• Legal Issues: References

    by George C. Hlavac, Esq., and Edward J. Easterly, Esq.
    NACE Journal, April 2012

    When a student fails to obtain a job, he or she may look at several different factors when trying to determine why. One place former employers and educational institutions do not want the proverbial finger pointed is at a reference provided for that student.

    While there are no federal or state laws that currently require employers or educational institutions to provide references for individuals, most do provide them. What information is ultimately provided can result in a legal land mine. There are, however, certain protections afforded to reference providers when information about an individual is disclosed. The key for reference providers is to know what information should and can be disclosed, and what legal ramifications arise as a result of improper disclosures.

    An Example

    A student is working at a summer internship at Company ABC. The internship is sponsored by the educational institution for one of the student’s classes. At the conclusion of the internship, the employer provides the institution with a written evaluation for the student and keeps a copy in its records. The evaluation of the student is not glowing. The student was repeatedly late to work and failed to complete assignments. The evaluation was also provided to the career center and the student’s faculty adviser.

    After graduation, the student puts the internship at Company ABC on his resume and potential employers begin contacting Company ABC for references. Company ABC reads directly from the evaluation and the student is repeatedly rejected from jobs. The student subsequently finds out that Company ABC’s reference is the reason for his unemployment situation. Is Company ABC facing potential liability?

    Analysis

    Whether Company ABC is liable depends on a variety of factors. The primary causes of action, however, which may be brought by the student, are for defamation or tortious interference with business contracts.

    To maintain a cause of action for defamation, the student must establish that the reference contained false and defamatory material and that it was communicated to a third person. For a statement to be deemed “defamatory,” it must harm an individual’s reputation and lower him or her in the esteem of the community. Courts have indicated that such a statement must result in some tangible harm to the person (e.g. loss of money, business, or employment). In addition, a substantially true statement may be defamatory if it is incomplete and misleading.

    Generally, courts rarely determine that statements pertaining to job performance are defamatory—unless an employer falsely accuses an employee of criminal conduct, lack of integrity, dishonesty, incompetence, or reprehensible personal characteristics or behavior. In the example, Company ABC has repeatedly informed other potential employers about the student’s incompetence, so there is potential liability associated with the reference. However, Company ABC has an escape hatch if it has documentation to support the statement’s veracity.

    Qualified Privilege

    If an employer can establish a qualified privilege between former and prospective employers, even if statements made about the student are false, it can escape liability. Thus, the qualified privilege for referring employers exists provided the speaker makes the communication in good faith and has a public or private duty; or has a legal, moral, or social obligation to do so. Additionally, the prospective employer receiving the information must possess a corresponding duty or interest in the communication.

    However, a statement loses its privileged character if the communicator is motivated by ill-will, demonstrates excessive communication of the statement, or conveys the statement without grounds for believing it to be true. An employer or educational institution may be protected by a qualified privilege concerning an employee when disclosing information is necessary to serve the employer’s legitimate interest in an employee’s fitness to perform.

    In the example, Company ABC had a legitimate interest in assessing and disclosing the employee’s ability to perform for future employers. Provided such assessments of the student were not motivated by ill-will or communicated to individuals not privy to such information (i.e. telling the janitor about the employee’s performance), Company ABC should not lose the qualified privilege regardless of the accuracy of the statements.

    Therefore, Company ABC should not be liable for disclosing the communication to prospective employers. However, Company ABC also disclosed this information to the career center and the student adviser. What happens if the student adviser subsequently discloses this information to a potential employer in a reference letter requested by the student?

    The student adviser’s primary defense is that the statements provided were true. Even if the student adviser did not verify the allegations, he or she can still avoid liability. While courts have not generally addressed the “qualified privilege” argument for such a disclosure, an argument could be made that the adviser would not be liable for defamation. After a referral source claims the privilege, the student must establish that the statement was made for malicious purposes. The referral source will not be liable for sharing information he or she had a reasonable basis for believing. As courts have indicated, it is in the public interest that information regarding an employee is readily available to the prospective employers.

    Here, the referral source—the student adviser—had a reasonable basis for believing the evaluation. The student worked for the individual providing the evaluation, and the evaluation came directly from the employer, not a third party. The student adviser should be able to maintain immunity from a claim for defamation.

    Based upon the foregoing, it is difficult for a student to maintain a cause of action for defamation in the employment arena. The student must prove that the statements made were intentionally false and made with
    ill-will to overcome the immunity provided by the majority of courts.

    Tortious Interference

    The second cause of action is tortious interference. This is significantly more difficult to establish for the student intern in the example. To maintain a cause of action for tortious interference, the student must establish that he or she had a reasonable expectation of entering into a valid business relationship, the employer or educational institution knew of the expected relationship, and that the employer or educational institution purposefully interfered with and prevented the relationship from occurring.

    Courts have routinely stated that merely providing a negative reference will rarely lead to a cause of action. As with defamation, the student must establish that the employer or educational institution provided the negative reference out of spite or ill-will. If such elements are not present, there is minimal chance of recovery against the referral source.

    Discrimination and Retaliation

    Another potential pitfall for referral sources lies with anti-discrimination laws. Title VII (which prohibits race, religion, national origin, and gender discrimination), the Americans with Disabilities Act, and the Age Discrimination in Employment Act prohibit discrimination in employment. The laws also prohibit retaliation against individuals who engage in a protected activity.

    Regarding retaliation, if the student intern from the scenario complained about discrimination or harassment while employed, he or she has now engaged in a “protected activity.” If Company ABC subsequently provides a negative reference to prospective employers, the student may bring a cause of action against the company for retaliation pursuant to the anti-discrimination laws. The burden then shifts to Company ABC to provide a legitimate, nondiscriminatory reason for giving the negative reference. It is imperative that a referral source maintains proper documentation if it provides a negative reference for any individuals, specifically those that have engaged in a protected activity.

    While there is no specific case law dealing with the presented scenario as it pertains to references provided by educational institutions, students are afforded similar protections. Should a student lodge a harassment or discrimination complaint against a career center or faculty member and subsequently receive a negative reference, the educational institution would be exposed to potential liability. Accordingly, educational institutions should base all references on facts that can be supported by documentation.

    Moreover, references should not disclose any “protected” information such as an individual’s race, religion, gender, national origin, age, or disabilities. Information that would be considered personal, such as economic status, parental/marital status, or any type of information, which, if disclosed, would be considered an invasion of the person’s privacy, should not be disclosed. Employers and educational institutions should also maintain uniformity when dealing with references. Policies and procedures should be implemented to ensure that all requests for references are dealt with in a similar manner for all individuals regardless of race, gender, religion, age, disability, national origin, or any other protected class.

    Family Educational Rights and Privacy Act

    Faculty or other school personnel who are asked to give references have an additional duty under the Family Educational Rights and Privacy Act (FERPA). FERPA requires that federally funded institutions, under programs administered by the U.S. Department of Education, comply with certain procedures on disclosing and maintaining educational records. FERPA was not enacted to preclude the disclosure of educational records simply because the records identify a student by name; rather, it was designed to protect the student’s educational information and status as a student.

    FERPA prohibits the disclosure of a student’s protected information to a third party, thereby prohibiting the disclosure of educational information to potential employers without the prior approval of the student or parent. This includes, but is not limited to, information such as records, files, documents, and other materials maintained by an educational agency or institution, or by a person acting for such agency or institution.

    Regarding reference letters, the critical inquiry is whether these records include or incorporate the student’s “educational information” (i.e., GPA, grades, social security numbers, and so forth). If a reference letter contains “protected” educational information, the information cannot be disclosed without satisfying FERPA’s predisclosure requirements. A referral source must obtain the signed, written consent of the student to disclose the foregoing information in a referral letter.

    FERPA further requires an educational institution to grant students access to their educational records, including letters of recommendation. A student may waive the right to access confidential letters of recommendation. Such a waiver must be in writing. Should a student provide a waiver to the institution, this should be explicitly stated in the letter of recommendation itself.




    Referral sources should be mindful of any information that is provided to potential employers. Any negative information may put an individual or entity on the defensive, especially if it costs someone a position.




    Tips for Providing References and Referrals

    • Prior to providing a reference, obtain written consent from the person about whom the reference will be given.
    • Develop policies and procedures about providing references including, if possible, designating specific individuals to provide references.
    • Employers are encouraged to provide only “necessary” information. This includes dates of employment, salary information, and position.
    • Follow your organization’s policy regarding providing a reference.
    • Avoid lunch discussions or “off the record” telephone conversations with prospective employers regarding a person's performance.
    • If you are unaware that the job applicant has named you as a reference, ask the prospective employer for verification that the person has given consent for the reference.
    • Provide only factual information, based upon personal knowledge/observation of the person through direct contact with the person or obtained from the person’s personnel record or student record.
    • Respond to direct and specific inquiries about the job applicant as per your organization’s policies and procedures. Direct the response to the person who requested the information.
    • Relate the reference to the specific position for which the person applied and the work that the applicant will perform.
    • Do not provide subjective statements or opinions; only provide factual information that can be substantiated.
    • Maintain uniformity with referrals. 


    Copyright 2013 by the National Association of Colleges and Employers. All rights reserved.


Legal Issues: References