EMPLOYMENT - Points of reference

After weeks of searching and selection, you've narrowed it down to just one candidate. The CV was first-rate, the applicant excelled in the interview and the psychometric tests suggested the person wasn't an axe murderer. The only trouble is, the current employer is refusing to supply a reference.

The industry is all too familiar with the maxim that self-praise isjust one candidate. The CV was first-rate, the applicant excelled in the interview and the psychometric tests suggested the person wasn't an axe murderer. The only trouble is, the current employer is refusing to supply a reference. no recommendation. So when it comes to hiring staff, most employers rely on more than interview performance or the contents of a CV. A written reference or a less formal verbal recommendation from a reputable source is essential to verify any impression gleaned from an interview.

In an increasingly complex and sophisticated recruitment market, this age-old method has served employers well. In fact, the popular, more recent practice of psychometric testing - designed to predict future performance and construct character profiles - has turned out to be less reliable.

In the world of commerce, this should come as no surprise. Most business relationships and transactions come about through referrals from satisfied customers, suppliers or contacts.

In employment, the law regarding references is fairly well established.

Nevertheless, in view of their importance in the selection process, there are some unpleasant pitfalls that need to be avoided.

The regulation of employment references has now required consideration by the European Court of Justice in Brussels. As the industry is well aware, any decision made by the court has to be taken seriously, since the ramifications are felt not only in this country but throughout the whole of the European Union. The general rule in UK law is that unless there is a specific agreement (say, in a contract of employment or as part of an out-of-court settlement), an employer is not obliged to give a reference to an employee. But the rule has been over-ruled by the European judges in the cases of individuals who have complained of sex discrimination, with the result that it could lead to a complete reversal of personnel practices.

Take, for example, the landmark decision involving Brenda Coote, who brought claims under the Sex Discrimination Act against her employer, Granada Hospitality. Coote brought two cases against Granada. In the first, she claimed she had been dismissed because she became pregnant. The case was settled by mutual agreement. However, Coote said her attempts to find employment outside the company were thwarted because Granada refused to provide a reference.

It's not uncommon for an employer to adopt such a stance, particularly where there is mutual resentment arising out of a legal dispute. As a result of Granada's refusal to provide her with a reference, Coote brought another case against the company.

The law regarding this type of situation had been established by the Court of Appeal in an earlier case, this time involving the Race Relations Act. It was simply that an employee could not issue proceedings against an employer for failing to provide a reference if the employment relationship had come to an end. In other words, you could not sue your employer for race or sex discrimination if you no longer worked for it.

All very sensible, you might think. However, the European Court took a different view when it came to looking at European sex equality laws - UK legislation has to be in tune with these. The court ruled that these laws, designed to promote equal treatment for male and female workers, would be undermined if an employer was able to take retaliatory action against an ex-employee because he or she had complained of sex discrimination.

Therefore, if a refusal to provide a reference was a form of revenge or punishment by the employer, it was unlawful under European law. Coote could therefore pursue her case even though she was no longer employed by Granada, as long as she was able to establish that there had been retaliation against her which resulted from her previous sex discrimination case.

The employment appeal tribunal that referred the issue to Brussels will now have to decide whether UK sex discrimination laws are consistent with this principle. If not, the government will have to legislate changes because European law is supreme.

As a consequence of this decision, which was made in October 1998, employers need to ensure that a refusal to give a reference cannot be viewed as retaliation against an ex-employee who has complained of sex discrimination.

Furthermore, as the race relations laws are constructed along similar lines, it seems likely that the government will come under pressure from the Commission for Racial Equality and others to provide the same rights to employees who have complained of race discrimination.

Employers should also be aware of the fact that any reference given has to be accurate, otherwise a prospective employer or even a former employee can sue. This is because an employer owes a duty to exercise reasonable care when drawing up a reference. Of course, a prospective employer has to have some comeback if a supplied reference turns out to be inaccurate. Similarly, a former employee should be able to expect former bosses to give accurate information, otherwise their chance of earning a livelihood is severely reduced.

It is common practice to add a disclaimer at the end of a reference.

Unfortunately, many employers think this amounts to a get-out clause, averting any future action against them. The courts will not give protection to an employer, no matter how well drafted the disclaimer is, if the reference is inaccurate and misleading. At the end of the day, the reference has to be worth more than the paper its written on, otherwise the process is rendered meaningless.

In addition, data protection legislation gives employees the right to see a copy of references provided to their current employer. There have been instances of employees being so incensed with comments made about them that they brought libel proceedings. Even if a prospective employee thinks a reference is good enough, employers are entitled to form their own opinion so long as it is in good faith. It's the employer's opinion that matters most.

In light of the way the law is developing in this area, employers would be well advised to take another look at their reference policies. If possible, they should ensure that references are agreed with employees when they leave - perhaps as part of an exit interview strategy - and that the content, when supplied, is accurate, fair and written with care.

If a reference is requested by an ex-employee who has complained of discrimination, then it is sensible to supply a reference, if only to guard against the possibility of a claim that a refusal is part of a vendetta.

At a time when compensation awards to employees are on the increase, the wisest option is to follow the old saying, it's better to be safe than sorry.

Makbool Javaid is an employment lawyer at Dibb Lupton Alsop and head of its discrimination law unit.