The fact is that there is no legal obligation on an employer to provide either a verbal or written reference for a departing or former employee. The only exception is in the financial industry where references are regulated by the Financial Conduct Authority.
However if an employer agrees to provide a reference, whether it is verbal or written there is a duty to take reasonable care to ensure that the contents are true, accurate and fair and are not misleading. This duty of care relates not just to the departing or former employee but also to a prospective new employer who may be influenced by its content in deciding whether to make an offer of employment.
One question that often arises is whether an employer can provide a bad reference. The answer to this depends on whether it is true or not. The worst case scenario is where an employer provides an untrue bad reference out of malice that cannot be substantiated and the departing or former employee loses employment opportunities. In this situation the employee can sue for damages for financial loss or even defamation and unlawful discrimination.
Where an employee is dismissed and brings proceedings say for unfair dismissal and unlawful discrimination then the provision of an untrue and bad reference can be an aggravating factor and potentially classed as victimisation. The employment tribunal can take into account when assessing any compensation.
Conversely employers can be sued by future employers who hire the departing or former employee as a direct result of a glowing reference that turns out to be untrue. There was a flux of case law in the 1990s where a number of former employers were successfully sued by former employees and new employers because they relied on references which turned out not to be true. Spring v Guardian Assurance plc and others  IRLR 460 HL is one authority where in extreme circumstances a former employee successfully sued his former employee for negligent misstatement which resulted in loss of employment opportunities and barred from the insurance industry.
For this reason many employers have now implemented a strict written policy on the provision of references. Many employers will now only provide a basic factual reference with no subjectivity. It is therefore common practice for many employers to provide minimal information for example just the dates of employment, job title and salary with no detail to how good or bad the employee was at their job.
It is also common practice for employers who do provide a reference to include a disclaimer of liability arising from any errors, omission or inaccuracies that may be contained. Disclaimers will generally be of limited effect however there is no real disadvantage to the employer by including one.
Some employers also have a policy not to provide references at all and this could imply that you have a problem with the departing or former employee. This in turn could lead to allegations that you are discriminating against them and have broken the mutual trust and confidence. It is therefore good practice to respond to each reference request and to back it up with a statement that it is not your policy as an organisation to give references.
Where the employment relationship breaks down and this results in a settlement agreement it is also customary for the Employer to provide a reference as part of the deal. It is my experience that employers are usually only willing to provide the most basic and factual of references. It is better in these circumstances for the departing employee to attempt to secure a personal reference from a colleague who can perhaps vouch for the quality of their work.
It is also good practice to be consistent in the treatment of employees when providing references. Providing a reference to one employee but not another could result in a claim of unlawful discrimination giving rise to risk and costs.
Another issue is what happens if the departing or former employee wants to see the reference? The general principle is that you do not have to disclose the reference. However a new employer will have to disclose the reference if the former employer has consented to its disclosure and that it is reasonable in all the circumstances for the new employer to do so.
If you really do not want the reference to be disclosed to the departing or former employee then it is vital that you inform the prospective new employer that you do not consent to its disclosure or any confidential parts of it to the employee. It is obviously better to make this request in writing.
The Information Commissioner has also issued a Data Protection Good Practice note in relation to subject access and employment references. This suggests that in most circumstances the employer should provide the information in a reference to the person to whom it relates. Where the person who wrote the reference refused their consent to disclose the reference this will not justify withholding the information contained in the reference, especially where it has affected the individual’s ability to take up a job offer. The Information Commissioner also recognises that there may be circumstances where it would simply be inappropriate to divulge the details or to disclose the reference for example where there is a threat of violence and/or intimidation by the former employee towards the person who wrote the reference.
To summarise there is no right to a reference, except that employers need to ensure that it is accurate and on this basis it is a good idea to ensure that time and thought is given to the task to minimise any future risks.
For more information contact our Employment team.