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Loose Lips Sink Ships

Barry Shanoff

January 1, 2006

3 Min Read
Loose Lips Sink Ships

IT'S A MOMENT THAT MAKES MANY waste company executives anxious: When a caller identifies himself as working for a firm where one of your former employees has applied for a job, what do you say? Does it depend on who the former worker is? Does your company have a strict policy for all such inquiries?

As if those situations were not already stressful enough, a New Jersey appeals court has set a precedent that is likely to make employers even more worried about saying anything at all about a former employee [Singer v. Beach Trading Co., 876 A.2d 875 (2005)].

Like many states, New Jersey has no settled law on whether an employer has an affirmative duty to respond to a reference check. Employers have long considered being tight-lipped as a good way to avoid trouble.

The appeals court ruling doesn't change a former employer's obligations. However, what is worrisome about the decision is that now a New Jersey employer who is merely negligent in giving false information about a former employee's work history — while keeping totally mum about personality, punctuality and performance matters — can be held liable if the employee suffers an economic loss as a result of the statements.

In the New Jersey case, the plaintiff, Marsha Singer, had been working for less than two weeks as a customer service representative at Englewood, N.J.-based HRK Industries, a photographic equipment supplier, when she was abruptly fired because she had allegedly misrepresented her previous job on her resume. Dissatisfied with her management skills and judgment, her manager had called Singer's former employer, Greenbrook, N.J.-based Beach Trading, to verify the accuracy of her experience.

However, the manager didn't directly ask about Singer's employment history, and he lied about his identity. He pretended to be a customer when he spoke with several individuals at Beach who allegedly provided erroneous information about her job title and responsibilities. Singer claimed she was fired based on what her manager learned in the phone calls.

The court rejected her defamation claim and her claim of wrongful interference with her relationship with HRK. However, the court ruled that she should be allowed the chance to prove negligent misrepresentation by her former employers at Beach.

To win a claim of negligent misrepresentation, a plaintiff must show several things: that the inquiring party clearly identified his or her purpose in asking for the information; that the person who responded did so voluntarily and acted within the scope of his or her employment, giving “unreasonably” inaccurate information; that the recipient relied on the accuracy of the information provided to take an adverse employment action against the employee; and that the employee suffered quantifiable damages from the misrepresentation.

Several states have enacted laws that protect employers from defamation lawsuits when they provide information in good faith, but even in these jurisdictions, plaintiffs may attempt to show that the release of information was not in good faith.

The appeals court decision will reverberate outside New Jersey because employers everywhere will want to avoid the possibility of a similar ruling in their home states. The conventional wisdom has been that employers are on safe ground when they provide information on an individual's dates of employment, job title and duties.

However, if employers needed justification not to give out even that much information, the Singer decision has provided it.

Barry Shanoff Legal Editor Rockville, Md.

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