My name is Mark Goodfield. Welcome to The Blunt Bean Counter ™, a blog that shares my thoughts on income taxes, finance and the psychology of money. I am a Chartered Professional Accountant and a partner with a National Accounting Firm in Toronto. This blog is meant for everyone, but in particular for high net worth individuals and owners of private corporations. The views and opinions expressed in this blog are written solely in my personal capacity and cannot be attributed to the accounting firm with which I am affiliated. My posts are blunt, opinionated and even have a twist of humor/sarcasm. You've been warned. Please note the blog posts are time sensitive and subject to changes in legislation or law.

Monday, February 25, 2013

References - A No Win Situation for Past and Future Employers

I am occasionally asked to provide verbal and/or written references for friends, acquaintances and former employees, whom I respect professionally. I am also asked to provide references for ex-employees where my level of respect for their professional abilities, to be charitable, is far lower than the aforementioned. However, if I was asked for a  reference, you may not be able to distinguish the person I like, from the one I would not recommend. That is just a sad reality of today’s litigious society.

So why would you not always be able to clearly distinguish my references? Kate McNeill-Keller of McCarthy Tetrault LLP, provides the answer in her article on Post-Employment Reference Letters: -Guidelines for Employers, “Employers face a two-fold concern over providing post-employment references. First, there is the risk of a defamation suit by the former employee as a result of a negative reference. Second, there is the risk of a claim for negligent misrepresentation by the subsequent employer as a result of an inaccurate or incomplete reference. While these risks should be considered (especially in regard to the content of the reference), they are generally outweighed by the risk of refusing to provide a letter of reference".

Although Ms. McNeill-Keller’s article discusses post-employment reference letters, we have been informed by our lawyers that the same issues essentially hold for verbal reference calls.
Many employers have been counseled by their employment lawyers to keep references very vanilla and in essence, fairly nebulous. Thus, in cases where I may have let go of an employee for in part, a lack of skill; I cannot come out and say such. Often when I get off the phone after a reference enquiry, I wonder what the person on the other side is thinking. The same holds for when I call for a reference check. I know prior to the call, that in most cases, the call is a pure waste of time. However, I call because on the odd occasion you get to speak to someone who has not been appropriately advised and they tell you more than they should. Alternatively, since I know how I sound, I try and pick up from a person’s tone and lack of enthusiasm if they really were keen on the applicant or not.
Where I would like to provide a positive verbal reference, I am always somewhat pensive and tone down my enthusiasm, since I am concerned that if the person I am recommending does not work out for the new employer, for whatever reason, someone will claim I misled them.
I actually received a reference from someone I know socially that totally ignored a fatal flaw of her former employee. When our firm later let that person go, she told me she felt terrible when she got off the phone with me, but she was counseled not to say anything bad about the person.

The above discussion is a sad commentary on the state of employment references and reflects how gun-shy many employers have become in today's litigious society. My reality is that where I want to provide a positive reference, I tone down my reference for fear of being accused of overstating someone’s abilities. Where I would  provide a less than glowing reference in an unencumbered environment, I become what I call specifically vague. This is a no-win situation for the former employer and the future employer, so is there a point to references? I wonder whether social media references on professional networking sites like LinkedIn are any better, or has the usefulness of references run its course as society has become more cautious and guarded?

Bloggers Note: A reader sent me this Dilbert comic strip link on references after reading this post. Thanks to the reader.

The blogs posted on The Blunt Bean Counter provide information of a general nature. These posts should not be considered specific advice; as each reader's personal financial situation is unique and fact specific. Please contact a professional advisor prior to implementing or acting upon any of the information contained in one of the blogs.