BEWARE OF PROVIDING EMPLOYEE REFERENCES

Employers are routinely asked to provide employment reference for former employees. Many employers will only confirm the dates of employment and the position held. Typically, an employer will offer to provide more extensive information such as work record, reputation and financial information if the employee agrees to execute a release agreement that releases the employer from liability. However, the risk of providing this kind of information even with a signed release agreement has increased.

The Ninth Circuit Court of Appeal recently refused to enforce a release agreement that protected his former employer from liability for providing an employment reference. In McQuirk v. Donnelly, plaintiff, a sheriff with the California Sheriff's Department for fourteen years, was offered and accepted a position with the Washington Sheriff's Department. In connection with the hiring process, plaintiff signed a release agreement permitting his former employer to release information regarding his work record, reputation and certain financial information. A representative of the California Sheriff's Department provided the information requested and in doing so seriously defamed the plaintiff resulting in the withdrawal of the offer of employment.

The District Court judge dismissed plaintiff's Complaint for defamation, interference with prospective business advantage and outrage, relying on the signed release. However, the Ninth Circuit Court of Appeal reversed, holding that the release signed by the plaintiff was unenforceable pursuant to California Code section 1668 that prohibits entering into contracts that are designed to protect a party from unlawful acts.

This extremely disconcerting ruling will undoubtedly discourage employers from sharing but the most meager information regarding former employees, since any release agreement will be unenforceable. On the brighter side, the Ninth Circuit made it clear that an employer is still entitled to a qualified privilege when giving recommendations:

We note that this outcome does not leave employers unprotected when giving recommendations regarding former employees to prospective employers. California law makes it clear that employers are entitled to a qualified privilege when giving recommendations. What we hold today is that employers may not contract for more than the qualified privilege granted to them under California law.

Thus, there is little use in obtaining a written release since it cannot afford any more protection than the qualified privilege provided by statute.