Donna Reynolds: Don't mislead with what you do or do not divulge in a reference

Donna Reynolds is a partner with CCW Business Lawyers

This is perhaps a result of an increasingly risk-adverse approach to providing references where employers or ex-employers will either provide a reference in the form of written confirmation of job title and start dates only – or not provide one at all for fear of potential claims brought by the subject of the reference or its recipient.

A satisfactory reference from a current or former employer for a prospective employee is a common request but there is no obligation to provide a reference or provide one in the terms sought. That is unless there is a contractual obligation within a settlement agreement or contract of employment or a legal obligation to provide specified information to a Job Seekers Plus Authorised Officer or in relation to a person carrying out certain prescribed functions for an organisation authorised by the Financial Conduct Authority.

Where employers choose or are required to provide a reference, there is a well-established duty to take reasonable care to ensure the information it contains is true, accurate and fair and doesn’t give a misleading impression. However, thanks to a recent High Court case involving an independent financial adviser carrying out prescribed functions authorised by the FCA, there is something interesting to say about providing references.

In Hincks v Sense Network Ltd [2018] EWHC (QB) Mr Hincks brought a claim against his former employer for negligent misrepresentation and a contractual claim of acting in bad faith, on the basis that the reference provided by the ‘umbrella company’ Sense Networks Ltd (which he had been working for) had given a misleading impression of him.

During 2013 and 2014, Mr Hincks was subject to close supervision by Sense due to various issues with his work. Although he came through this period of supervision successfully, he completed an investment for a client which he was not authorised to do and which did not comply with internal processes. An investigatory meeting led to a termination by Sense of his FCA authority to transact business.

Mr Hincks contended that the reference provided by Sense following his termination had given a misleading impression of him because the negative opinions it contained were based on a sham investigation with a pre-determined outcome. For example, it included the finding of the investigation that “he had knowingly and deliberately circumvented the agreed process”. Mr Hincks argued a reasonable employer must, if including negative opinion in a reference, satisfy itself that the investigation was both procedurally and substantively fair.

Dismissing his claim, the High Court was very clear; unless there was a “red flag” prompting further inquiry, there was no duty to examine the procedural fairness of the underlying investigation. The standard of care to be exercised by a reasonable reference writer should be expressed in broad terms and while the nature of the duty depended on the surrounding facts, common features of the duty were:

to conduct an objective and rigorous appraisal of facts and opinion, particularly negative opinion, whether those facts and opinions emerge from earlier investigations or otherwise;

to take reasonable care to be satisfied that the facts set out in the reference are accurate and true and that, where an opinion is expressed, there is a proper and legitimate basis for the opinion;

where an opinion is derived from an earlier investigation, to take reasonable care in considering and reviewing the underlying material so that the reference writer is able to understand the basis for the opinion and be satisfied that there is a proper and legitimate basis for the opinion; and

to take reasonable care to ensure that the reference is fair, in the sense of not being misleading either by reason of what is not included or by implication, nuance or innuendo.

Further enquiry was only necessary where, for example, there were obvious errors in material gathered during, or produced from, the underlying investigation or information came to light causing the reference writer to doubt the reliability or integrity of the facts or opinions in the underlying investigation.

This case may help to contribute to an increase in the number of refused reference requests, but where employers are in any doubt as to what it means to take reasonable care, it provides useful guidance in meeting that duty.

Donna Reynolds is a partner with CCW Business Lawyers