Employers in Canada can say the most awful things about employees in a job reference, even if they are false, as long as they are stated in good faith

I am constantly sent marketing materials by PR firms or people who want to be quoted in my column. I generally quickly file them under G (G for garbage). But one just got lucky.

Allison & Taylor Inc., a U.S. job reference checking company, sent me a list of “scenarios that could inhibit a job offer.” I’ve picked out the most interesting items from their list. The questions are theirs, but the answers are quite different and entirely my own:

1. Are you protected by your old company’s policy to only confirm the dates and title of employment in a reference?

Most Canadian companies have what I refer to as “name, rank and serial number” reference policies, only providing positions and dates of service when called for a reference. This is based on the erroneous belief that they could be sued if they ever say anything pejorative about a former employee, or perhaps because as Canadians they are reflexively polite.

Such a policy is wrong-headed and deprives employers of one of the primary motivational tools in their armada. If an employee, desultory or sparkling, knows they will receive the same reference as everyone else, the employer loses a primary incentive to excellence.

Further, employers are protected legally from being sued for derogatory references. Unlike in the U.S., employers in Canada can say the most awful things about employees in a job reference, even if they are false, as long as they are stated in good faith — based on that employer’s honest belief — and not stated negligently. That is because there is a legal “qualified privilege” in reference checks against defamation. Therefore, employers who adopt blanket reference policies for fear of being sued are misguided.

But here is the rub. If an employer makes clear in a policy to all employees that it will only provide dates of employment and title, and then goes on to provide a negative reference, that employer risks being sued for breach of contract. Published company policies are contracts. If you as an employer have such a misguided policy, don’t put it in writing.

2. Is your boss badmouthing you?

If an employee is being slandered by an ex-employer outside of the legal protection of a job reference, qualified privilege will not apply and you can sue that former employer for defamation. Also, even if it is in a privileged job reference context, if you can show the employer’s reference was made maliciously or entirely negligently, that privilege is lost.

I generally find that when an employee approaches our office to take action against an employer who provides a negative reference, most employers will cease doing so when threatened with legal action, however weak that action might be in reality.

3. Do you have a separation agreement with your past employer dealing with references? Is it being honoured?

Smart employees, particularly after a bruising battle, will incorporate a positive reference requirement in their severance agreement.

However, if it’s not being honoured, you happily no longer have to establish malice, only that your agreement is not being complied with. You can then sue for breach of contract.

But how do you prove that? New prospective employers will not want to be mixed up in your fight and involving them might be fatal to your employment prospects there. Often, employees will find an employer friend to call on their behalf to obtain the reference, even taping the conversation, which is legal in Canada. Employers in that situation should therefore be cognizant of not only the contract, but the possibility their reference will be recorded and used against them.

Employers also face the issue of who exactly is bound by such a contract. The entire company should not be bound in the requirement to provide a positive reference as the employer cannot be responsible for everyone, particularly those who were out of the loop on the original litigation or settlement.

Employers, in agreeing to such a clause, should delineate precisely which management staff are affected.

4. Were you a victim of discrimination, sexual harassment or wrongful termination?

Predatory employers tend to remain so even following dismissal and pose a greater risk of providing pejorative references. This could be added as grounds for punitive or other damages in a wrongful dismissal case, as well as a reason to award more months of severance.

Some courts have found that denial of a deserved reference is cause for greater damages for wrongful dismissal. For the same reason, a reference that creates more difficulty in obtaining re-employment, if established, is a reason a court will increase the severance.