Hidden dangers in references

Michael Cox was looking forward to the new job.

After 17 years with Sun Alliance in Britain selling insurance, he had taken the plunge and signed on the dotted line with rivals Hambro Guardian.

It was after the contract was signed that the trouble started. Cox's boss-to-be, Brian Cosgrove, sought a verbal reference over the phone from Sun Alliance.

Cosgrove's scribbles make damning reading: "Very concerned with relationship with tied agents - little too close (inducements passed hands?) ... got to the point where he was suspended! Very long + drawn out hard to prove anything. Out-of-court settlement to allow him to resign. Doubts about honesty ... "

In fact, Cox had resigned from Sun Alliance, with compensation and an agreed reference, before an internal investigation had finished its work.

Legally, nothing could be pinned on him.

A reluctant Cox was encouraged to resign from Hambro, and ended up taking a junior job elsewhere.

He was devastated at the turn of events, and as well as struggling to make ends meet, suffered a nervous breakdown.

He also sued Sun Alliance for breach of duty of care and won: in April, the company's appeal was thrown out.

The judge described the allegations of bribery as baseless, and said the "implications of these remarks was as serious as it could be".

There is no equivalent case in New Zealand. But several similar courtroom stoushes overseas have led to such employer wariness that written references appear to be extinct in our big corporates and verbal references permitted only with a long list of rules.

References are "a two-edged sword for employers", says Auckland lawyer Andrew Caisley.

Employers rely on a free flow of information about staffers to get a good picture of the talent pool; a growing grievance industry makes them nervous to be part of it.

"Employers carry a much greater liability", says Caisley. "Departing employees are far more likely to sue employers."

Nothing in law obligates an employer to write a reference for a departing staffer. And no one writes a bad reference - or includes one in their applications. "I view written references with suspicion," says Yvonne Treen, the general manager of human resources for the 8500-staff company Spotless Services.

All the companies contacted by Career say they give out the standard bland letter of service describing dates of tenure and job outline to any employee who asks.

But not one of the companies contacted bothers with written references.

Among those which have either scrapped written references or ban them on company letterhead are Progressive Enterprises, Fisher & Paykel, Spotless Services, Lion Nathan, the New Zealand police and Vodafone.

Some, like Fletcher Challenge Forests and Ford, allow managers to write personal references for staff - but not on company letterhead.

As soon as a reference is given, whether verbal or written, or by an individual or a company, an obligation to be fair and accurate comes into play, says Caisley.

But a piece of positive fiction masquerading as a reference in order to offload someone quietly is worryingly common practice, says University of Auckland associate professor of law Bill Hodge.

"Lord knows, I've written good references myself at university to get rid of people," he admits. "But it is becoming less common."

Get the facts wrong accidentally or on purpose in a reference - or write a misleadingly positive one - and face a writ from a company or former staffer for negligent mis-statement or making a false declaration.

Accusation of defamation is another risk, says Caisley, but the employee would have to prove damage or loss.

Action can also be taken under the Privacy Act if information released, whether with or without permission, is inaccurate or misleading.

But it's not just bosses who can be in the firing line over references. If an employee submits a reference or application form to a potential boss knowing it is incorrect, then the law allows swift dismissal.

Two similar cases in New Zealand law, one in 1978 and the other in 1990, saw two university-educated people - one a much younger Mike Treen, now a political activist - claim no tertiary education at all in their applications to work in vehicle assembly.

Both were sacked when their employers found out they had spent long periods at university, says Hodge.

"It wasn't about competence, it was about [employer] trust and confidence."

Treen's case was sparked by the discovery that his application included a good reference from a drainlaying company for which he had never worked.

What about qualified privilege? That's the right to claim immunity from defamation action when giving an honest opinion on someone to another person who has a legitimate interest in hearing it.

The advent of the Privacy Act in 1993 has changed all that, says Hodge, as it overrides common law and as a defence has been much weakened.

However, Hodge says he is disappointed that written references have fallen so far out of favour - "I still think it is a valuable tool."

"The message is that it's still appropriate for a good employer to give references. But there is no obligation. Just make sure that you get your facts right."