Business owners and supervisors are often asked to give references about former employees. Few businesses may be aware, however, that they can open themselves up to lawsuits when they provide any type of subjective information about a former employee.
Employees can sue former employers for defamation if they believe that the employer has said untrue things about their abilities or job performance, causing a prospective employer to not offer a job. The risk of a lawsuit is greater if the employee has filed a discrimination suit against the former employer, because anything negative the employer says about the employee to a prospective employer may be considered retaliation against the employee for filing the original discrimination suit.
To complicate matters further, businesses may also be held liable for failing to reveal the misdeeds of former employees if the employer provides only favorable or incomplete references about a former employee.
In a recent case, the courts held a school district liable when it gave a glowing review of a former principal and neglected to tell the hiring school district that there were allegations that the principal had molested a young boy. The principal was caught molesting another student in his new place of employment. The second school district successfully sued the first district for giving a negligent referral.
To avoid the risks involved in giving references, businesses should create a policy stating that it will not give subjective information about any former employee. Under such a policy, the company only verifies the titles of former employees and their dates of employment. But make sure the policy is strictly followed and that no one attempts to speak even “off the record.”
Those companies who wish to provide more detailed references about former employees can reduce their risk of being sued by requiring all employees to sign a statement that they will not sue the company because of job references. These forms should be signed by all employees when they are hired. Although some states require all employees to sign such releases, Pennsylvania law does not require it.
In addition, no existing Pennsylvania law provides protection to employers who give job references. These “good faith” laws do exist in 26 other states and offer varying degrees of protection to employers who release truthful references about former employees.
A case for mandatory arbitration clauses
Businesses that require employees to arbitrate employment disputes can avoid expensive litigation and runaway jury verdicts. Moreover, consider these benefits: Arbitration is confidential, arbitrated cases are not a matter of public record like lawsuits, and arbitrations typically move more quickly to resolution than lawsuits.
An agreement to arbitrate is enforceable under the Federal Arbitration Act, provided that it is in writing and is irrevocable as to pending disputes. The courts scrutinize the provisions of arbitration agreements for overall fairness and preservation of fundamental due process rights. Provisions that should be in any arbitration agreement include:
1. A description of the claims that are within the scope of the agreement
2. A procedure for initiating and notifying the parties of the arbitration demand
3. A provision for selecting the arbitrator(s)
4. Mandatory informal mediation as a prerequisite to arbitration
5. Procedures for conducting the hearing and pre-hearing discovery
6. Allocation of costs
7. A statement that an arbitration agreement does not enhance or diminish the at-will nature of employment
8. A choice of which laws will be applied (usually the laws of the place of employment)
9. A confidentiality requirement regarding the arbitration and its final outcome
10. A provision reserving the right of the employer to prospectively terminate or modify the arbitration agreement
11. A provision that determines where the arbitration will take place.
Legal Affairs is compiled by the attorneys of Eckert Seamans Cherin & Mellott LLC, a national law firm headquartered in Pittsburgh.
