Legal duty in giving references

By Camus Wong, Solicitor, Litigation Department, Woo Kwan Lee & Lo

Article exclusively contributed by Woo Kwan Lee & Lo

The case of Spring v Guardian Assurance plc and others, which was heard in the UK, dealt with an ex-employee's claim in respect of an unfavourable reference provided by his former employers.

The Defendants were insurance companies and the Plaintiff had been a sales director and office manager for them. It was initially found that the Plaintiff had incorrectly sold a policy with the aim of generating substantial commission for himself at the client's expense. He was later dismissed, when it was discovered he was planning to join a rival firm, and he then attempted to set up a business selling insurance policies for another company, namely SA.

SA and the Defendants were members of "the Life Assurance and Unit Trust Regulatory Organisation" ("the Organisation"). Their code of conduct required SA to ask the Defendants to supply a reference for the Plaintiff. One was provided, describing him as a man of little or no integrity who could not be regarded as honest. The Plaintiff brought an action alleging three things: malicious falsehood; breach of an implied contractual term that the Defendants would prepare any reference using reasonable care and make it full, frank and truthful; and negligence in providing an unsatisfactory reference.

The trial judge held that the person who handled the matter for the Defendants had only acted through other servants or agents and honestly believed what they said about the Plaintiff in the reference. There was no evidence of malice on his part. As the Plaintiff was not a member of the Organisation, there was no implied contractual term between him and the Defendants for the provision of a reference. The trial judge therefore dismissed the first two claims but allowed the third, holding that the Defendants owed a duty of care in regard to the reference and had been negligent in preparing it. Both sides subsequently lodged appeals against the rulings.

The UK Court of Appeal upheld the trial judge's findings and stated that the major issue for the Defendants' appeal was whether a duty of care was owed in giving a reference or in obtaining information on which it was based.

The Court held that the giver of a reference owed no duty of care in the tort of negligence to the subject of the reference and that his duty was governed by and laid in the tort of defamation. Therefore, the only remedy available for an error or falsehood was an action in defamation, or for the associated tort of malicious falsehood, in which it would be necessary to prove malice. The Court also said that employers were under no legal duty to give a reference, though they were commonly thought to be under a moral and social duty to do so, if one was requested.

The Defendants' appeal was thus allowed and the Plaintiff then appealed to the House of Lords. They held that an employer has at least a moral obligation (not a legal one) to give a reference because the employee may stand little chance of getting another job without one. If prepared to provide one, the employer owes a duty of care in its preparation, having special knowledge of the employee's character, skill and diligence in the performance of his duties. When such a reference is provided, it is plain that the employee relies upon the exercise of due care in its preparation before making it available to a third party. The House of Lords therefore allowed the Plaintiff's appeal.

In summary, unless an employment contract has an express term about the provision of a reference, there is no general duty imposed on employers to provide one. Nevertheless, it is common practice for an employer to give a reference almost as a matter of course. The provision of such is expected of employers and is an accepted practice in the current employment market. If an employer declines to give a reference without good reason, it would damage the prospects of a former employee and might also affect the relationship with existing staff.

Since employers owe a duty of care when preparing references, they are advised to exercise reasonable skill and care to ensure the accuracy of the stated facts. In failing to do this, an employer would be liable for negligence and the employee might thereby suffered economic consequences, which would be clearly foreseeable in the case of a carelessly given reference.

Q&A on personal data in references
Q1 Is it a legal requirement for Hong Kong employers to give a reference letter?
A1 No. Unless an employment contract has an express term about the provision of a reference, there is no general duty imposed on employers to provide one. But, if the employer does agree to give a reference letter, it should be prepared with due care and not include potentially defamatory information.

Q2 What can I do if I consider there is inaccurate personal data in my reference letter?
A2 You can ask your ex-employer to correct the inaccurate data pursuant to section 22 of the Personal Data (Privacy) Ordinance ("the Ordinance"). If the ex-employer agrees there is an inaccuracy, he should make the necessary correction and supply you with an amended copy of the reference no more than 40 days after receiving the request. If the former employer does not accept there is an error or inaccuracy, he may refuse to comply with a request to correct. However, he must then issue a notification of refusal to comply with the data correction request and state the reasons under section 25 of the Ordinance.

Taken from Career Times 28 January 2005

(Last review date: 23 August 2013)

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