Article #2

Employee Recommendations: Pitfalls and Loss Prevention Techniques

The employee you have fired is looking for a job. A prospective employer calls you for a recommendation. Why was he let go? Can he do the job? Would you hire him again?

You do not believe you can give him a favorable recommendation, but on the other hand, you hesitate to say something that will cost the employee a chance at a new job and a new start. How should you respond?

This has always been an awkward and uncomfortable situation for a former employer. The employer in this situation now has a new worry. There has been an explosion in employee termination litigation in the last 10 years in this country. As a result of evolving theories of liability, the employer may now be sued not only for the termination decision, but also for what the employer discloses or fails to disclose about that decision after the fact. What is the potential liability an employer may face in responding to a request for employee recommendations? What can a company do to avoid lawsuits?

An employer is exposed to at least three types of potential liability when responding to a request for information concerning a terminated employee. Under a given set of circumstances, it may be claimed that the employer's comments to a prospective employer have invaded the former employee's right to privacy. It may be claimed that the comments constitute defamation of the employee's character. Finally, it may be claimed that the employer's representations about his ex-employee are somehow fraudulent misrepresentations giving rise to a cause of action by the new employer against the old.

Invasion of Privacy

There is recognized in most states, including New Hampshire, a cause of action for the invasion of privacy. This theory of liability is broader than the simple claim that someone has read your mail or peeked through your curtains. An actionable invasion of privacy may occur when anyone, including an employer, publicly reveals private facts about another person that, when made public, will cause embarrassment, humiliation or ridicule to that person. This theory of liability exists even if the facts made public are true. The employer faced with a request for an employment recommendation must understand that the disclosure of embarrassing facts about the employee's performance to the new employer may, under appropriate circumstances, expose the ex-employer to a claim of damages including economic and so-called "emotional distress" damages.

Defamation

Few employees who have been terminated for performance reasons are likely to accept those reasons at face value. We all like to think that our failures are the result of circumstances beyond our control. It is likely that negative comments made to a prospective employer will be viewed by the ex-employee as false and upon consulting a lawyer, the ex-employee may be advised to bring a civil action for defamation of character, i.e., libel or slander. In order to recover for defamation, the employee must show that his employer "published" a false statement of fact that could lower the employee in the esteem of the prospective employer and others similarly situated. If the false statement conveyed to the prospective employer costs the employee his new job (as it likely will), there may be liability for substantial economic damages as well as the general damages commonly available for reputation injury.

Misrepresentation

Some employers go to the opposite extreme. In an effort to avoid litigation with the disgruntled former employee, a glowing recommendation is given which conceals or downplays the performance problems at the core of the decision to terminate. The new employer may hire the employee based on such recommendations. The employee may commit the same costly errors which he has in the past. The new employer may justifiably conclude that these errors and the damages caused by them could have been avoided if the former employer had been honest in his evaluation of the employee. At the least, this type of inaccurate response to a request for an employment recommendation is not likely to make the ex-employer any friends in the business community. Although there are very few legal decisions by the courts on this subject, many employment lawyers now believe that a claim for misrepresentation by the new employer against the old may be an emerging theory of recovery.

It is also in the employer's own interest to be circumspect about the use of overly positive recommendations for employees who have been terminated. More than one employer has found his letter of recommendation introduced as the first exhibit against him at trial when he is sued for wrongful termination or employment discrimination based on age or gender. It is difficult for the employer to convince a jury that his termination decision was based on the employee's poor performance when he has written a glowing letter of recommendation.

Avoiding Lawsuits

The former employer, faced with an invasion of privacy claim, may argue that the disclosure of the private facts surrounding the employee's departure was in good faith and privileged. The employer may defend the claim of defamation by saying his statements were true or were made based on good faith and reasonable opinion that they were true. He may defend himself against a misrepresentation claim by saying he has no duty of accuracy to the prospective employer or that the prospective employer had no reasonable right to rely on the recommendation without performing his own investigation of the employee's qualifications.

The first goal of the employer, however, should be to avoid litigation because even a successful defense has all the characteristics of major surgery: It is painful, time consuming and expensive. The following techniques are among those suggested by employment law experts to avoid litigation:

• At a minimum, the employer should require a written authorization from the employee before providing any information to the prospective employers. This will assist in avoiding a claim that there has been an improper disclosure of private facts. Some written authorizations actually contain waiver and release language that requires the employee to agree to forego any legal claims arising out of the release of information. Such contracts are frequently challenged in the courts as unenforceable, but their presence in the authorization will do no harm and may do some good from the employer's perspective.
• The existence of a written authorization alone may not be enough to protect the employer because the ex-employee will argue that he authorized the release of only "truthful" statements and not negative statements about his job performance.

The safest course is to advise the prospective employer that it is company policy to provide only the former employee's date of hire, date of separation and positions held in the company. In this way, the employer avoids invasion of privacy or defamation actions because the employer has said nothing embarrassing or untruthful about the terminated employee; and the employer avoids a misrepresentation action because the employer hasn't provided any information upon which the prospective employer could rely to his or detriment.

This "name, rank and serial number" approach is a simple solution, but is sometimes difficult to implement because there are too many people in the company receiving inquiries and giving responses to employee recommendation requests. The employer should have a formal mechanism in place that designates a single person within the company as responsible for receiving and responding to employee recommendation inquiries. This advice holds true no mater how large or small the employer's company. It should, of course, actually be company policy to provide only this minimal information about all employees. The downside of this approach is that it hurts the good employee who would otherwise benefit from the positive recommendation.

Confidentiality Clause

A confidentiality clause may be contained in a separation agreement which is negotiated prior to the employee's departure. This is often a technique used when litigation between the employer and the employee has either occurred or is threatened. The employer and employee agree that when the employee leaves the company, his employment records will be sealed and will not be provided to prospective employers. In addition, the employer and the employee may stipulate the exact statement the employer will make when responding to any inquiry from prospective employers. Such an agreement, if adhered to, should prevent a future claim for invasion of privacy or defamation. The employee or his attorney will attempt to negotiate the most positive statement possible. From the employee's standpoint, however, the agreed statement should be no more than a neutral recommendation that does not leave the company exposed to criticism, or perhaps liability, for having somehow deceived a prospective employer.

Access to Personnel Files

New Hampshire has a statute regarding employee access to personnel files. R.S.A. 275:56 has implications for the employer concerning the type of information which must be released about a former employee.

• The statute provides a right for every employee [present and former] to have access to and a copy of the entire personnel file on the employee.
• The act also provides that if the employer and employee disagree about the information contained in the file, the employee may submit a written statement concerning his version of the information together which such evidence as he chooses to support such version.

This "rebuttal" statement must be maintained as part of the personnel file and according to the language of the statute must be "included in any disclosure of the contested information made to a third party."

Agreements to Expunge Records

There is a distinction between an agreement to "seal" a personnel record and agreement to "expunge" adverse references or materials contained in a personnel file. It is generally not recommended that an employer agree to the expungement of adverse employment materials as part of a separation agreement or settlement of a lawsuit because the evidence is often needed either to defend the employer against subsequent claims by the same employee or to establish an appropriate "course of conduct" in the defense of subsequent claims by other employees.

Upon receipt of a request made by a third party for release of a personnel file on a present or former employee, consider directing the materials directly to the employee rather than to the third party requesting the materials.

Many human resource professionals are reluctant to restrict the free flow of information between employers concerning the credentials of employees in the job market. It is often difficult to make judgments about a job applicant strictly from a resume or personal interview. The need for accurate information becomes more critical depending on the responsibility the job applicant will be asked to assume with a new employer. There is no doubt that the loss prevention techniques suggested here stifle this free flow of information in a way that may damage productivity in a general sense. This is yet another unfortunate result of the litigation explosion in this country. But with the increase in employee litigation, it becomes critical that companies undertake loss prevention techniques designed to prevent litigation, and the suggestions offered above are only a few of those being offered by legal experts in the field today.

About the Author

Craig L. Staples is a seasoned litigator and trial lawyer serving the legal needs of individuals and businesses throughout New Hampshire. Mr. Staples has handled over 500 civil litigation cases on behalf of institutions, businesses and individuals in 23 years of legal experience. He graduated with honors from the University of New Hampshire in 1976, receiving his J.D., cum laude, from Villanova University in 1979 where he as a member of the Villanova Law Review. He concentrates his practice in the areas of employment law, anti-discrimination law, civil rights and business law on behalf of public and private employers as well as management level employees. He has tried numerous jury and non-jury cases both in New Hampshire and Pennsylvania including the defense of a civil rights class action lawsuit involving a class of over 400 plaintiffs against a New Hampshire municipality and its officials. Mr. Staples also has substantial appellate advocacy experience having appeared and argued successfully before the appellate courts in Pennsylvania as well as the New Hampshire Supreme Court. He has frequently lectured to employers, public officials and to bar organizations in the areas of municipal liability, civil rights and employment law.