It is common to include a term in a compromise agreement that the employer will respond to any requests for a reference in accordance with an agreed form. The form of reference is usually annexed to the compromise agreement.
References may be provided either in a personal capacity or on behalf of the employer as a corporate reference. A compromise agreement cannot require an individual to provide a personal reference unless that individual is a party to the agreement.
The employer is legally responsible for the content of any corporate reference because it is provided on its behalf. For that reason, many employers have a policy in place regarding which employees or level of management are allowed to provide a reference, in what format (verbal and/or written) and what it can include. It is helpful to include the details of the reference in the compromise agreement.
A personal reference is one given by an individual in a personal capacity. It may refer to work done for a particular employer but it is not given on behalf of the employer. A compromise agreement would not usually provide for a reference from an individual.
The legal position is the same whether the reference is given in writing or over the telephone. However, it can be difficult to prove what was said over the telephone.
Employers are generally entitled to refuse to provide a reference if there is no agreement to provide one in the compromise agreement. However, their policy on references should be consistent or it could lead to allegations of discrimination.
Often an employer may be reluctant to provide a detailed reference because of the risk of being subject to a claim for defamation. A reference would be defamatory if it contained an untrue statement that disparages the reputation of the ex-employee in the estimation of right thinking members of society. However, if the reference can be agreed in a compromise agreement, this minimises the risk of any defamation claim.
Employers providing a reference must be able to justify and support any comments made in the reference and show that they honestly believe that the contents of the reference are true.
A claim for breach of contract against the employer could arise if they fail to provide a reference where there is an agreement to provide one either in a compromise agreement or a contract of employment.
Often, the reference will include a disclaimer stating that it is made in confidence and good faith and that no responsibility can be accepted by the employer for any inaccuracies. This is likely to be effective in respect of the person receiving the reference. However, it would not prevent an employee bringing a claim, unless the content of the reference was agreed in the compromise agreement.
It is increasingly common for employers to provide very bland references, stating only the start date, the finish date and job title. A compromise agreement is a good opportunity to agree a better reference. This can be included as part of the negotiation process.