It is an unfortunate reality that, from time to time, employers will be required to layoff/terminate one or more employees, the direct by-product of which is requests from former employees for letters of reference.

Risky Business

Two inherent risks that employers face in providing post-employment letters of reference are (1) a former employer advancing a claim of defamation (where the employer provided a negative reference), and (2) a subsequent employer advancing a claim of negligent misrepresentation (where an inaccurate or incomplete reference was provided).

Having said this, the risks of defamation and negligent misrepresentation are usually outweighed by the risks associated with refusing to provide a letter of reference. The Supreme Court of Canada has indicated that refusing to provide a former employee with a reference following termination constitutes “bad faith” and “unfair dealings” in the manner of dismissal. This finding could support a damages claim in favour of the employee.

If you’re considering withholding a letter of reference as a bargaining chip to persuade an employee to accept a severance package, think again! Failing to provide a reference can make it harder for the former employee to secure alternative employment, thereby reducing the ability to mitigate their damages. This could result in the employer being on the hook for a (much) longer period of reasonable notice.

Given the above, it is often in an employer’s best interests to provide reference letters upon request. However, employers would be well-advised to develop policies around this practice (adherence to internal policies may stave off allegations of discrimination or bad faith).

Suggested Guidelines

What follows is a general guideline for employers when providing reference letters to former employees:

Standardized Letters vs. Descriptive Letters. “Standardized letters” (also known as “letters of employment”) provide factual information, such as start date, termination date, job title and duties, and responsibilities. This type of letter can be advantageous because it reduces the possibility of claims for defamation/negligent misrepresentation. On the other hand, however, the limited nature of these letters may hinder a former employee’s ability to find alternative employment, thereby lengthening the period of reasonable notice. Descriptive letters (or a typical “letter of reference”) provide qualitative information, including performance, leadership details, and employee initiative.
Consider who will draft/provide letters of reference. In some cases, it may be appropriate to delegate the drafting of reference letters to a certain department, such as Human Resources. The person drafting the letter should also be the point of contact for any follow-ups.
Clarify whether there are any parameters around your ability to provide/discuss a letter of reference. Limitations on an employer’s ability to provide a letter, or to answer questions related to same, should be confirmed with the former employee in advance. Ideally, an employer should obtain the former employee’s express consent to provide/discuss any letter of reference.
Information should be correct and accurate. Employers should ensure that reference letters are factually correct to avoid possible claims. If it is necessary to include any negative comments, have the letter reviewed by another person to evaluate whether those statements are fair.
Be consistent. Ensure internal policies around the provision of reference letters are applied consistently to all current and past employees.
Letters of reference for employees who have been terminated with cause. In this situation, it is generally a good idea to include only factual information, such as the former employee’s job title and description, job duties, responsibilities and dates of employment.
Is litigation an issue? Where litigation is involved (or where litigation is a concern), it may be a good idea to provide any letters of reference on a “without prejudice” basis.
Consider seeking legal counsel. If you aren’t sure whether to provide a reference letter, or if litigation is a concern, you should seek advice from your lawyer.

How Momentum Can Help

The lawyers at Momentum have experience in all aspects of Ontario employment law and can advise you whether it would be appropriate to provide a letter of reference, and what to include therein. If a current or former employee has requested a reference letter and you’re not sure how to proceed, please contact us for a free consultation.