Reference Checking: How to Avoid Liability

There are lots of prohibitions in the law about what an employer can ask during an employment interview, but no prohibitions about what an employer can ask during a reference check. So when you're the reference being checked, be careful what you say about a former employee whom you would not recommend hiring.

Here's how you can get into trouble: You get a call seeking a reference on a former employee, who was a terrible worker. You provide an honest assessment. The prospective employer decides not to hire based on that assessment and tells the candidate why he or she isn't getting the job. You've just taken on liability for which you can be sued.

Here's how it plays out in court: The former employee tells the judge that his previous company—i.e., you—did not treat him fairly when he was there. He says you made his life miserable, even though he worked harder than anybody else. He understands that a company has the right to hire and fire whomever it chooses, but he asks the judge if it's fair for his former company to continue to treat him unfairly and ruin his chances for a successful future. In all likelihood, the judge will rule against you.

Here's another scenario: A prospective employer calls seeking a reference, and you provide a recommendation for an unsatisfactory former employee. The new employer hires the person, who's still performing way below expectations. You have taken on liability and can be sued by the new employer. The legal premise is that they "acted in reliance" on your reference and were damaged by the bad behavior of the employee about whom you fibbed. That employer, through the courts, can hold your company accountable for the damage suffered at the hands of the problem employee.

Moral of the story: When it comes to good employees, go ahead and sing their praises. When it comes to third-rate employees, just provide the title they held and the dates they worked when they were with you. Don't answer the question, "Would you rehire that person?" Say, "Our policy is that we provide only the information I have already given."

The problem is worse when someone you know asks for a reference and pressures you for information. Resist the pressure. Don't take on liability. If he or she puts friendship on the line and continues to pressure you, do not give in. It's better to lose such a "friend" than to wind up in court.