REFERENCE CHECKS
Useful Screening Tool or Liability Trap?

Why is it so difficult to get an honest reference for a candidate these days?

A rigorous screening process for prospective paid and volunteer staff members generally includes reference checks. While the results of reference checks can be invaluable, the process can also be frustrating for the person performing the checks. The seeds of this frustration are planted in two increasingly common practices:

• Some employers refuse to provide references for former employees, outside a standard confirmation of the applicant’s name and dates of employment.
• Other employers provide positive referrals as a means of getting rid of poor performers. This practice may result from the fear that an employer risks liability when giving an unfavorable report about a former employee.

Both of these practices contribute to the unfortunate reality that poor performers and even potentially dangerous employees are often re-circulated among unsuspecting prospective employers. Your agency may well have such a policy — and it is also likely that your agency has suffered from having too little information about prospective employees.

Could my organization be liable for giving references — positive or negative?

Liability can result from a number of reference-giving practices — including giving a favorable report on an employee who poses a known danger. An organization relying on such a reference might allege negligent referral or negligent failure to warn if they are harmed by a former employee of your organization.

For example, in a widely-reported case involving Allstate Insurance, the company provided a letter of recommendation for Paul Calden, indicating that he was released following a corporate restructuring process. Calden was actually fired by Allstate for bringing a gun to work. Allstate’s letter of recommendation was among the items considered when Fireman’s Fund Insurance Company later hired Calden. Some time later, Calden shot five co-workers, killing three.

Today, to discourage the practice of giving false-positive references, twenty-five states have laws in place which afford some protection to employers that provide honest assessments when providing references. A growing practice among employers, particularly in those states where there is no legislative protection for reference-giving, is to request that applicants sign a written waiver as part of the job application process which releases their former employer from liability for providing information about their previous employment. Such releases are legally enforceable, and can protect the previous employer from claims of defamation. Therefore, a safe practice, even in states where protective legislation exists, is to only release information about a former employee with written authorization from that employee, and to limit statements to those which can be factually supported in the personnel file of the former employee.

Nevertheless, your agency must tread carefully to avoid potential liability for defamation when you provide information about former employees. A claimant alleging defamation — including written defamation (libel) or spoken defamation (slander) — must generally prove that

(1) the communication was defamatory (defined as language, spoken or written, that tends to lower an individual in the esteem of any substantial and respectable group);

(2) the communication was made in reckless disregard of the truth or with the knowledge of its falsity; and

(3) that injury resulted.

The best way to insulate your agency from potential liability for defamation is to limit statements about a former employee to those that can be supported in the employee’s written files. For example, informing a prospective employer that "Mary was occasionally tardy" would be inappropriate unless Mary’s file contained information supporting this statement.

It is critical to specifically designate through your organization’s policies who has the authority to give references. Any supervisor or others who are authorized to provide references should receive training about the risks of negligent references and safe practices in reference giving.

Is there any way to minimize potential liability in giving references?

Nonprofits concerned about possible missteps in giving or receiving references should consider adopting a formal policy governing the organization’s commitment to check references for prospective employees and to provide written references for former staff.

A policy on checking references. The first step in implementing your policy on checking references begins when you give advance notice to prospective staff of your intent to incorporate reference checks in your screening and hiring process. Your application form should include a statement concerning your reference check policy (and background check policy, if appropriate). Furthermore, you should make the satisfactory completion of reference checks a condition of employment. The application form should also indicate that any false or misleading statements on the application or the withholding of information will be grounds for the rejection of the applicant or termination if the dishonesty is discovered after the employee has been hired. Tips for effectively checking references include:

• Use a script asking the same questions of all applicants for a particular position.
• Make your managerial or supervisory position clear to the former employer and give a brief description of the position you are filling.
• Ask only position-related questions, including questions about past job performance. Questions about personal characteristics should be asked only if they are relevant to the position responsibilities or conditions.
• Refrain from asking leading questions or those that can be answered by a simple yes or no.
• Obtain waivers. Have every candidate sign a waiver granting the employer permission to contact previous employers and other personal references.
• Always check more than one reference. Checking only one reference may be considered negligent.
• Use the reference checking process to verify employment history, and always listen carefully to the tone of the person providing the reference.

A commitment to provide references. As a condition of employment, require that all employees agree to cooperate in implementing the agency’s referral policy and complete a reference information form. The form should contain a "hold harmless provision," which expressly permits the release of the form to any prospective employer.

Consolidating the interviewing and reference check process and training those involved. Hiring managers in some nonprofits routinely delegate reference checking to a subordinate. This practice is generally unwise. The interviewing and reference checking processes at an organization should be centralized so that only those persons trained in conducting interviews and reference checks should be engaged in these activities. In most cases this should be the direct supervisor of the new employee.

Some nonprofits use a Reference Form instead of providing oral references for past employees as a means of reducing potential liability. A Reference Form includes an objective, verifiable assessment of the employee’s performance over a two- to three-year period. Also important is a summary of positions held, dates of employment, and last salary. In addition, include a statement about the employee’s reason for leaving the agency and space for the employee to indicate if he or she disagrees with the facts or opinions expressed in the document.

The statement should be signed by a senior manager as well as the employee. The Reference Form should be presented with your letter accepting the employee’s resignation or confirming his or her dismissal, and should be included with other information routinely provided to departing employees. From a practical standpoint, the use of a Reference Form eliminates the need to track down former employees and obtain their permission to provide references on a case by case basis.

What information should be verified in a reference check?

If professional designations or credentials are required for a position, it is well worth the time involved to double-check degrees, certifications, and licenses noted by applicants for professional positions. Sadly, a significant percentage of job seekers falsify their professional credentials. The discovery of any false statements about credentials constitutes grounds for rejecting an applicant or terminating an employee. The employment application should include a statement that applicants falsifying information on the job application will be subject to rejection or dismissal.

In addition to verifying academic credentials and other certifications, it is very important to check more than one reference. In a recent case involving the McDonald’s Corporation, the company faced liability after an incident involving the molestation of a customer by an employee. As it turned out, the company had only checked one reference on the worker, a practice increasingly considered negligent. The preferred practice is to check a minimum of three professional, volunteer or educational references.

What additional resources are available on the topic of reference checking?

• The Nonprofit Risk Management Center’s Staff Screening Tool Kit: Building a Strong Foundation Through Careful Staffing ($30 plus $5 shipping) offers more extensive information on the use of reference checks in a comprehensive screening process.
• The Center also provides a wide range of consulting services at reasonable, hourly rates in addition to specialized workshops for nonprofit audiences.

To order the publication listed above, or for more information about the programs, services, and publications of the Nonprofit Risk Management Center, visit our web site at http://www.nonprofitrisk.org or contact us at (202) 785-3891 or via e-mail at info@nonprofitrisk.org.