Employers may be liable for providing negligent references on behalf of former employees
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Spring v Guardian Assurance[1995] 2AC 296.
The facts:
Mr. Spring had recently been dismissed from his job as sales director and office manager for a life insurance company, Guardian Assurance. He proceeded to apply for employment with various other companies, upon which they duly requested character references from his former employer.
The written reference provided in each case was overwhelmingly negative, suggesting among other things that Mr. Spring was “a man of little or no integrity and could not be regarded as honest”. Unsurprisingly, he was not offered any of the positions.
Mr. Spring sued in negligence, claiming damages to compensate the economic loss suffered due to his inability to find work.
What the court decided
The House of Lords held, by majority, that his former employer was liable in negligence. Mr. Spring was entitled to an award of damages to compensate him for his lost potential earnings.
The Court was willing to find that employers generally owe a duty of care to their former staff and, where an employer elects to provide a character reference, they must do so with due care and skill.
Notable quotes from the judgment:
Lord Goff:
“… [W]hen the employer provides a reference to a third party in respect of his employee, he does so not only for the assistance of the third party, but also, for what it is worth, for the assistance of the employee. Indeed, nowadays it must often be very difficult for an employee to obtain fresh employment without the benefit of a reference from his present or a previous employer.”
“… [W]hen such a reference is provided by an employer, it is plain that the employee relies upon him to exercise due skill and care in the preparation of the reference before making it available to the third party.”
“… [T]he central requirement is that reasonable care and skill should be exercised by the employer in ensuring the accuracy of any facts which either (1) are communicated to the recipient of the reference from which he may form an adverse opinion of the employee, or (2) are the basis of an adverse opinion expressed by the employer himself about the employee.”
Take-away message:
Executives may be able to sue their former employers for providing an unduly bad character reference, where that reference is given negligently and the employee suffers economic loss as a result.
Not all negative references will be considered negligent, however, and if an employer’s opinion is reasonable and supported by facts, an action in negligence will be unsuccessful.
While this case is UK authority, and therefore not binding in Australia, it is likely to be given significant weight by Australian courts. The decision was followed by Harper J in the Victorian Supreme Court in Wade v State of Victoria [1999], although it remains to be seen whether other senior courts will follow suit.
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