Double-edged Sword: You Can Face Liability for Saying Too Much or Too Little

October 6, 2008

Responding to a request for a referral about a former employee who was terminated for antisocial or potentially dangerous behavior can be extremely challenging. On the one hand, current employees may be tempted to disparage a former coworker who left on less than amicable terms. On the other hand, some employers may attempt to avoid lawsuits by lavishing praise on the former employee to ensure he’s hired elsewhere. You should be aware that you face potential liability both for failing to warn others about the former employee and for providing negative referrals. Although Wisconsin law is less than clear on the issue, you can reduce your risk of liability by taking care to avoid misrepresenting any facts about a former employee’s conduct, while at the same time providing as little information as possible about him.

No general duty to warn
In the most recent case involving the priest abuse scandal before it, the Wisconsin Supreme Court ruled that employers don’t generally owe a duty to warn potential employers and unknown individuals about a dangerous former employee. However, the court failed to set forth a clear uniform rule governing an employer’s liability to third parties for referring a dangerous former employee to another employer.

Several victims of sexual abuse by a priest in Kentucky sued the diocese in Wisconsin where he was once employed. They alleged that the diocese “knew or should have known of [the priest’s] propensity for sexually abusing children, and despite this knowledge, did not refer [him] to the police or take any other action to prevent [him] from continuing his pattern of sexually abusing children.” Specifically, they claimed that the local diocese in Wisconsin should have warned “unforeseeable third parties,” including “any potential future employers” as well as parents of “unforeseeable victims.”

The Supreme Court ruled that Wisconsin law doesn’t allow an unrelated third party to sue an employer for failing to disclose negative personal information about a former employee to the general public or unknown potential employers. The court commented that holding employers liable for failing to warn the general public about a former employee would “create a vast obligation dramatically exceeding any approach to failure to warn recognized either in this state or any other jurisdiction. There is no state in which employers are recognized as being negligent for failing to seek out, find, and warn future employers of sexually dangerous former employees.”

While declining to impose a general duty on employers to warn the public about a former employee’s negative personal history, the court didn’t address the larger issue of when you can be held liable to third parties for providing referrals to other employers. The court said it didn’t need to address that issue because the victims in the case before it failed to allege any affirmative representations by the diocese. Instead, they merely alleged that the diocese possessed negative information about a former employee and failed to disclose that information to potential employers and individuals who had “virtually no relationship” with it. However, the court cautioned that “in some cases, the failure to warn may be a breach of duty of ordinary care.”

What other states are doing
Surveying other states’ law, the Supreme Court noted that in jurisdictions where a negligent referral doctrine has been adopted, the general rule is that an employer is not liable to third persons for failing to disclose negative information about a former employee. An employer is liable only for “fraud or misrepresentation” if it makes an untrue affirmative representation about a former employee that presents “a foreseeable and substantial risk of physical harm to a third person.”

For example, if a school district terminates a teacher for inappropriate behavior with students and then writes a letter of recommendation extolling this “outstanding rapport” with students and stating that it “wouldn’t hesitate to recommend him for any position,” it may face liability under the negligent referral doctrine. However, the court noted that “even those states that have recognized a negligent referral doctrine do not impose liability when a referral letter is sent by a past employer to a future employer of such an employee unless actual misrepresentations are made in such a letter.”

Double-edged sword
In addition to facing potential liability to third parties for not disclosing facts about a former employee, you may, in some circumstances, face liability for disclosing too much information if you prevent a former employee from obtaining other employment. Wisconsin’s “blacklisting law,” Wis. Stat. § 134.02(1), prohibits two or more people who are employers from “preventing any person from obtaining employment, procuring or causing the discharge of any employee by threats, promises, circulating blacklists, or causing blacklists to be circulated.”

However, you won’t be liable for giving a truthful statement of the reasons you terminated a former employee if you’re asked to do so by him or a business to which he has applied for employment. Likewise, Wis. Stat. § 895.487 states that an employer providing a reference is assumed to be acting in good faith and is immune from civil liability for a referral unless it can be shown that the employer knowingly provided false information in the reference or made the reference maliciously or with an intent to discriminate against the former employee. Hornback v. Archdiocese of Milwaukee, 752 N.W.2d 862 (Wis., 2008).

Bottom line
Although the law isn’t settled in Wisconsin, you most likely won’t be held liable to third parties for failing to disclose negative information about a former employee unless you commit actual fraud or a misrepresentation when providing a referral. Similarly, you generally won’t be liable to a former employee for providing a truthful statement of the reasons he was terminated if that information is specifically requested. Thus, you can reduce the risk of liability by disclosing only truthful information and revealing as few details as possible about a former employee.

In many cases, you can simply verify the former employee’s dates of employment and provide general information about his job description. Don’t volunteer the reason he was dismissed. If you’re specifically asked why a former employee was terminated, provide a short, truthful answer without revealing the details of the termination.

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