How to Handle Employment References

While giving truthful employment references is not legally actionable, references, by nature, tend to be highly subjective. The employer’s view of the truth may be different than the employee’s view of the truth. This is particularly true in the case of underperforming employees.

In the case of an employee who has been fired, it is a fair assumption that the employee will typically feel some ill will toward his or her former employer and may just be looking for an excuse to file a legal suit. Such employees are often mad as heck! Even employees who leave the service of a company voluntarily frequently do so because they were unhappy at the company. In any case, references given for former employees can create an opening for legal action if the employee does not feel he or she has been fairly treated by the former employer.

Some small business owners believe they can be less cautious when giving verbal references than they would be in the case of supplying a written one. Not true! Any type of reference can be legally actionable. I have experienced past employees or their friends calling my company for a reference just to “test” what kind of reference a potential employer may hear about them.

While many courts are sympathetic to the need of employers to give references, others are not. Courts have been known to judge for an employee because a reference given, while good, was not good enough!

The safest policy is to offer no references at all beyond confirming dates of employment, position held, and rate of pay earned. This may not seem right, but your responsibility is to keep your business running smoothly and out of court so that your current employees can enjoy a healthy working environment. As an employer, your firm will be held responsible for actionable references made by any supervisor at your company.

I have argued with managers who believe a policy of no references is unfair to a good employee—but I didn’t write the laws and I don’t run the courts. As long as politicians, judges, and juries see employment references as one more avenue for taking a shot at small businesses, you need to be cautious.

About Bob Adams

Bob Adams is a Harvard MBA serial entrepreneur. He has started over a dozen businesses including one that he launched with $1500 and sold for $40 million. He has written 17 books and created 52 online courses for entrepreneurs. Bob also founded BusinessTown, the go-to learning platform for starting and running a business.