk.

But furnishing a favorable reference can be troublesome, too. The danger is reflected in the decision of the California Supreme Court late last year in Randi W. v. Muroc Joint Unified School District.⁹ The case involved a school teacher who had been the subject of complaints of sexual molestation, harassment and improper touching of students. The teacher obtained a favorable reference letter, which omitted any mention of the prior complaints. A student who was molested at the teacher's new school sued the teacher's former school district on a third-party liability claim based upon the omission of the background information in the reference letter.

The California Supreme Court agreed with the student, holding that the teacher's former school district was subject to liability for failing to disclose the complaints. Although it did not impose an affirmative duty to provide references, the ruling focused on the employer's choice to provide a reference while omitting important data. As the Court stated:

[T]he writer of a letter of recommendation owes to third persons a duty not to misrepresent the facts in describing the qualifications and character of a former employee, if making these misrepresentations would present a substantial, foreseeable risk of physical injury to third persons.¹⁰

Another employer similarly has been held susceptible to third-party liability for failing to include statements relating to an ex-employee's violent propensities. In Jenner v. Allstate Insurance Company, the employer, not wishing to offend an employee, provided a favorable recommendation even though the employee had engaged in bizarre behavior, threatened co-workers, and brought a gun to work.¹¹ The families of five victims he shot and killed at his new job were able to sue for the improper reference.

Minnesota Milestones

These new rulings propel the law of references in new directions. In the past, most reference cases in Minnesota have, like Stuempges, been confined to defamation. The most notable is Lewis v. Equitable Life Assur. Soc. of the U.S.¹², which involved the doctrine of self-publication. The foundation for the claim was created when four employees fired for "gross insubordination," a pretextured charge the court later found to be false. While no reference letters were involved, the court found that the former employer could have foreseen that the former employees would have little choice but to state the reason for their discharge to prospective employers.

Other Minnesota milestone cases fall into more conventional patterns but have resulted in a noticeable lack of success for the claimants. For instance, in Hunt v. University of Minnesota, the Court held that communication of statements that were "not complimentary" about a public sector employee to another prospective public employer was not actionable because of the qualified privilege allowed in the employment context.¹³ The same privilege was recognized in Stuempges but rejected on the facts of that case. In Hunt, however, the Court was influenced by the public nature of the claimant's employment, noting that "[r]eadily available information about the qualifications of any public employee is in the public interest."¹⁴

In Gernander v. Winona State University,¹⁵ another public academic employee was denied reference relief. In Gernander, a college professor who was denied a promotion due to an unfavorable internal reference letter was unable to prove his case because the remarks were found to be constitutionally protected as "opinions," a common defense in defamation actions.¹⁶

Although the doctrine of official immunity does not apply to defamation,¹⁷ another type of immunity may apply. In LeBaron v. Minnesota Board of Public Defense, deprecatory statements made in a letter explaining the reasons for the county public defender's discharge of an assistant public defender were absolutely immune from suit since the employer was required to respond to the ex-employee's letter to the state public defender charging improper termination.¹⁸

Written communications giving the reasons for an employee's termination may be actionable even if not communicated to prospective employers.¹⁹ This may occur in connection with remarks published in personnel files or statements made to other employees. The battleground in these cases is usually centered on whether the employer acted with improper motive. If the employer acts without a proper motive, it loses the "qualified privilege" defense.²⁰

The privilege applies if the Court determines, as a matter of law, that the statements were made on a "proper occasion" and for a "proper purpose."²¹ The privilege also requires that an employer have reasonable or probable grounds for the statements, a matter usually resolved on the basis of the quality of "investigative steps" taken by the employer before uttering the communications.²²

Nettlesome Nature

Despite their nettlesome nature, reference letters can often be desirable from an employer's standpoint. Conscientious employers may wish to provide reference letters to favored employees to help them find new positions. They also may wish to encourage other employers to engage in similar communicative efforts in order to assure a free flow of information about prospective employees. The Supreme Court has recognized this "public interest" by assuring that employers "can give an accurate assessment" of an employee.²³ Absent legal protection, the Court fears that employers will be reluctant "to evaluate honestly their former employees' work records."²⁴

A reference, whether written or oral, often is instrumental in helping employees find other work, thereby eliminating or reducing the need for reemployment compensation benefits and decreasing insurance premiums for employers. More importantly, aiding employees in their search for new work will help employees mitigate damages and reduce the former employer's total liability.

These salutary considerations, however, are offset by competing factors. The potential liability for damages in a defamation suit filed by a former employee due to a bad reference is usually not a significant factor causing employers to hesitate in sending out reference letters.

However, the prospect of the litigation process is more ominous. Even if the employer prevails, it suffers the time, expense, and friction caused by reference-related litigation. One easy way to avoid such litigation is to adopt a "no reference" policy, or simply reference letters that provide the job title, duties, and dates of employment, which are of little value to either the employee or a prospective employer.

The Robinson and Randi W. cases highlight the legal dilemma employers face in connection with references. The failure to give a reference, or furnishing a negative one, could expose the employer to prospective liability from the employee. On the other hand, providing a reference letter that fails to include material information that would be derogatory to an employee could redound to the employer's detriment in a subsequent lawsuit by a future employer or third parties injured by the employee.

But a "no reference" policy does not assure avoidance of liability. The Randi W. rationale could be extended to impose an affirmative duty upon employers to disclose negative information, particularly if an employer is aware of information that could pose a threat to the safety of others.

Statutory Solution

The common law does provide some protection from suits by employees, usually providing the panoply of traditional defamation defenses, such as truth, opinion, and qualified privilege, if not abused by "ill will" or other disqualifying features.²⁵

These common law protections, however, are often viewed as insufficient. They generally apply only to claims by employees. These protections may prove to be inadequate since even greater exposure to liability can occur through third-party liability, as reflected in the Randi W. case. Moreover, common law approaches are often intensively fact-based, which frequently cannot be decided without time-consuming and divisive litigation.

One solution to this dilemma is the creation of a statutory safe harbor protecting employers who furnish reference letters. About 20 states have enacted statutes that provide full or limited immunity for employers from faulty references. They range from Alaska to Florida. Minnesota has a quasi-safe harbor provision, which only pertains to ex-employees. The statute has been construed to provide absolute immunity to employers who respond to employee requests for reference letters.²⁶ Under Minn. Stat. § 181.933, Subd. 2,

No communication of the statement furnished by the employer to the employee under subdivision 1 may be made the subject of any action for libel, slander, or defamation by the employee against the employer.

Recent efforts to strengthen the protection for employers have failed in the Minnesota Legislature. A bill to grant absolute immunity to employers who commit defamation in personnel records never made it to committee hearings in either the Senate or House of Representatives last session.²⁷ A last minute effort to tack on the provision to a measure requiring law enforcement background checks also was defeated.²⁸

Employee interest advocates generally take a hard line against extending protection to employers for bad references. They might, however, wish to reconsider their position. Lawsuits by employees due to bad references are easy to bring, but hard to win. They must overcome formidable defamation defenses of truth, opinion, and privilege. Establishing damages can also be difficult. Proof of harm usually requires cooperation of a prospective employer who would testify that an applicant was turned down because of a reference letter, a concession that a prospective employer may not be readily willing to make.

Employees have an interest in maximizing the free flow of information from ex-employers to prospective new employers because reference letters are an important tool in the search for future employment,. One method to achieve this objective is the use of releases by which employees agree that, in consideration for a reference, they agree not to sue. However, an open-ended release, without the employee's knowing what is going to be in the reference letter can be dangerous. Therefore, an employee would be well advised to negotiate with an employer concerning both the terms of the reference letter and an accompanying release of liability.

Reference Recommendations

The scourge of reference-related litigation, and its new variations, can hardly be avoided. There are, however, some ways that employers can limit their exposure to legal liability.

Here are some recommendations to avoid or minimize reference letter liability:

• Be Reticent: Silence may not truly be golden, but in dealing with employment references, too many communications can be catastrophic. Therefore, employers who wish to avoid any liability may opt for a policy of reticence and refuse to furnish any references. This, however, is not foolproof for, as reflected in the Robinson case, the failure to give a reference could in appropriate circumstances be deemed retaliatory.

• Be Released: An employer who wishes to furnish references, while avoiding liability, may ask an employee to furnish a release, assuring that no legal action will be taken if the reference is unfavorable. A properly worded release can assure the free flow of communications while eliminating the risk of litigation.

• Be Consistent: Consistency is a useful policy to follow in handling references. If an employer decides not to furnish any references, that policy should be applied across-the-board, lest an employee assert a claim of discrimination or other wrongdoing for failing to furnish a reference letter when they are given to others.

• Be Opinionated: Traditional defamation defenses, including qualified privilege for an employment contract, apply in connection with reference letters. One of the most notable defenses is that of "opinion," as reflected in the Gernander case. Couching letters in terms of beliefs or impressions can attain the absolute privilege under the First Amendment for "statement of opinions."

• Be Careful: Fact-based assertions in references, especially those that may impute immoral, criminal, or other wrongful behavior, should be avoided. Careful selection of language and avoidance of evocative words should be utilized.

• Be Insured: Most comprehensive general liability insurance policies preclude coverage for employment-related claims.²⁹ They do, however, generally provide coverage, and a corresponding duty of defense, for claims of defamation. Employers should ascertain applicable insurance coverage before determining whether, and how, to furnish references.

• Be Lucky: In today's litigious society, the furnishing of references is laden with potential legal liability. Therefore, it always helps to be lucky in order to avoid exposure to liability.

To Refer or Not

Both employers and employees suffer from the uncertainty surrounding reference letters. The result places employers between a rock and hard place and often times crushes an employee's ability to find new work. As matters now stand, employers are in a Shakespearean dilemma. Many of them feel like paraphrasing the melancholic Danish prince pondering his fate:

To refer or not to refer
That is the question;
Whether 'tis nobler in the mind to suffer
The slings and arrows of outrageous litigation
Or to take arms against a sea of lawsuits.
And by opposing end them? ³⁰

Click here to go to Defamation Law.

ENDNOTES

1. See Lewis v. Equitable Life Assur. Soc. of the U.S., 389 N.W.2d 876 (Minn. 1986).

2. 297 N.W.2d 252 (1980).

3. 297 N.W.2d at 255. The unfavorable remarks included derogation of the salesman's ability to sell, coupled with his alleged lack of motivation.

4. 117 S. Ct. 843 (1997).

5. Section 704(a) of the Civil Rights Act of 1964, 42 U.S.C. § 2000e-3(a).

6. 117 S. Ct. at 849.

7. Minn. Stat. § 181.932; Minn. Stat. § 363.03.

8. Hahimoto v. Dalton, 1997 WL 366013 (9th Cir. 1997).

9. 929 P.2d 582 (Cal. 1997).

10. 929 P.2d at 591.

11. Case No. 93-09472 (Fla. Cir. Ct. 1993), cert. denied, 650 So. 2d 997 (Fla. Ct. App. 1995)

12. 389 NW2d 876 (Minn. 1986).

13. 465 N.W.2d 88 (Minn. Ct. App. 1991). But see Bauer v. State, 511 N.W.2d 447 (Minn. 1994) (malice is question of fact in defamation action by public sector employee).

14. 465 N.W.2d at 94.

15. 428 N.W.2d 473 (Minn. Ct. App. 1988).

16. Gertz v. Robert Welch, Inc., 418 U.S. 323 (1974); Erven v. Provost, 413 N.W.2d 861 (Minn. Ct. App. 1987).

17. 511 N.W.2d at 449.

18. 499 N.W.2d 39 (Minn. Ct. App. 1993), rev. denied (June 9, 1993).

19. See e.g., Frankson v. Design Space Int'l, 394 N.W.2d 140 (Minn. 1986); Brooks v. Doherty, Rumble & Butler, 481 N.W.2d 120 (Minn. Ct. App. 1992), rev. denied, (April 29, 1992).

20. 394 N.W.2d at 145; 481 N.W.2d at 125-26.

21. Thompson v. Campbell, 845 F. Supp. 665, 680 (D. Minn. 1994) (Doty, J.).

22. Wirig v. Kinney Shoe Corp., 461 N.W.2d 374, 380 (Minn. 1990).

23. 297 N.W.2d at 257.

24. Id.

25. 394 N.W.2d at 144.

26. Huthwaite v. H.B. Fuller Co., 1992 WL 95879 (Minn. Ct. App. 1992), rev. denied (July 15, 1992).

27. H.F. 822 (1997).

28. S.F. 294 (1997).

29. Meadowbrook, Inc. v. Tower Insurance Co., 559 N.W.2d 411 (Minn. 1997).

30. W. SHAKESPEARE, "HAMLET," Act III, Sc. 1.

This article originally appeared in Bench & Bar, December 1997.