To Give or Not To Give a Reference - That is the Question

January 22, 2020, by HR à la carte | Work Environment and Policies

We often get asked the question about whether an employer should provide a reference letter, especially in the case where the employee was terminated without cause.  We always advise the best policy is to provide one, with the caveat that it is truthful. 

Many companies have a policy against providing letters of reference for ex-employees.  The thought process is that if they didn’t have anything positive to say about the employee, the negative reference could result in some sort of litigation.  However, in the cases of employees who have been laid off or provided a severance package for a without cause termination, courts have determined that by not providing a letter of reference the employer has hindered the employee’s ability to find their next employment opportunity.  In some cases, courts have even upped the severance amount payable or ordered damages to be paid to the employee as a result.

Providing a reference helps the employee find their next position. Under common law, employees have a duty to mitigate their job loss, meaning that they have to actively search for their next job and accept a reasonable job offer.  By not providing a reference letter, employers are hampering the employee’s effort to mitigate.  In Deplanche v. Leggat Pontiac Buick Cadillac Ltd., 2008 the court outlines the reasons why this is the case:

“In assessing the appropriate period of notice, another factor that should be considered is the refusal to provide a letter of reference.

In cases where an employee has been terminated and there is no issue as to cause, in most circumstances the employer and the former employee have a common interest in seeing that the former employee is re-employed at the earliest opportunity.  In addition to the obvious benefit to the former employee, re-employment ensures that the employer’s exposure to damages will be minimized.  For this reason, many, if not most, employers are quite willing to provide positive references, even if the reason for termination was performance-related, and many employers provide outplacement services.  In most cases, money spent on outplacement services is money well spent.  An employer is not obliged to provide outplacement services, nor is an employer obliged to provide a letter of reference.  However, an employer will run some risk if it fails to provide either.

 A failure, or refusal, as here, to provide a letter of reference adds another dimension.  As the Plaintiff testified, the automobile dealership industry is a small one.  Most people in the industry know the others.  It is expected that people will have references from their previous employers.  If they do not, questions will be raised in the minds of prospective employers.  An employer such as Leggat must know that a failure to provide a reference will make it more difficult for a terminated employee to secure alternate employment.  For this reason, a longer notice period is warranted where a reference is refused.

 A refusal to provide a reference is relevant in terms of another issue, namely, its effect on the issue of mitigation.  It will be more difficult for the employer to argue that the employee has made insufficient efforts to mitigate his or her loss where the employer has made it more difficult for the employee to secure other employment.  This is so particularly because it is the employer who bears the onus of proof on the issue of mitigation:

  I do not accept Mr. Reid’s submission that it was appropriate for the Defendant to refuse a reference because the reasons for the dismissal were based on performance.  The Plaintiff was not dismissed for cause.  No employee is perfect, but references are given as a matter of course.  If a reference is not given, the message to prospective employers is clear - this employee should not be hired." 

When you are asked by an ex-employee to provide a letter of reference here are some guidelines to help you:

• References should be given in good faith

• Do not breach rules of confidentiality. Any information regarding service dates, etc., should only be confirmed to a potential employer or provided at the employee’s written request.

• Ensure the letter of reference is based on facts (don’t embellish either in a positive or negative way).

• The information provided should be defendable in that none of the information in the letter should be news to the employee; one of the ways to do this is to pull language from a previous performance review that the employee signed off on.

• Put in a statement in the letter of reference that the information provided is only intended to show how the employee worked in your organization’s environment and is not intended to be a representation as to how the employee would work in the new organization’s environment.

Although providing references can sometimes be difficult, it is often the right thing to do.  By keeping the reference factual, simple and to the point you will be able to make it a win-win situation for both the organization and the ex-employee.

This blog has been updated from our original blog posted on Jan 22, 2016