References - useful guidance for employers
The question of references is still a thorny one for many employers. In a large proportion of the cases we deal with, references tend to be limited to the basic factual information (start date, end date, job title). This is often because employers don’t want to risk being sued for giving a poor reference (or one that’s excessively positive either!). However, the ‘bare facts’ approach doesn’t work in fields where fuller references are expected or required, such as in education, care work or other regulated environments. It is a popular misconception that “you can’t give a bad reference”. In fact, if you don’t give a bad reference when the situation merits one, particularly in a regulated environment, that can cause significant problems.
In the recent case of Hincks v Sense Network, the High Court was asked to consider a situation where a reference specifically mentioned findings from an investigatory process, yet that process had arguably been conducted unfairly. Was the reference negligent as a result? The judgment set out some very useful guidance for employers.
The case involved a regulated environment, because Mr Hincks’ role was to sell financial products. He was working for a company called CIFS as an independent financial advisor. CIFS didn’t have their own FCA authorisation, but were covered by an umbrella body called Sense Network. A transaction in 2014 was called into question from a regulatory point of view, and Sense Network requested Mr Hincks’ attendance at a meeting. He was not given any details of any charges or allegations prior to the meeting. After the meeting, Sense Network terminated Mr Hincks’ authorisation to act as an independent financial adviser. He was given a right of appeal, but his appeal was not upheld.
When Mr Hincks subsequently applied for roles elsewhere, the firms were required to take up references from Sense Network. Sense Network’s reference was written by the same person who had conducted the investigation meeting and made the decision to terminate the authorisation. It was a particularly negative reference and said (amongst other things) that “it was reasonable to conclude that he had knowingly and deliberately circumvented the agreed process.” Mr Hincks said that the reference had killed off his prospects of finding another job as an independent financial adviser.
Mr Hinks argued that the reference was negligent and that Sense Network should be required to compensate him. He raised a number of points about the fairness of the process, in particular that a proper investigation had not been carried out, he had not had an adequate opportunity to defend himself against the allegations, and the meeting had been carried out in a “harassing manner.” He argued that the reference had to be negligent if the person giving it had not satisfied themselves that the investigation had been carried out fairly.
The Court’s decision – and useful guidance for employers
The Court did not agree with Mr Hincks’ arguments, and said that if his case succeeded in establishing an obligation on writers of references to check the procedural fairness of investigations, it would cause problems for the whole system of the giving and receiving of references.
However, the Court took the opportunity to set out some key features of the duties that fall upon someone who is giving a reference:
“a) to conduct an objective and rigorous appraisal of facts and opinion, particularly negative opinion, whether those facts and opinions emerge from earlier investigations or otherwise;
b) to take reasonable care to be satisfied that the facts set out in the reference are accurate and true and that, where an opinion is expressed, there is a proper and legitimate basis for the opinion;
c) where an opinion is derived from an earlier investigation, to take reasonable care in considering and reviewing the underlying material so that the reference writer is able to understand the basis for the opinion and be satisfied that there is a proper and legitimate basis for the opinion; and
d) to take reasonable care to ensure that the reference is fair, by not being misleading either by reason of what is not included or by implication, nuance or innuendo.”
The Court also noted that if there had been a “red flag” that justified further examination of the fairness of the process, that might have put an obligation on the referee to look into things further. However, no such “red flag” had existed in Mr Hincks’ case.
The guidance given by the Court in this case will prove very useful to employers who are required to provide ‘full’ references. My usual rule of thumb is “fair, factual and not misleading”, which is still a useful summary, but the Hincks case breaks that down and expands upon what that means in practice.
By employment law standards it does seem that Mr Hincks was not treated fairly, but of course he wasn’t an employee of Sense Network, and therefore different standards applied, which I think was a highly relevant factor in the Court’s decision.
If you are in doubt regarding a reference, it is always best to take advice. We have years of experience at advising on issues around references and are happy to help.
If you would like to talk through a situation you are dealing with, or if you need advice on any aspect of employment law, please contact any member of the Pure Employment Law team (01243 836840 or firstname.lastname@example.org).