legislation: Reference Litigation Serves As Warning To Former Employers

Barry Shanoff

September 1, 1997

6 Min Read
legislation: Reference Litigation Serves As Warning To Former Employers

Information on employment applicants is a valuable but scarce commodity in a world of heretoday, gone-tomorrow workers. Legislatures in at least 20 states - California, Florida, Illinois, Maryland, Minnesota, Ohio and Texas, for example - have passed laws that provide former employers with partial immunity from defamation lawsuits arising from employee references.

This consensus, however, has not resulted in better and more informative employment references.

Instead, the trend among employers is to respond to reference requests by giving less information or none at all. The reason for such widespread hesitancy is a growing number of court decisions that have held employers liable for the information provided in employment references.

Earlier this year, the U.S. Supreme Court, in Robinson v. Shell Oil Co., ruled that employment references can lead to tort liability and liability under federal employment discrimination laws. In this case, Charles Robinson alleged that a negative reference from his ex-employer, Houston-based Shell Oil Co., cost him a position with a prospective employer.

According to Robinson, the bad reference was Shell's retaliation for his complaint to the Equal Employment Opportunity Commission about a discriminatory discharge. But, a federal appeals court held this claim was not actionable under the Civil Rights Act because the alleged retaliatory acts occurred after Robinson had left Shell's employment.

The Supreme Court then reversed and held that Robinson stated a viable retaliation claim under Title VII. The high court noted that its ruling would prevent employers from wholesale retaliations against former employers who alleged discriminatory discharges.

The decision, however, did not answer the question of whether an employer can avoid liability under Title VII for retaliation by providing truthful references. As a result, an employee seemingly could press a claim against a former employer that provides a negative, but accurate, reference on the theory that the employer chose to provide a reference - rather than remain silent - for retaliatory reasons.

Moreover, employers who give substantial information on some former employees may face a retaliation charge from a former employee for whom the employer has given little or no information. Thus, Shell provides employers with yet another reason to avoid providing job references.

The Shell decision comes on the heels of a ruling earlier this year by the California Supreme Court involving a favorable employment reference that omitted important information: A student who had alleged sexual molestation by a teacher was allowed to sue the teacher's previous employer, which had provided the student's school with a reference that failed to disclose complaints against the teacher for improper touching.

The California ruling does not require employers to provide references, but rather forces them to disclose all key information whenever they chose to provide a reference. Both decisions illustrate that even truthful references can produce litigation and liability.

As claims based on truthful, but incomplete, references mount, defamation suits continue to be filed against employers despite statutory and common law immunity. These suits require employers to prove that their statements were truthful or that they were made in good faith and without malice. Though employers often prevail in these cases, the steep costs of defending such claims are reason enough to avoid providing detailed references.

A Florida appeals court reinstated an employee's defamation claim arising from an employment reference despite the safe-harbor statute in effect. The employee alleged that his former employer illegally informed a prospective employer that he had been discharged for violating a company policy and would not be considered for rehire "under any circumstances."

The employee alleged that the ex-employer's statements were false because he had not violated any policy and because Florida's Department of Labor and Employment Security had awarded him unemployment benefits after finding he was not guilty of misconduct. The court also found that, under the circumstances, the employee had stated a claim for intentional interference with an advantageous business relationship.

Many employers have attempted to minimize the risk of providing references by requiring employees to sign releases that force the employee/accuser to pay the company's legal fees and costs in defending an unsuccessful employment reference claim.

Nevertheless, until protection for reference-providing employers is more secure, it is not likely that much, if any, information will be passed along.

Acquisition Allied Waste Industries Inc., Scottsdale, Ariz., has announced that the San Diego County Board of Supervisors approved Allied to assume ownership and operation of the solid waste disposal system for San Diego County, Calif. This transaction will allow the company to internalize 1,200 tons per day of volumes currently collected in its San Diego operations and will substantially increase its presence in the Southern California market. Allied will pay approximately $160 million in cash consideration and assume responsibility for approximately $24 million in future capital expenditures.

Eastern Environmental Services Inc., Mt. Laurel, N.J., has completed its acquisition of the Ruben Smith Carting Co. in Atlantic City, N.J. It also has signed definitive purchase agreements to acquire five collection companies in New York City and a collection company in Miami. The combined companies have annual revenues of approximately $20.1 million.

American Disposal Services Inc., Burr Ridge, Ill., has acquired 10 waste management companies located in New England, Missouri, Indiana, Ohio and Pennsylvania, bringing to 5`1 the company's total acquisitions since January 1993. The acquisitions were purchased using a combination of cash and stock.

Awards The American Forest & Paper Association has awarded its eight annual Best Paper Recycling Program Awards. Winners include: Manitowac County (Wis.) Materials Recovery Facility; Charleston County (S.C.) Department of Solid Waste/Recycling; Granger Recycling Center, Lansing, Mich.; Northwestern University, Ill.; Tree Musketeers, El Segundo, Calif.; and Rhode Island Resource Recovery Corp.

The California Integrated Waste Management Board, Sacramento, Calif., has presented the Walt Disney Co. with a "Waste Reduction Award Program of the Year" plaque. In 1996, the company recycled 80,000 tons of waste, saving $528,000 in disposal costs.

Contract Global Recycling Technologies Inc., Stoughton, Mass., has been awarded a contract by the Massachusetts Division of Operational Services for the recycling of spent mercury-bearing fluorescent lamps. The contract is available to all Massachusetts agencies, authorities and municipalities for one year with up to four option years.

Loans The California Integrated Waste Management Board, Sacramento, Calif., has approved $2,221,134 in loans to Evergreen Glass, Stockton; MBA Polymers, Richmond; and Vision Recycling, Almeada County.

New Facility Allison Transmission announces the opening of its new customer training facility in Indianapolis, Ind. The 13,000-square-foot facility offers courses on basic maintenance to more in-depth classes that cover hydraulic and electronic controls of the World Transmissions.

Re-Opening Med/Waste Inc., Opa Loca, Fla., has announced that its South Carolina waste incineration facility which suffered fire damage has been granted permission to reopen and resume normal operations by the S.C. Dept. of Health and Environmental Control.

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