By Howard Levitt

One of my more difficult client-management tasks is convincing employer clients to provide positive references. Now, the courts are clear that there is no obligation to provide any reference at all. But there are consequences, including legal ones, for failing to do so.

In fact, many contingency lawyers representing employees provide a series of onerous, offensive and even grotesque demands in initial demand letters while slipping a request for a reference somewhere in the middle. By now, every employer reading this will have received such a missive. They want the employer sufficiently offended that they pay that letter little attention and lump the reference request in with the balance in their pile marked “G” for garbage. It is the employee’s lawyer’s hope that the request is overlooked and no reference provided. In fact, I have had many employer clients confide in me, when the issue arises months later at examination for discovery or mediation, that they had not even noticed that a reference was requested.

The failure to provide a requested reference has three potential legal consequences. First, courts will conclude that the absence of such a reference made the employee’s plight more difficult so will explicitly increase the severance awarded to account for that. That is because the main purpose of severance, as the law makes clear, is to provide the employee with sufficient time to secure alternate employment. And it is easier to find such employment when armed with a positive reference.
Second, the failure to provide a deserved letter of reference can be viewed by the court “as an act of bad faith” as one judge put it and, usually with other employer conduct, can lead a court to award additional bad faith damages on top of damages for wrongful dismissal.

The last instance where failure to provide a reference arises is when an employer links a reference to an overall severance settlement.

As the Ontario Court of Appeal put it: “There is no legal obligation on an employer to provide a letter of reference. However, a threat to withhold a letter of reference by the employer as part of a negotiation/litigation strategy may, in some situations, provide valuable support for an employee’s subsequent claim that a release was unconscionable and should not be enforced.”

In other words, using a reference as a bargaining chip to extract a settlement and to get a release signed could convince a court to set that release aside and permit the employee to sue for additional wrongful dismissal damages. In addition, essentially extorting an employee by saying that no reference, or a negative one, will be provided if they do not accept the employer’s offer will so offend the court as to lead to bad faith or even punitive damages against that employer.

Most Canadian employers these days do provide references, at least in name, but they are actually letters confirming employment or “tombstone references,” simply stating the employee’s position and length of service with nary a compliment strewn in. This is not much better than no reference at all and might suggest to a future employer that there is nothing good that could be said about that employee.

In addition to the legal liability, refusing to provide a positive reference is unfair to an employee who worked hard for that employer and wishes to have the advantage of that good work for the next chapter of their career. After all, if an employee is going to receive the same, or no, reference, regardless of how hard they work, it is not only unfair but the employer forfeits the opportunity to use references as a tool of motivation and reward.

So why are employers so apparently short-sighted? Actually, they are not. Simply misinformed. Stemming from U.S. law, many employers believe that it is legally dangerous to provide references because the employee could sue you if you say anything bad and, rather than only provide references to productive, deserving employees, they find it easier to provide none at all.

But reference law in Canada is very different from the U.S. Even if you say something terrible about an employee and it is entirely untrue, you cannot be sued for defamation unless you did not believe it to be true and stated it maliciously, a very tough test for any employee to meet. The reason for this is that what is called “qualified privilege” extends to employment references as the courts want employers, as a matter of public policy, to be free to provide references. The only other potential source of legal liability is if the reference is provided entirely carelessly, i.e. negligently. But that is easy to deal with. Unless an employer knows that employee’s work well, they should speak to those who do, and take notes, before providing references.

My mother’s old adage, “If you have nothing good to say, say nothing at all,” thus needs an update for the law of references. Instead it should read, “If you have nothing good to say, say something bad.”