Furnishing Employee References - Some Cautions to the Practitioner

A sole practitioner from a neighboring town calls to ask for references for a former employee of your firm. You thought the employee was a poor worker and showed little interest in advancement. What should you tell this CPA? CPAs who want to cooperate with other firms and companies but still protect themselves from liability should know something about the rights of their former employees and about defamation law in their jurisdictions. An earlier Practitioners Forum article (Reference Checking: A Critical Part of the Hiring Process, by Robert Half, JofA, Aug88, pages 130-134) stressed the need for thorough reference investigations when firms make hiring decisions. It pointed out that today's litigious environment makes employers nervous about offering any comments about former employees, especially negative ones. This article looks at references from the supply side, offering suggestions for dealing with external inquiries about former employees. DEFAMATION The common law torts of libel and slander make up defamation law. Slander refers to oral communications while libel applies to written statements. CPAs must exercise caution to avoid both forms of defamation when responding to a request for information on a former employee. Any statements a court might hold to be false and injurious to a former staff member's relationship with a present or future employer could expose a practitioner to a potentially costly defamation claim. Although the burden of proof rests with the plaintiff, it is important that any statements made be defensible as fact. Responding to inquiries--even in strict confidence--does not ensure protection if statements cannot be verified. PRIVILEGE TO DEFAME Under some circumstances, otherwise defamatory statements are protected under an absolute or qualified privilege. For example, if the former employee requests a letter or reference and waives access in writing to its content, the legal theory of consent may afford some protection from liability. In a New Mexico case, an applicant consented to an inquiry about her job qualifications. Her former boss told the potential employer that she lacked professional competence, which lost her the job. In denying her claim, the court ruled that the privilege conferred by consent is absolute. Of course, protected statements must be made within the scope of the consent. If the court doesn't find consent, a qualified privilege still may exist. Statements that otherwise would be considered defamatory may be protected under a number of womewhat vague criteria. One requirement is that the person making the statement act in good faith and have a legitimate interest in the information. The information must be relevant to the hiring decision and can't be shared with anyone who lacks a legitimate interest. In this context even a false statement may be immune, provided it is made in the belief it is true and without negligence in investigating its truthfulness. Comments on the applicant's character and integrity are normally acceptable for accounting positions because of their importance to the hiring decision. Nevertheless, the use of excessive or improper language can defeat the qualified privilege. While an employer can't control what the recipient does with a reference letter, he or she is responsible for avoiding negligent dissemination. The employer therefore should control access to company files and take common-sense precautions to limit access elsewhere. …