Employment Reference Guidance for Businesses
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Employment Reference Guidance for Businesses
It remains increasingly common for businesses to take up references for employees who they are proposing to employ.
For prospective employers, understandably, this can be an effective safeguard against employing somebody whose attendance, conduct or performance history makes them unsuitable. For every business, avoiding problems down the line with staff will be high on the agenda.
For the employer asked to give the reference, who rarely has anything to gain, providing a reference triggers a host of legal obligations. The employer providing the reference owes duties to the recipient, but also to the employee who may stand to lose out on a job.
Here, we’ll cover the following:
Do employers have to give a reference?
- References in the financial services sector
- References in the Education sector
- References in the Health care sector
Legal obligations when giving a reference
Discrimination and Whistleblowing considerations
Data protection considerations
How to deal with disciplinary issues in a reference
The consequences of getting it wrong.
Do employers have to give a reference?
By and large, it is open to an employer to refuse to provide any reference at all. Experience shows that this is sometimes the safest course of action where difficulties have arisen and in reality it will leave potential employers to draw their own conclusions. At the same time, there is a natural temptation to provide a reference to help difficult employees to ‘move on’ and employers must be aware of their wider obligations – including the duties not to discriminate, victimise, or expose employees to ‘detriments’ as a result of whistleblowing.
In some regulated sectors, however, the taking up and giving of employment references is mandatory.
Financial Services
In the financial services sector, the Senior Managers and Certification Regime (SM&CR) and the Senior Management Arrangements, Systems and Controls Sourcebook (SYSC) require most FCA-regulated firms to take up references whenever they are considering:
- appointing or permitting somebody to carry out an FCA or PRA controlled function;
- issuing a certificate to somebody under the certification regime; or
- appointing somebody as a board director
As such, it will often be necessary to request regulatory references when promoting an employee, even if they have been employed in the same firm for several years already.
Firms must request references from current and past employers covering a six-year period – including from firms registered overseas where the individual worked at a UK branch.
There is a corresponding obligation on FCA-regulated firms to provide references within six weeks of receipt of a request.
Settlement Agreements may not be used to undermine a firm’s obligations under the regulatory reference rules.
The firm providing the reference must follow the template in the SYSC (or give all of the same information required by the template) including details of:
- all regulated functions and all roles held
- any disciplinary action taken in relation to the individual conduct requirements, or in relation to matters concerning fitness and propriety
- any other information relevant to the recipient firm’s assessment of the candidate’s fitness and propriety, including any disciplinary allegations or serious misconduct.
The firm supplying the reference should, as a minimum, reflect back over a 6-year period.
The SYSC requires firms providing a reference to ensure that it is true, accurate, fair, and based on documented facts – but only after taking reasonable care as to any factual content and opinions expressed.
Difficulties commonly arise where there have been disciplinary or performance concerns. The SYSC advises that the firm should allow the individual to comment on any proven allegations and how the firm should reflect them in any regulatory references.
The SYSC also makes clear that the regulatory reference rules are subject to an overriding obligation to disclose all information of which the firm is aware that it reasonably considers to be relevant to the recipient firm’s assessment of whether the individual is fit and proper. It also makes clear that firms are entitled to give information which goes further than what the template regulatory reference requires.
The regulatory reference rules also impose a positive obligation on firms to update references where new matters come to light, even after the individual has left.
Education
In the public sector, the Staffing and employment advice for schools (published by the DFE) and the Keeping Children Safe in Education (‘KCSIE’)– Statutory Guidance for Schools and Colleges provide legal guidance to schools and colleges on Safer Recruitment.
The Independent Schools Inspectorate requires independent schools to follow the KCSIE Statutory Guidance as well.
Schools and colleges are encouraged to request references before the interview stage – to enable any discrepancies to be discussed at interview.
A reference should be obtained from the candidate’s current or most recent employer, and it must have been completed by a senior person with appropriate authority.
The school/college providing the reference should address it to the recipient directly (rather than give open references) and send it in a timely manner.
The Principal/Headteacher providing the reference should state whether they are satisfied with the candidate’s suitability to work with children.
For maintained schools, the reference should state whether the candidate has been the subject of capability procedures and if so, provide details.
References should include facts (not opinions) of any substantiated safeguarding concerns.
The reference may also report any allegations of a safeguarding nature – either which meet the harm threshold, or which are low-level but repeated – unless they are false, malicious or unfounded. A recent case decided by the High Court recalls that only details of proven safeguarding allegations should be included in references in order to avoid committing defamation.
Recipients should verify references with the Headteacher/Principal directly and follow up on any references which are vague or provide insufficient information.
Whilst the guidance discourages schools and colleges from offering Settlement Agreements where the individual is subject to an allegation that they pose a risk to children, in all cases it forbids schools/colleges from committing to a reference which would undermine their obligation to report suitability or safeguarding concerns to future employers.
Healthcare
In CQC-regulated settings, Regulation 19 of the Health and Social Care Act (Regulated Activities) Regulations 2014 requires employers to obtain the applicant’s full career history, satisfactory verification as to why their previous employment ended (if it involved working with children or vulnerable adults), and a satisfactory written explanation of any gaps in employment.
The same Regulations encourage the use of references for these purposes, as do many local authority safeguarding teams. Indeed, an employer who fails to take up appropriate references could well be failing in its safeguarding responsibilities.
For NHS doctors, the position is stricter. Doctors must provide references which cover the previous 3 years of employment. Where a doctor has worked for the same organisation, two references will be required. Where a doctor has worked for more than one hospital in the last three years, one reference is required from each hospital.
Legal Obligations when giving references
First and foremost, any employer who gives a reference owes a duty both to the recipient and to the employee (the subject of the reference) to take reasonable care in providing it.
The author must ensure that the substance of the reference is true, fair and accurate and does not create a misleading impression.
The duty includes verifying the information on which the reference is based, but it does not require the author to be full and comprehensive.
This duty applies to written references and oral references alike – whether given in a formal capacity, or in a personal capacity.
Experience shows that there is no such thing as an “off the record” chat.
Businesses need to be especially careful when dealing with telephone enquiries about current or past employees – not least because employers are more likely to be caught unaware and there may be a dispute about what was said.
Implied obligations to give references
There can be an implied obligation to provide a reference where the type of employment is such that an employee cannot move from one role to another without a reference. This was traditionally the case with professional vocations such as lawyers, accountants and healthcare professionals.
Nowadays, these types of cases are thought to be rare and the duty to provide a reference can often be overcome by having professionally drafted contracts of employment and policies.
Discrimination and whistleblowing
Employers must be cautious not to discriminate when giving a reference or, even, if declining to give a reference
Risks can commonly arise when an employer is asked to express a view upon the performance or attendance of an employee who is disabled, has suffered with pregnancy-related illness, or has taken statutory leave. Employers who express unduly negative views – or who decline to give references in order to avoid making any comment at all – may be at risk of discrimination claims.
You may be at risk of victimisation claims if the substance of the reference you provide – or, even, your refusal to provide any reference at all – is influenced in any way by the employee having made or supported a complaint of discrimination.
Likewise, providing a negative reference – or declining to provide a reference – can expose businesses to whistleblowing claims if the employer is motivated by the employee having made a protected disclosure.
Similarly, a prospective employer might also be at risk of claims if they withdraw a job offer based on a reference which they knew to be unlawful.
Data protection
When giving references employers should check that their Privacy Notices cater for the types of information that may be supplied in a reference.
Employers should ideally gain the employee’s consent before providing a reference, especially if it will involve imparting sensitive personal data such as attendance records.
Disciplinary concerns
In most cases, businesses providing references can refer freely to allegations which resulted in formal warnings or a dismissal. Where the employee has appealed, it is best practice to state that in the reference, together with the outcome of the appeal.
Particular care is needed for unresolved disciplinary matters – such as where an employee resigns during a disciplinary process, or where new matters come to light after the employee leaves. In such circumstances it is prudent to take professional advice before providing a reference in order to minimise the risk of claims by the employee or the recipient.
The consequences of getting it wrong
Most employers will make offers of employment conditional upon the receipt of satisfactory references. A negative reference can therefore easily lead to job offers being withdrawn, normally without the employee having any recourse whatsoever against the prospective employer who turned against them.
Dissatisfied employees will often look to their current or former employer (who wrote the reference) for recompense via the civil courts. In cases where the employee is currently employed and the new job would represent a promotion, the claim would normally be worth the difference in earnings between the current job and potential job. In cases where the employee had already left employment, the claim might be worth the full amount of the new salary – which could easily run into 6-figure sums. In all cases, to succeed in gaining compensation the disappointed employee would need to have taken ‘reasonable steps’ to minimise their loss – by applying for and accepting other available jobs.
If the reference (or your refusal to provide a reference) is discriminatory or amounts to retaliation for whistleblowing, the disappointed employee may bring a claim in the Employment Tribunal. As well as financial loss, they would stand to recover further compensation for what is referred to as ‘Injured Feelings’.
On the other end of the scale, an employer who gives a reference which is unduly optimistic about the employee could be exposed to a risk of claims by the recipient who takes on the employee, in good faith. For this reason, many employers use disclaimers in references to exclude or limit their liability in the event that the reference proves to contain incorrect information or express negligent opinions. Whilst disclaimers can be effective as against the recipient, they will rarely protect a business from claims by an employee.
Are references disclosable?
Provided the reference is given in confidence, it will not be susceptible to discovery via a Data Subject Access Request. Those giving and receiving references may rely upon a stated exemption in Schedule 2 to the Data Protection Act 2018.
References would however be subject to the usual duties of disclosure in litigation. For example, if an employee threatens to sue for negligence, it would normally be necessary to supply a copy of the reference as part of the ‘pre-action’ stages.
Contact us
The Employment Team at Rix & Kay is experienced in advising on all aspects of employment references – ranging from advising on the content of references, right through to defending businesses before the High Court about references they have given about current or past employees.
For Employment Law support, contact Elaine Abbs on t. 01732 441 125 or e. ElaineAbbs@rixandkay.co.uk for more information.
