Important Considerations About Reference Checks You Need to Know

Today’s employers face what appears to be a never-ending stream of legal compliance challenges as
they go about trying to hire the right candidates. Reference checks are one of the most effective tools that
can be used by employers to assess the suitability of candidates, however, many employers do not take
full advantage of this process because it can be time consuming and oftentimes yield only a little
worthwhile information.

Anyone that has conducted reference checks knows firsthand that most employers only provide an ex-
employee’s date of employment, position title and salary, where permitted by law, unless the prospective
employer has a signed release from the ex-employee granting permission for them to provide additional
information. Employers provide this minimal amount of information because they have been advised by
legal counsel that this is the most effective way to avoid legal liability from a number of legal concepts
which we will discuss later.

Adding to this challenge are a myriad of security issues such as terrorism, workplace violence, theft,
domestic violence, identify theft, etc. The nexus of these issues makes it increasingly difficult for
companies to achieve their primary goal of hiring the best possible person to fill a position.
With this as a backdrop, our intent is to help you to navigate the land mines in the hiring process and
provide advice on how to avoid incurring legal liability when conducting reference checks.
One of the most important legal concepts to understand about reference checks which many employers
do not have a good understanding of is ‘qualified privilege.’

32 states, based on our research, have passed job reference qualified privilege or immunity statutes.
These laws shield employers from lawsuits brought by an ex-employee as a result of providing
information about the person to a prospective employer. Under a protection of “qualified privilege,” an
employer’s statements about a former or current employee must be truthful, made in good faith, and
made for a legitimate purpose. It is important to note that employers cannot volunteer information about
former employees. The ultimate benefit and intent of these statutes is for all employers to be able to
obtain more complete information about applicants before hiring them, thus facilitating a more informed
hiring decision.

“But the qualified privilege is just that—qualified” according to Attorney Justin Kelton, Abrams Fensterman
LLP in the article, What Employers Need To Know About Defamation. Attorney Kelton added ”there are
exceptions to the privilege. For example, liability may arise where statements are published [stated] with
“actual malice, personal spite, ill will, culpable recklessness or negligence, or if the statements were so
vituperative in their character as to justify an inference of malice. Additionally, the tone of an employer’s
remarks can be relevant to the issue of malice.”

Additional legal concepts associated with employment reference checking include the following:
Defamation of Character

Communicating to a prospective employer information that is false and/or likely to negatively impact the
reputation of former employee.

Negligent Hiring

Failure by a prospective employer to adequately check references or to gather information relevant to the
hiring decision. If a prospective employer knew or should have known, based on a reasonable inquiry into
an applicant’s background, that a candidate was not suitable for the position and subsequently places a
dangerous or unqualified individual in a position where they can harm co-workers or third parties, the
employer can be held liable for the employee’s acts.

Negligent Referral

The act of failing to disclose certain types of information. Failing to provide negative information in
response to specific questions from one employer could be grounds for substituting or transferring liability
to the other employer.

“An employer who refuses to provide references may believe that this is the safest approach to take with
regard to reference checking. However, this approach is not risk-free. Employers may now be held liable
under an emerging legal theory of “Negligent Referral” by failing to disclose certain types of information.
Failing to provide negative information in response to specific questions could be grounds for substituting
or transferring a company’s liability to you as an individual. The legal argument could be easily made that
had you provided the negative information when asked, the company would not have hired the applicant.
This argument would be especially convincing if the information withheld is so negative that the applicant
would not have been hired had the other employer known the information.”

Reference checking is an essential part of thorough due diligence when hiring. It is very important for
employers to make a good faith attempt to contact multiple references. Obtaining multiple references is
important to be able to verify consistency among respondents as well as to demonstrate that you have
made reasonable efforts to confirm the validity of information provided to you by the candidate. If an
employer does not make reasonable inquiry about the person they hire, and the employee causes harm
to co-workers or third parties, the hiring employer can be found legally and financially responsible.
Exercising due diligence is the best protection against this legal exposure.

One of the safest approaches to deploy when you intend to conduct reference checking is to inform the
candidate that you plan to check references and to have them provide written consent granting you
permission. Be sure to have the consent form you use approved by legal counsel. It should be note that
this written consent should be requested separately from any ‘consent and authorization’ form used to get
consent to conduct a background check.

The person conducting the reference check should be:

  • very familiar with the duties of the job being filled,
  • the skills required to perform the duties, and
  • the personal qualities required to assure a good fit in the position.

Generally, this will be the supervisor of the available position or many companies restrict reference
checking to be conducted by HR personnel.

Some important factors to consider include:

Keith Rosser, Reed Screening shared in his article, ‘Employment Referencing: Best Practice Tips for
Employers,’ “Ensure the reference is authentic and not fabricated by the candidate. Do not use contact
information provided by the candidate, but instead identify official company email addresses or phone
numbers to confirm the identity of the referee, or by using instant referencing – which uses payroll and
open banking data to verify dates of employment and salary information. This can help prevent fraudulent

“Recently, there has been a spike in hiring fraud and so-called “reference houses”: legitimate-looking
websites with seemingly genuine email and telephone details, which exist to offer fake references in
exchange for money. It’s important that organizations develop their approach to tackling this problem by
running IP address checks of online references, auto lookups against known reference houses, and pre-
verified legitimate company addresses.

Former employers may not always be open to sharing details about a candidate’s performance due to
confidentiality agreements, which must be respected. In this case, it may be necessary to ask the
candidate to supply an alternative professional reference, or you may have to decide whether you want to
risk proceeding.

Avoid making assumptions or subjective judgements based solely on referee feedback. Remember that
referees may have their own biases or motivations. Take the information as one part of the decision-
making process, considering it alongside other factors, including employment history, credentials, and

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