It is, generally speaking, true that the employer has no legal obligation to provide a reference letter to a past employee. A company may freely decline to provide a reference letter with impunity. This proposition is qualified by other considerations mentioned below.

Tombstone Letters

Employees often encounter an employer who refuses to provide them with a reference letter. In such instances, employees should note that it is often foolish for their company to refuse to provide them with a reference letter. Frequently, an employer will wish only to provide what is referred to as a “tombstone letter”, which states nothing more than “John Smith worked here from January 1, 2016, to August 1, 2017, in the position of Marketing Manager”. This misses the point. Such action by the employer will only add more weight to a potential claim. The longer the employee remains unemployed, the more punch a termination claim may have. Finding a new position as soon as possible following termination, on the converse, will limit the damage claim, should the issue be unsettled.

The Right to be Wrong

An employer also has the right of “fair comment”. That is, as long as the reference they provide for an employee is not fabricated or maliciously made, the company may make statements which may not be completely accurate, as long as the company is sincere in its belief. Unfortunately, in many cases, as long as a reference has been made honestly, even if factually wrong, an employee will have no claim even if he or she has a serious disagreement with the reference.

If the employer should cross the line and provide a knowingly false reference, the employee in question could sue that employer for defamation. The resulting damage claim could be quite severe, including not only compensatory damages for injury to reputation but also punitive damages to punish the company for such conduct. If this statement resulted in the loss of a job opportunity, there could also be a lost income claim.

The Bargain for a Reference

In cases where an employee has been terminated, it is a good idea for that employee to bargain for a complimentary reference letter to be provided as part of an overall settlement agreement with the employer. Any related minutes of settlement should also state that the company will provide verbal references in a manner consistent with the written reference letter.

Such agreements put the reference letter into a new context. That letter is now part of a larger contractual agreement. The employer no longer has the right of fair comment or the right to be honestly wrong. If the employer departs from the agreed reference, it can be sued, not for defamation, but for breach of contract. That could potentially be a large claim. Assume, for example, a new job offer has been made which is contingent upon a satisfactory reference. The employer’s failure to comply with this contractual commitment may expose them to a claim for considerable lost income, plus a claim for aggravated damages.[1]

No Strings Attached

An employer’s agreement to provide a reference letter should never be tied to payment of a statutory minimum severance payment or other employment standards. Stating, for example, that “we will give you a reference letter only if you drop your claim for {vacation pay, earned overtime, earned bonus, earned salary, statutory severance}” will not only negate any agreement reached but will also expose the company to bad faith damages.

Similarly, it has been noted by the Ontario Court of Appeal, that a company’s threat to withhold a positive reference letter could be used to support an argument that the settlement reached was inherently unfair.

Serious Misconduct

Employees should note that there may be different considerations at play when the company legitimately believes that a former employee has committed serious wrongdoings. In such cases, the employer may, for good reason, be reluctant to provide an overall positive reference letter for fear that a new employer may seek a remedy against it. Although such claims are rare, both parties may then agree to use a tombstone letter, aided by a statement that such a letter is consistent with its business practice of refusing to provide reference letters.

Looking Outside

It should not be forgotten that the employer is not the sole source of the reference. Often business contacts who have done business with the employee will be able to volunteer positive views to assist the employee in his or her job search. These references are often considered more valuable than that of the employer as they are untainted and unbiased.

Employers’ View

Companies should understand the complexities of this issue. The law is not intuitive. Employers can avoid defamation claims and minimize severance claims by obtaining proper advice on this issue.

What Does All This Mean to The Employee?

When an employee faces termination, there will be a need for a positive reference letter to assist them in their transition to new employment. Employees should be aware of the intricacies of this issue, their related rights and their employers’ obligations.

Get Advice Before You Act

If you have questions about this issue or any employment question, contact the offices of Toronto employment lawyers Grosman Gale Fletcher Hopkins. We regularly advise workplace parties on a wide range of legal workplace issues. Contact us online or by phone at 416-364-9599 to schedule a consultation.

[1] In defamation cases, damages are “at-large” and usually need not be specifically proven. In a breach of contract case, this is not so and the damage claim must be proven.