By Matthew M. Collins
Although there are some industries, such as healthcare, in which an employer may be legally obligated to disclose information regarding former employees, most businesses are under no such obligation. Nevertheless, many businesses respond to inquiries about former employees without giving it a second thought. Responding to such inquiries can result in lawsuits against your business. For a small or newly established business the costs and distractions caused by even one frivolous lawsuit can be devastating. For the reasons addressed in this article, in most situations it is in your business’ best interest to exercise the “right to remain silent/”
While laws vary from state to state, responding to inquiries about a former employee can result in claims such as defamation, negligent or intentional misrepresentation, retaliation and emotional distress. Further, it is not just the former employee who may raise claims, but also a new employer that relies upon information provided by your business. Here are five common mistakes made by businesses and the practical advice to avoid them.
Mistake #1. Assuming the truth is a defense.
A truthful statement may be a defense against some claims such as a former employee’s claim of defamation. However, truthfulness is not a defense against all claims. Under federal and many state anti-discrimination laws, providing negative information, refusing to provide positive information or informing a prospective employer about the former employee’s complaint(s) can form the basis for a retaliation claim, despite the truthfulness of that information. Even where the truth is a defense, the cost of successfully defending the claim can be substantial.
Mistake #2: Providing a positive reference when one is not justified.
Some businesses provide a positive reference when one is not justified in hopes of minimizing the potential for a terminated employee to be disgruntled and/or to bring a lawsuit. However, a new employer who relies upon your positive reference to their detriment could assert a claim for misrepresentation. Additionally, an unjustified positive reference can undermine your ability to defend potential wrongful termination claims brought by the former employee.
Mistake # 3: Providing a reference but failing to disclose negative information.
Although a business may not be legally obligated to respond to inquiries regarding a former employee, once it does respond, it is obligated to provide accurate information and may even be obligated to disclose negative information about the former employee. A breach of these obligations can result in a lawsuit by the new employer who relies upon inaccurate, incomplete and/or misleading information to its detriment.
Mistake #4: Responding emotionally or because it is the “right thing to do.”
Some business owners or managers respond to inquiries about former employees because they feel the “right thing to do” is warning prospective employers about a bad employee. Some may even respond because they are upset or angry at the former employee and want to “get even.” Although responding to inquiries may temporarily make the business owner or manager feel better, the reality is that this doesn’t benefit them. To the contrary, the response exposes the business to costly claims and litigation.
Mistake #5: Not knowing what your employees are saying.
Even if your business has policies in place to ensure proper responses to inquiries about former employees, you need to be sure your employees are following those policies. Many employees may think they know how to respond to such inquiries, but unless you have a standard policy and you take steps to ensure that your employees follow the policy, you run the risk that these employees may expose your business to possible lawsuits.
What Your Business Should Do . . . Some Practical Tips:
· Adopt (and follow) a policy to not respond to inquiries about former employees except to confirm dates of employment and position held.
· Employers in regulated industries such as healthcare should ensure that they understand when they are legally obligated to respond to inquiries and when they are permitted to remain silent.
· Do not allow ad hoc or “off the record” responses. If you provide information beyond dates of employment and positions held, be sure the response is accurate, complete, and can be substantiated. And be consistent – don’t say “no comment” regarding some employees but provide references for others.
· Do not respond emotionally. Have a pre-planned response that you can provide to a would-be employer.
· Educate your managers and employees on your policy and the risks of violating that policy. If you need additional muscle, remind employees that, in many cases, the former employee will sue the employer as well as the individual employee who provided the information.
About the Author:
Matthew M. Collins chairs the employment law group at Brach Eichler, a law firm based in Roseland, NJ. Contact him at email@example.com.