Reference letters: The good, the bad and the tombstone (The Lawyer’s Daily)

(This article originally appeared in the July 25, 2017 issue of The Lawyer’s Daily.)

Sometimes there are clear-cut instances where an employee has committed misconduct that gives an employer just cause to dismiss the employee. However, obvious instances of just cause are rare indeed. The overwhelming majority of dismissals are without cause and many raise an eternal debate for employers: whether or not to provide the dismissed employee with a reference letter.

In my experience, most employers grapple with this issue because of three main concerns:

  1. They have been taught that it is generally a bad idea to provide a positive reference letter to a departing employee;
  2. The employee is leaving on bad terms and there is concern that providing a reference will undermine the employer’s defence in litigation if the employee sues; and/or
  3. They don’t want the departing employee’s future employer coming back if the employee does not work out, and alleging that the reference was somehow inaccurate.

The debate as to whether or not to provide a reference is clouded by a great deal of misunderstanding as to the options available to employers and the advantages to providing a reference letter of some kind. Providing a reference letter can be beneficial and even reduce an employer’s potential severance liability. If an employee is dismissed without cause and does not have a specific, defined contractual or statutory severance entitlement amount, then the common law will most likely apply to the assessment of the person’s severance entitlement.

The common law uses a set of factors to assess the employee’s reasonable notice entitlement. However, the common law also places on the employee a duty to take reasonable steps to find comparable employment to mitigate his or her damages. If the employee earns money over the reasonable notice period (assuming that a settlement has not been reached or the court has not rendered judgment), then the employer is entitled to deduct those earnings from any damages it owes the dismissed employee. This is where a reference letter can be very useful.

It is prudent for an employer to do whatever it reasonably can to assist the employee to find a new job because this can reduce the potential damages owed to the employee as a result of the dismissal.

Once the employer decides that it is reasonable to provide a letter, the employer then has three main options in terms of the type of letter to provide:

  1. A positive letter;
  2. A more factual, less “glowing” letter which confirms the employee’s role, start and end dates with the company, number of subordinates or a description of the reporting relationships and some of the main duties the person performed (this is often called a “letter of work record”); or
  3. A letter simply confirming the employee’s role, and start and end dates (this is often colloquially referred to as a “tombstone letter”).

So, reducing severance liability is a great potential advantage to providing a reference letter. However, from a non-monetary aspect, providing a reference can also engender goodwill with the departing employee and/or help smooth over what may have been an uncomfortable departure.

Additionally, the courts tend to take a positive view of an employer’s provision of a reference or a letter of work record to departing employees, which can assist the company in the courtroom if faced with litigation.

Employers must use prudence when deciding what to say about an employee, of course. For example:

  • Watch saying unduly glowing things about the employee that are subjective and prone to personal opinion (“the employee was the best district manager you could ever find”) since this may result in an allegation that the former employer misrepresented the employee’s skills, qualifications, personality, character, etc. to a potential new employer;
  • Also, be cautious not to breach the departing employee’s privacy rights if asked to provide comments or follow up to a reference letter. It is always important not to make disparaging or embarrassing comments about the person as this could result in a legal claim.

That said, there is usually little concern with providing a positive reference letter to a departing employee who is leaving on positive terms. Employers can take some comfort from the Ontario Superior Court’s April 2017 decision in Papp v. Stokes Economic Consulting Inc.2017 ONSC 2357, in which the court dismissed claims of defamation, intentional infliction of mental suffering, and punitive, exemplary or aggravated damages for the employer’s bad reference about Papp particularly given that the reference was substantially true and not made with malice.

If things are not ending overly well, then a letter of work record can be a crisp, accurate and effective way to highlight the employee’s experience using simple factual details.

All in all, much of the concern to provide a reference letter is unwarranted. Typically the benefits of proving a reference letter outweigh the potential downsides.

Want to hear more about the pros and cons of reference letters? Watch Simon’s video, Reference Letters: Yay or Nay? below!

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