References can cause employers headaches. This guide sets out some of the key issues to consider.
Seeking a reference
Generally, there is no legal obligation to request a reference for a prospective employee, and businesses are free to employ someone without obtaining a reference. However, usually it is sensible to make a job offer conditional upon receipt of at least one satisfactory reference.
When an offer is conditional upon receiving a satisfactory reference and then a bad one is provided the employer could withdraw the offer even if the employee has started employment. If the offer was not conditional the employer would have to provide adequate notice.
If a candidate is carrying out certain functions for an organisation authorised by the Financial Conduct Authority (FCA) or Prudential Regulation Authority (PRA), the firm will be required to obtain references from previous employers. The information sought will depend on the type of role (see below).
Providing a reference
Generally, employers do not have a legal obligation to provide a reference. However, there are some exceptions.
Organisations must ensure that if no reference is provided they are not discriminating against a person because of protected characteristics (such as race, age, sex or disability). Any reference policy should be applied consistently. Also, If a person has made allegations of discrimination, brought discrimination proceedings or given evidence or other information they must not be victimised as a result.
In the case of FCA authorised firms recruiting people carrying out “controlled functions”, there is a general duty on employers to provide relevant information to ensure that the person is fit and proper for the role.
In the case of FCA/PRA authorised firms recruiting persons in senior management positions and “significant harm” functions under the certification regimes, there are more onerous obligations relating to requests and the provision of information. These requirements came into effect on 7 March 2017.
An employer may be under an obligation to provide an agreed reference as part of a settlement agreement.
General duty when providing a reference
In many sectors it has become increasingly common to provide only basic factual references. The reference would include dates of employment and job title.
Duty to ex-employee – If a reference is given it must be true, accurate and fair and must not give a misleading impression.
In providing the reference, the ex-employee must also not be discriminated against.
Duty to recipient – If a reference is given it must not be misleading.
References and data protection
The first data protection principle of the GDPR states that personal data must be processed lawfully, fairly and in a transparent manner. Data will only be processed lawfully if at least one of certain conditions is satisfied, one of the conditions being that the data subject has given consent to the processing of their personal data for one or more specific purposes. Consent needs to be freely given, specific and informed.
The Information Commissioner’s Office (ICO) has provided guidance stating that given the unequal bargaining power between the employer and the employee, employers will find it difficult to rely on consent. Although consent may suffice and should be obtained before providing a reference, businesses may also have to identify another legitimate basis for processing data, such as the processing being necessary for the purposes of the the legitimate interests of a third party.
This guide is intended for guidance only and should not be relied upon for specific advice.
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