References and the Defamation Trap


Employers who are asked to give a reference for a former, or soon to be former, employee generally follow one of five policies: (1) the "tell all" policy, in which the employer openly discusses all issues pertaining to the employee, good and bad; (2) the "if you don't have something nice to say, don't say anything at all" policy in which the employer provides letters of recommendation for good employees, but refuses to give references for bad employees; (3) The "no comment" policy, where the employer provides no information at all; (4) the "name, rank, and serial number" policy whereby the employer confirms employment, and provides the date of hire, date of termination, and position held; and (5) the "I don't know what the heck we do" policy in which the employer does not have a specific policy, and the scope of the response to a request for a reference varies depending upon who is seeking the information, who is providing it, whether the person providing the information has had his or her first cup of coffee, and other material factors.

From a potential liability perspective, the safest approach is a "no comment" policy or the "name, rank, and serial number" policy. It is unlikely that employers who adopt such policies risk any liability exposure. Indeed, the New Mexico Court of Appeals recently acknowledged that employers have a right to refuse to give any information at all, without fear of liability. Davis v. The Board of County Commissioners of Dona Ana County, 1999 N.M.C.A. 110 (9/7/99).

The obvious problem with a referral that provides no information is that a completely undermines the purpose and value of a referral. Honest and accurate referrals advance society's interest in promoting a productive and qualified work force. A neutral reference denies a good employee the benefits of the employee's positive work history. By the same token, a neutral referral unfairly advantages poor employees who, aware that nothing negative will be said about them when they seek their next job, have less incentive to do good work. An employee's work history is his or her business goodwill. Neutral employment references completely devalue this asset.

Widespread use of neutral referrals adversely affects the field of education, just like it does other employment areas. How many school administrators have bitten their tongue and made no comment regarding a poor teacher, with the hopes that the prospective school district will hire the teacher. The passing of poor teachers from one school district to another, when viewed from a global prospective is certainly troubling, as there will always be one group of children who will suffer at the hands of a lousy teacher who, because no one will speak forthrightly about his or her qualifications, manages to find yet another teaching position.

From a systemic viewpoint, widespread use of a neutral reference policy may also serve to subject employers to liability under a negligent hiring theory. Employers, particularly school districts because they are in the business of working with children, have a duty to reasonably investigate prospective employees. A school district that accepts a neutral referral, and takes no further action to investigate a prospective employee's background and history, may find itself subject to a negligent hiring lawsuit in the event that the employee has a history of sexual abuse, physical abuse, or similar misconduct.

A neutral comment policy may also indirectly lead to increased unemployment benefits costs to the employer. Unemployment benefits terminate upon re-employment of the employee. Neutral references, which do not highlight a good employee's positive work history, may make it more difficult for the employee to obtain re-employment, and ultimately result in increased unemployment obligations of the employer.

Counter-weighing against the societal benefits of full and complete disclosure of an employee's work history is the fear of a defamation suit. Since the 1980's lawyers have routinely advised their employer clients to keep their mouths closed when asked to give an employment reference. An employer who has faced the time and expense of defending a defamation suit, as well as the potential liability exposure, may likely be inclined to look out for its own best interests and feel little obligation to shoulder society's interests. The safest way to avoid a defamation suit is, of course, to say nothing at all.

The risk of defamation liability has, however, been somewhat overstated. In the context of school employees, there are but a handful (if that many) of cases in which school districts have been found liable for defamation. Cf. True v. Ladner, 513 A.2d 257 (Me. 1986) (a superintendent was found to have defamed a former teacher with his statements that the teacher "was more concerned with living up to the terms in his contract rather than going the extra mile" and that he "did not feel [the teacher] turned the students on", where the teacher had positive evaluations and the superintendent had never personally observed the teacher in the classroom) with Zerr v. Johnson, 894 F.Supp. 372 (D. Colo. 1995) (rejecting a defamation suit against a school principal based on his statement that the former teacher's teaching skills were very poor); Manguso v. Oceanside Unified School District, 153 Cal. App. 3d 574, 200 Cal. Rptr. 535 (1984) (rejecting a claim of defamation based upon a letter of recommendation that was written several years prior, on the grounds that the teacher failed to show that the administrator acted with malice); Hett v. Ploetz, 121 NW 2d 270 (1963) (same).

Under New Mexico law, to establish a claim of defamation, the former employee must prove each of the following:

a. The employer published the communication (publication involves communicating the statement to someone other than the employee);

b. The communication contained a statement of fact;

c. The communication was concerning the employee;

d. The statement of fact was false;

e. The communication was defamatory (which is defined as a wrongful and unprivileged injury to a person's reputation);

f. The persons receiving the communication understood it to be defamatory;

g. The defendant knew that the communication was false, negligently failed to recognize that it was false, or acted with malice;

h. The communication proximately caused actual injury to the employee's reputation; and

i. The employer abused its privilege to publish the communication (the issue of privilege will be addressed more thoroughly in the next section of this paper).

N.M. UJI 13-102.

The truth is an absolute defense to a claim of defamation. If the information given by the employer is accurate and truthful, the employer cannot be said to have defamed the employee. For purposes of a defamation claim, insignificant or immaterial errors do not render a truthful statement false. N.M. UJI 10-1013.

Further, defamation applies only to statements of fact. A statement of opinion cannot give rise to a finding of defamation. N.M. UJI 13-1004. However, an opinion which implies that it is based upon the existence of undisclosed fact may be deemed to be a statement of fact. Id. In determining whether a statement is a statement of fact or a statement of opinion, a jury will consider the entirety of the communication in the context in which it was made, and whether reasonable persons would likely understand the communication to be one of opinion or fact. Thus, an employer's statement along the lines of "in my opinion, the employee lacks judgment" would not support a claim of defamation, whereas a statement "in my opinion, the employee dipped into the petty cash fund, and shouldn't have had his female students sitting on his lap" or the like, if untrue, would support a defamation claim.

An employer may be liable for a false statement whether made in writing or verbally. Many employers feel a greater freedom to speak openly when responding to verbal, rather than written requests. This is a dangerous practice. Employees may have friends or an investigative firm call for references, fictiously representing themselves as prospective employers, in an effort to gather evidence to support a defamation claim.

Defamation is not the only potential legal theory that the full disclosure employer faces. If the employer reveals information relating to the employee's personal life, that has no bearing on his or her employment, the employer may be subjected to a suit for invasion of privacy. For example, the employer has no business of discussing, in response to a request for referral or otherwise, matters concerning an employee's sexual history, family, health, etc., unless there is some relationship between those issues and the employee's employment.

If the employer's objective is to harm the former employee or to advance its own interest (such as making a good employee an endangered servant by scaring away all other prospective employers, the employer may find itself subject to an interference with prospective contract claim.) "One who intentionally and improperly interferes with another's prospective contractual relation is subject to liability to the other for the pecuniary harm resulting from loss of the benefit of the relation, whether the interference consists of (a) inducing or otherwise causing a third person not to enter into or continue the prospective relation or (b) preventing the other from acquiring or continuing the prospective relation." M&M Rental Tools, Inc. v. Milchem, Inc., 94 N.M. 449, 612 P.2d 241 (Ct. App. 1980), citing Restatement (2nd) of Torts § 766B.

Further, if a negative referral is in retaliation for an employee's participation in union activities, filing of a discrimination claim with the New Mexico Human Rights Division or the EEOC, or for engaging in similar protected conduct, the employer may be liable for retaliatory discharge. See e.g. Robinson v. Shell Oil Co., 519 U.S. 337, 117 S. Ct. 843 (1997) (recognizing a retaliatory discharge claim under Title VII against a former employer for giving a negative reference in response to the employee having filed a race discrimination suit).

For employees from whom the employers anticipates a lawsuit, the safest response is "no comment." In this situation, the employer's interest in avoiding litigation may outweigh the society's interest in full and accurate disclosure. First, the employer already knows that the employee is litigious. Second, a negative referral, even if honest, may likely lead to a retaliation claim that may be hard to defend. Third, a positive referral may likely be used against the employer in court if the employer contends that he employee was terminated, not promoted, etc. because of poor work performance. A common trick for attorneys who represent an outgoing employee client is to have the employee ask for a letter of reference. The unwitting employer, thinking that a position reference may get the employee out of its hair, provides a glowing referral. The employee then uses the employer's own words to dispute any contention that he or she was a poor work performer.

On the plus side for public school districts, the New Mexico Tort Claims Act provides another defense to tort claims for defamation, invasion of privacy, tortious interference with prospective contract, and tort claims for wrongful discharge. § 41-4-4 NMSA 1978. The Tort Claims Act creates sovereign immunity for New Mexico governmental entities and government employees, unless the claim falls into one of eight enumerated exceptions. None of the exceptions would appear to extend to any of the above-mentioned claims. See § 41-4-5 through 41-4-12 NMSA 1978. The New Mexico courts, however, have consistently construed the tort claims immunity very narrowly, and with some creative lawyering, there may be limited circumstances in which a former public employee could squeeze a claim into one of the exceptions.

B. The "Qualified Privilege."

In 1995, the New Mexico Legislature joined the majority of jurisdictions in recognizing the societal benefit that stems from open disclosure of an employee's work history. The New Mexico Legislature created a statutory privilege that protects employers who make good faith referrals.

When requested to provide a reference on a former or current employee, an employer acting in good faith is immune from liability for comments about the former employees job performance. The immunity shall not apply when the referenced information supplied was knowingly false or deliberately misleading, was rendered with a malicious purpose or violated an civil rights of the former employee.

§ 50-12-1 NMSA 1978.

The statutory qualified privilege codifies the law of defamation, which has always recognized that a communication in furtherance of a public or private duty, if made in good faith, is privileged. Zuniga v. Sears, Roebuck & Co., 100 NM 414, 671 P.2d 662 (Ct. App.), cert. denied 100 NM 439, 671 P.2d 1150 (1983) (the employer had a qualified privileged when it reported that a former employee had committed theft, where the employer had a good faith reason to believe the truthfulness of its statement).

The determination of whether the employer acted good faith is dependent on the particular facts and circumstances. The law does not, however, impose an absolute requirement that the employer be correct in its belief. Zuniga, 100 N.M. 414.

For the employer to have a good faith belief that the employee has engaged in an act of misconduct, the employer must have adequately investigated the matter. Kestenbaum v. Pennzoil, Co., 108 NM 20, 766 P.2d 280 (1988) (upholding a jury verdict against an employer where the employer failed to implement proper investigative procedures before firing an employee for sexual misconduct, mismanagement, and illegal activities). The adequacy of the investigation turns on the circumstances. If the reference includes particularly harmful information, such as a teacher engaged in sexual improprieties with a student, the school administrator should conduct a very thorough investigation, which would likely include interviewing witnesses, obtaining access to police investigative information (if possible), and giving the employee the full and fair opportunity to tell his or her side of the story.

The qualified privilege extends only to "comments about the former employee's job performance". Accordingly, there is no qualified privilege for statements regarding extraneous matters, such as the employee's family, sexual misconduct, drug and alcohol use, etc., to the extent that such issues are unrelated to the employee's job performance.

The qualified privilege also applies only to references that are made in response to a request. There is no privilege for the employer who voluntarily initiates communications to prospective employers.

The privilege does not distinguish between written and verbal communications, and applies to both.

The privilege does not apply to statements that are false or deliberately misleading, statements rendered with a malicious purpose, or statements which violate the former employee's civil rights (presumably this latter provision relates to retaliatory comments in violation of Title VII ,the New Mexico Human Rights Act, and similar statutory provisions).

C. Negligent Hiring, Negligent References.

Any employee whose history suggests a likelihood that he or she is likely to cause injury in the future creates potential problems both at the time of hire and at the time of discharge. An employer who hires an employee with injurious propensities may be liable under a negligent hiring claim if, because of the employment relationship, the employee is put into a position where he or she can harm others. At the outgoing end, if a negligently given referral allows a dangerous employee to obtain employment with another employer in a position that affords him the opportunity to harm others, the referring employer may be liable under a negligent representation theory.

Negligent hiring and negligent misrepresentation claims almost always arise in the context of an employee who commits sexual or physically assaults. This is of particular concern to school districts, as the employment of a dangerous individual puts that individual in a position to harm children.

Although the vast majority of negligent hiring and negligent misrepresentation claims involve sexual and physical assaults, such a claim may also lie where an employer knows, or has reason to know, that an employee is likely to engage in other misconduct (i.e. a negligent referral of an accountant who has a history of embezzlement).

Negligent hiring exists where there is evidence that the employer hired an individual who was unfit, considering the nature of the employment and the risk he posed to those with whom he would foreseeably associate, where the employer knew, or should have known, that the employee was unfit. Valdez v. Warner, 106 NM 305, 742 P.2d 517 (1987). The liability flows from a direct duty running from the employer to those members of the public whom the employer might reasonably anticipate would be placed in a position of risk of injury as a result of the hiring. Id.

To avoid a negligent hiring claim, a school district must conduct an adequate investigation of each prospective employee's background prior to hiring. Such review should include a criminal background check (pursuant to § 22-10-3.3. NMSA 1978, public school districts are required by law to conduct criminal background checks on job applicants), a thorough interview, checking references including not only those listed by the applicant, but calls to the applicants former employers (the usefulness of this step, of course, depends upon the hope that the prior employers do not implement "no comment" referral policy). In addition, some school districts, including some in New Mexico, require drug testing of job applicants. This practice was approved in Knox County Education Association v. Knox County Board of Education, 158 F.3d 361 (6th Cir. 1998). Historically, employers have also used polygraph tests, honesty tests, and handwriting samples to assist them in weeding out untrustworthy prospective employees. In 1988, Congress banned the use of polygraph tests for private employers. 29 U.S.C. § 2002. Public school districts may, however, continue to use polygraph tests. 29 U.S.C. § 2006.

School districts that fail to properly investigate the background of prospective employees subject themselves to substantial liability if they hire an employee with a history of misconduct, should that employee strike again. For example, in Pittard v. Four Seasons Motor Inn, Inc. 101 NM 723, 688 P.2d 333, the court held that a hotel employer could be liable for the sexual assault of a young boy by an employee, when the employer failed to consider the employee's history of alcohol use on the job and physical violence.

Tort liability for bringing the perpetrator and victim together arises not only in context of hiring, but also with respect to referrals for outgoing employees. As indicated above, an employer has no duty to give a referral. If, however, an employer elects to give a referral, the employer must give a full and complete information, including negative information regarding the employee.

The seminal negligent misrepresentation case involved a school district's failure to disclose information regarding an assistant principal's past sexual misconduct. Randi W. v. Muroc Joint Unified School District, 929 P.2d 582 (Cal. 1997). Despite the fact that at least four administrators from three previous school districts had knowledge of the assistant principal's misbehavior with female students, not one of them mentioned this behavior in their letters of reference. Indeed, one of the administrators recommended the assistant principal for "almost any administrative position he wishes to pursue" and stated that he would recommend the employee "for an assistant principalship or equivalent position without reservation," and another stated that the assistant principal was "an upbeat, enthusiastic administrator who relates well to students." Based on the letters of recommendation, the assistant principal was hired by a new school district. As could reasonably be foreseen, the assistant principal was subsequently accused of touching in a sexual manner and molesting a 13 year old student.

The California supreme court held that, where the school districts gave letters of recommendation, they had a duty to fully disclose all material information regarding the employee. The court concluded that misleading half-truths constituted misrepresentations, for which the school districts could be liable.

The New Mexico Court of Appeals followed Randy M. in Davis v. Board of County Commissioners of Dona Ana County, 1999 NMCA 110, NM (9/7/99). The claim in Davis was that a mental health technician at a psychiatric hospital sexually assaulted and sexually harassed one of his patients. It was further alleged that, prior to working at the psychiatric facility, the employee worked as detention sergeant and classification officer at the Dona Ana County Detention Center. It was alleged that during his employment there, the employee was reprimanded on multiple occasions for sexual harassment of female employees, and that there were reports that, as a detention officer, the employee traded sexual favors from inmates in return for helping them, as well as evidence that the employee engaged in sexual relations with inmates in his office. The employee voluntarily terminated his employment with the detention center of the eve of a disciplinary hearing. Notwithstanding that history, the administrator for the detention center gave the following letter of recommendation:

To Whom It May Concern:

This letter will introduce you to [the employee]. I had the distinct pleasure of working with [the employee] for the past two years. In my opinion, he is an excellent employee and supervisor for the Dona Ana County Detention Center. In developing social target programs for the inmate population, he displayed considerable initiative and imagination. The [employee] was instrumental in the department's maintenance program and was involved in remodeling projects.

I know that this department will suffer for his leaving. Employees of his caliber are difficult to find. I am confident that you would find [the employee] to be an excellent employee. Should you need verbal confirmation of his ability, I would deem it a pleasure to respond to any inquiries you may have.

The New Mexico Court of Appeals held that the administrator, by providing a referral, had a duty to disclose negative information about the employee. If the employer speaks, he must disclose enough to prevent his words from being misleading. Id. "In other words, half of the truth may obviously amount to a lie, if it is understood to be the whole." Id.

In response to the employer's argument that the imposition of such liability would discourage the employer's from saying anything at all, the court noted that it would be better for employers to remain completely silent than to misleadingly suggest that the employee does not create a risk.

The rule of Randy W. and Davis is clear. If an employer is going to give a reference on behalf of an employee, it has a duty to include negative information if re-employment of the employee would put him or her in a position to harm others.

CONCLUSION


The safest, but socially least effective response to a request for referral, is to say nothing at all. Societal interests are best promoted by full and fair referrals. Such a practice, however, creates some risk of liability for defamation or other torts. The liability risk, however, is relatively limited where the employer provides a honest and complete letter of reference. It is the opinion of this author that the societal benefits of full and complete disclosure outweigh the individual employer benefit resulting from a no comment policy.

An employer can protect itself by (1) ensuring that all facts and opinions stated in the referral are based upon a thorough investigation; (2) obtaining a waiver or signed consent from the employee to disclose information (one way to achieve this prior to the time that relations with an employee go sour is to obtain such consent in conjunction with the employee's regularly scheduled evaluations); (3) prepare a letter of recommendation jointly with the departing employee, which affords the employee the opportunity to rebut matters in the letter of recommendation with which he or she disagrees.

One of the most difficult situations may be the employee who is accused of misconduct for which there is some proof, but not enough to convincingly establish that the employee did or did not commit the offense. For example, should a letter of reference should be given for a teacher who has an outstanding work history, but who has been accused by a student of inappropriate sexual misconduct, which the teacher denies, and for which there is little corroborating evidence one way or the other. In this situation, the "no comment" is always the safest. Alternatively, the employer can truthfully report that the teacher has an excellent work history, supported with specific references to the teacher's evaluations, that the teacher has been accused by a student of sexual improprieties, that the teacher denies this misconduct, and that the school district was unable to conclusively establish which side of the story to believe. By fully disclosing these facts, the referring school district has spoken only the truth, and therefore limited its potential liability for defamation. On the other hand, it has given the prospective school district sufficient information to further investigate the matter, thereby providing some protection against the recurrence of a future similar event.