Employment Dispute Resolution

1. Storyline:

Tina Ray is the personal secretary to Tom Selleck, who is a Director of ‘Blumfeld Pvt Ltd’, a social media advertising company. Tina has worked in the company for five years. Initially hired as a typist for the back office of the company, Tina has risen to the current position over the time. Her work has been appreciated by her company time and again as reflected in the bonus payments that have been given her linked to her performance.

On 25th December 2020 (during an office Christmas party), Tom Selleck overhears Tina making the following statement to another colleague by the snacks bar:

“Tom is a great boss. He is nice to me, but I fear that he may be taking his own job too lightly because yesterday I saw him leave office earlier than usual when there was a foreign client coming in. It was a big account too and I heard that we did not get it and Mr. Jones’ secretary Tara told me that he was furious because he felt that Tom lost them the account.”

Next day, Tom informs Tina that she is terminated and has to leave at the end of January 2021. He also tells her that he is pursuing possible claim against her for defamation on the basis of the conversation that he overheard between Tina and her colleague during the office Christmas party. Tina is devastated because she never meant to harm Tom’s reputation and was merely stating her concerns about what she heard from someone else.

Tina is selected by ‘Tulip Pvt Ltd’ to be the secretary to the Managing Director. The job will pay Tina £ 150 a week more than what she is getting at ‘Blumfeld Pvt Ltd’. Tina needs a reference letter from her present employer. She approaches Tom. He sends the following email on 24th January to Tulip:

“Tina Ray has been working as my secretary since May 2019. I would say that her work is satisfactory at times and average at other times. I have also had some concerns about her ability to keep confidential information to herself. She can be somewhat careless with information that as a secretary she needs to be more circumspect with.”

Tina does not get the job from ‘Tulip Pvt Ltd’. Tina is distraught and files a claim of negligence and economic loss against Blumfeld Pvt Ltd. The judge decides in favour of Tina and awards her damages for loss of prospective employment.

2. Discussion of the legal issues surrounding the storyline:

This brief note discusses the law related to negligent misstatements made by the employer in a reference letter. The important principles of law that are involved in this scenario relate to negligence, defamation, and employer liability for damages for economic loss.

Negligent misstatement in a reference letter concerning the employee can be linked to duty of care of the employer owed to the employees. This raises potential for claim in negligence as well as defamation (in some cases) and right to damages for economic loss if there is a direct link between the breach of duty by the employer and loss of potential employment to the employee. This note explains that while it is easier to establish negligence in such cases where misstatements are made by the employer in the reference letter, establishing a claim in defamation is more difficult because the employee would have to establish malice on the part of the employer in making the misstatement as merely untrue statements made by the employer may not attract liability in defamation and the employer also can raise a defence of qualified privilege in such cases.

With regard to the law on negligent misstatements and liability in negligence, failure of an employer to provide accurate reference for the employee can lead to liability to pay damages to the employee in certain circumstances. Although employers are not bound to give reference letter to the employee, courts have given serious thought to the issue of reference by the employer as reflected in the statement made by Lord Slynn observed in Spring v Guardian Assurance plc, where he noted that frequently, employees will stand no chance of getting another job or a better job, unless he is given a reference. In a recent case, guidance has been provided as to when liability of the employer for negligent misstatement in a reference letter can arise. The court observed in Hincks that a reasonable reference writer should subscribe to a standard of care which will include objective and rigorous appraisal of facts and opinion, reasonable care to be satisfied that the facts set out in the reference are accurate and opinions are given on legitimate basis, and reasonable care to ensure that the reference was fair and not misleading, including by reason of what was not included or by implication, nuance or innuendo. Thus, the ground of employer liability for negligent misstatement would be arise in case of inaccurate statements in the reference letter or making statements that do not have legitimate basis.

In the context of negligence law, employee can claim damages against the employer for negligent misstatement by establishing breach of duty of care that the employer owes to the employee and the consequent loss to the employee which can be directly linked to the breach of duty of care. In TSB Bank plc v Harris, the court upheld the employee’s right to fair and accurate reference. This suggests that there is a duty on the employer to provide such reference in an accurate and fair manner. Another case that can be referred to here is that of Hedley Byrne & Co, which concerns negligent misstatements and pure economic loss that arises by placing reliance on such statements. Although this case is not particularly related to misstatement in connection with employee reference, Smith and Baker have argued that the legal principle in this decision can be used to assess a duty of care upon referees and employers not to make negligent misstatements.

In Spring v Guardian Assurance plc, the court upheld the employer’s duty of care to an employee and based on the breach of this duty, the employee was held have a right to legal redress against a negligent reference given by the employer which led to the employee not getting a desirable job. This case is also significant for understanding whether an employee may also have claim in defamation law in case of negligent misstatement. In Spring v Guardian Assurance plc, the House of Lords held that the employee can have remedy of damages for pure economic loss in the event that a negligent misstatement in the reference letter leads to loss of job opportunity; however, the defamation claim requires establishment of malice, which may not be established in every case of negligent misstatement in the reference letter. Post this decision, there is an acceptance of the principle that employee can have remedy for economic loss in cases involving negligent misstatement.

To summarise the legal position on the point of negligence law in the case of negligent misstatement, the employee can get relief if he establishes that the employer owed him a duty of care to provide an accurate reference regarding his work, which was breached by the employer when he provided an inaccurate reference, and the employee lost an opportunity to work somewhere else as a direct consequence of this breach of duty. Causation is therefore, an important element of the tort of negligent misstatement.

With regard to claim in defamation, employees can find out what their employers wrote about them in the reference letter if they place a request for the same to their new employer under section 7 of the Data Protection Act 1998 in order to assess whether any defamatory statements are made are made against them. An employee may claim an action in defamation if statements made in the reference letter attack their reputation; however, in order to establish tort of defamation, falsehood of the statement made in the reference letter is one of the necessary elements. With respect to this, the maker of the statement has the burden to prove that the statement is true. In the case of an employer however, a defence of qualified privilege can be taken by the employer. Under the Defamation Act 2013, the employee will also have to establish that the statements have caused or are likely to cause serious harm to their reputation. The employer can take the defence of truth in substance (Section 2) or honest opinion (Section 3). The more powerful defence however in this context is the ‘qualified privilege’ defence.

The employee will have to establish that the employer’s statement amounts to malicious falsehood which amounts to falsehood that is calculated to cause damage. As pointed out by Lord Woolf in Spring, this is difficult for the employee to establish. The decision in the case of Thour v The Royal Free Hampstead NHS Trust, goes to highlight the problems that are associated with defamation cases by the employee against the employer in the case of inaccurate reference. In this case, the employee sued the NHS for libel for a negative reference letter that cost him a new job opportunity. The defendant used common law qualified privilege as a defence in this case as it relates to information passed under a public or private legal, social or moral duty from one individual to another individual who has a reciprocal duty to receive the information. When this defence is used, the onus is on the claimant to establish that the statement made by the defendant was made maliciously. In this case, the claimant was not able to establish malice and the defendant was successful in pleading defence of qualified privilege.

While inclusion of unverified claims by the employer or complaints that are not investigated may amount to unfairness, this may not extend to defamation unless malice is established by the employee. There are authorities that show how employees can get relief against such unfair comments in reference letters, but Spring remains a good example of how defamation may be inadequate to provide relief to the employees in such circumstances. Thus, in Cox v Sun Alliance Life Limited, the employer provided a reference letter with specific complaints against the employee but these complaints were not investigated, leading the court to hold the reference letter to be unfair. Similarly, reference to unverified facts and uninvestigated claims against the employee were held to be unfair in Jackson. Non-disclosure of facts and claims against the employee and then using these in the reference letter can also amount to a violation of the Data Protection Act 1998 as held by the court in AB v A Chief Constable.

Finally with regard to damages for economic loss, in Guardian Assurance plc, the court has allowed that for the breach of the employer’s duty of care involved in the making of the negligent reference, if that leads to the loss of opportunity for work, then employer liability for economic loss to the employee can be made out.

To conclude, in cases involving negligent statements made by the employer in the reference letter, the employee who has suffered pure economic loss as a consequence can take action under negligence and defamation. A perusal of the case law suggests that employees may have greater chance of success under negligence law rather than defamation. Employers may have stronger defence against defamation claim under the ‘qualified privilege’ defence which allows employers to share information passed under a public or private legal, social or moral duty from one individual to another individual who has a reciprocal duty to receive the information. Furthermore, employees also have to establish malice on the part of the employer as well as significant harm (under Defamation Act 2013), which may be difficult to establish in the court. Under negligence law however, employees can be successful if they are able to establish the ingredients of negligence misstatement.

Table of cases

• AB v A Chief Constable [2014] IRLR 700
• Cox v Sun Alliance Life Limited [2001] EWCA Civ 649
• Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465
• Hincks v Sense Network Ltd [2018] EWHC 533 (QB)
• Jackson v Liverpool [2011] EWCA Civ 1068
• Spring v Guardian Assurance plc [1994] 3 All ER 129
• Thour v The Royal Free Hampstead NHS Trust [2012] EWHC 1473 (QB)
• TSB Bank plc v Harris [2000] IRLR 157

Bibliography

Books

• Smith I and Baker A, Smith and Wood’s Employment Law (Oxford University Press 2015)
• Painter R and Holmes A, Cases and Materials on Employment Law (Oxford University Press 2015)

Websites

Scodie M, ‘Defamation in employment’ (2014) accessed https://bateswells.co.uk/wp-content/uploads/2019/06/bwb-empup-defamation-march14-pdf.pdf