Q: One of the most troublesome problems that I face is the request for job references for a former worker. Fear of lawsuits makes me hesitant to provide that information. Are there guidelines on what I can and cannot say?

A: When called upon to provide references for terminated employees, employers are frequently trapped between their desire for the employee to re-enter the work force (and not make an employment claim) and their interest in providing a frank description of the employee's performance without inviting a lawsuit. Balancing these interests is difficult.

When discussing former employees with potential employers, you must be careful about defamation. This occurs when, without legal justification, you intentionally or recklessly make a false statement about another person to a third party, causing that person harm. Let's say you fire your concrete finisher, Joe, because you thought he was stealing finishing tools. However, you're not 100% certain. If you inform a prospective employer that Joe is a thief without genuinely investigating that charge, your statement could be considered reckless. You are tarnishing Joe's reputation and jeopardizing his chances of securing employment. If Joe sues you for slander and proves that he hasn't stolen anything, you could suffer a heavy loss.

The most treacherous form of defamation is called "compelled self-defamation." This occurs when an employee is fired based upon an untrue allegation of bad conduct and is later forced to explain the situation to a potential employer. So how do you protect yourself? The rule is that an employer cannot, with the exception of some opinion statements, be held liable for telling the truth. But the objective truth of virtually any statement can be disputed or distorted, and your view of the truth may not always prevail in court. For example, trial testimony may reveal that the employee who reported Joe's theft lied to you. By firing Joe based upon this uncorroborated allegation and reporting your suspicions to the prospective employer, you easily could be found by a jury to have carelessly defamed the innocent worker. This scenario illustrates the wisdom of expressing only facts for which you have ample corroborating evidence, or merely verifying information provided by the employee to the prospective employer.

While the law of defamation protects the reputation of employees, it also reserves opportunities for employers to communicate truthful information for the purpose of doing business. An employer will not be held liable for defamation for a statement in which he has a good-faith belief, and which he makes at a proper time to an appropriate person and only for a legitimate business purpose. Courts call this "qualified privilege."

If any of the elements are missing, however, the privilege fails, and the employer may be liable. In the case of Joe, you may have a qualified privilege to speak to the employer, since your statement is made in the course of business as a courtesy. The hiring agent has good reason to solicit the information, and a telephone call during business hours is an appropriate time and manner of communication. As long as you limit your comments to the employment information requested and don't use the call to vent unpleasant feelings about Joe, your statements probably fall under business-communication protection. However, if Joe were to consider a lawsuit, his lawyer might attack your less-than-extensive investigation of the alleged theft.

Courts have held that employers may be liable if they communicate information about which they have no first-hand knowledge and which consists largely of rumor. Unless you warn the hiring agent that Joe was merely accused by another of being a thief, and that you have no other proof, you may be accused of not having a good-faith belief in your statement.

Because an employer's qualified privilege for defamation is a delicate one, take the following steps if you fear liability:

  • Talk to your attorney.
  • Stay well within the qualified privilege.If you offer your opinions and advice, state the factual basis of your opinions and alert the caller to the limits of your knowledge.
  • Before providing employment information, consider requiring employees to execute a release of liability for claims against the company. These releases are effective to bar negligence claims, but are not effective to avoid liability for intentional conduct.
  • Adopt a formal company policy regarding who is authorized to provide references and under what circumstances.