Two major ethical challenges concerning the giving and getting of reference information:
Do you reveal relevant negative information in view of the possibility of being sued by a former employee who is denied a job as a result?
Do you diligently seek relevant information concerning the qualifications, work habits and character of job applicants?
What are the ethical implications of providing or withholding substantive reference information in order to avoid the possibility of being sued?
Who are the stakeholders?
- Former employee/job applicant
- Former employer
- Prospective employer
- People who will be affected by employee’s performance
What ethical principles are involved?
- Trustworthiness – obligations to:
- demonstrate integrity by “walking the talk” (assuring consistency between stated values and actions) and
- convey the truth by avoiding all forms of falsehood, incomplete or out of context information that is misleading and, in certain circumstances, to be candid and forthright in revealing relevant information
- Respect – obligation to balance the privacy interests of the employee against the interests of the prospective employer in having relevant information that will enable an intelligent decision.
- Responsibility – duty to prevent foreseeable harm to others, accountability for consequences of choice to disclose or not disclose, duty to be careful and accurate re: information conveyed.
- Fairness – duty to be fair to the employee, to the prospective employer and others who will be affected by the job applicant’s performance.
- Is it fair to employees who would benefit from a full and candid evaluation to refuse to give such information in order to avoid litigation from employees who would be properly adversely affected?
- Caring – duty to demonstrate proper regard for the well-being of the various stakeholders.
- Citizenship – obligation to obey the letter and spirit of the law and to be a good citizen seeing to protect and advance a good society
Applicable Laws
- Defamation laws
- Reference-Checking Privilege Statutes
- Fair Credit Reporting Act (FCRA)
- Retaliation laws
Defamation laws
An employer can be held civilly liable for oral (slander) or written (libel) defamatory statements that are false and injurious.
- Reference-checking laws – to combat almost universal organizational policies forbidding or restricting the disclosure of substantive information about former employees (especially negative information) for fear of litigation, a significant number of states have enacted laws protecting employers from liability for providing good-faith job references for former employees.
Liability for Failing to Reveal Negative Information
A school district was held liable where a 13-year-old girl was sexually molested by the vice-principal of her school who had been hired by her school district on the basis of an unreserved reference letter written by the defendant school district despite its knowledge of prior charges or complaints of sexual misconduct and impropriety that had been made against the vice-principal. The California Supreme Court ruled that although ordinarily a recommending employer should not be held accountable for failing to disclose negative information regarding a former employee, “liability may be imposed if . . . the recommendation letter amounts to an affirmative misrepresentation presenting a foreseeable and sustainable risk of physical harm to a prospective employer or third person.” Randi W. v. Muroc Joint Unified School District (Cal. Sup. Ct. 1997)
Obtaining Employee Reference Information: Fair Credit Reporting Act
The federal Fair Credit Reporting Act (FCRA) and state counterparts such as the California Consumer Credit Reporting Agencies Act (CCRAA) extend beyond traditional credit reports and impose strict requirements on employers seeking information on job applicants.
- Though the laws refer to the protection of “consumers” and have especially strict requirements when information is obtained from a “consumer reporting agency,” a prospective or former employee is considered a “consumer” and any outside contractor or agencies used to gather information or check references are usually considered “consumer reporting agencies.”
- The statutes apply not only to reports provided by outside companies but more broadly to any written, oral or other communication of any information bearing on a “consumer’s” (including job applicants) “credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living” used for the purpose of establishing a consumer’s eligibility for employment. This includes background and driving record checks performed by a third party on behalf of an employer.
- The federal statute is interpreted and enforced by the Federal Trade Commission (FTC)
An employer that uses or intends to use an outside company to check references or obtain any other background information on a job applicant or existing employee must inform job applicants in a clear or conspicuous written disclosure that background information may be sought and obtain a signed authorization from the applicant permitting the employer to obtain such “consumer reports.”
- The disclosure and authorization should be in a stand-alone document, not integrated into an employment application.
- In California, the applicant must be told he/she can receive a copy of the report at the same time as the employer.
If the employer is considering taking adverse action based on information from an outside agency, the applicant must be provided with a Pre-Adverse Action Disclosure that includes a copy of the background report received along with a description of consumer rights as summarized by the FTC.
If the employer makes a final decision to take adverse action based on the report from an outside agency, a written Adverse Action Notice must be provided to the individual regarding the decision along with detailed information regarding the agency and the content of the report.
Statutes often impose special limitations regarding information that is considered “old.” For example, California law prohibits employers from obtaining criminal conviction information regarding applicants that is more than seven years old (a similar limitation was removed from the FCRA).
Actual litigation against employers regarding job references is rare.
