Articles - Compliance and Legal

The Lawsuit Alleging Misrepresentations in Responding to Reference Checks

In a 2008 federal court of appeals case, two medical employers responded to reference checks for the same anesthesiologist, Dr. Robert Berry. Dr. Berry was then hired by the inquiring hospital, where he botched a routine 15 minute procedure, leaving a patient in a permanent vegetative state. The incident allegedly occurred due to Dr. Berry’s drug addiction.

The hospital and its insurance company settled with the victim and in turn sued the previous two employers for misrepresentations in their responses to the hospital’s reference checking efforts.

The lawsuit alleged misrepresentation; the hospital claimed that the previous employers did not give accurate information in response to the reference checks by withholding known information about misconduct and drug use, and that had it received such information, it would not have hired Dr. Berry.

The First Employer — Liability For Affirmative Misrepresentation In Response to Reference Check

The first of the two previous employers was a medical group that was fully aware that Dr. Berry had a drug abuse issue. After this medical group gave him a second chance, Dr. Berry continued to misuse drugs, and the medical group terminated his employment for that reason.

However, this medical group gave Dr. Berry a glowing recommendation in response to the hospital’s reference check.

The Fifth Circuit Court of Appeals stated:

[I]f an employer makes a misleading statement in a referral letter about the performance of its former employees, the former employer may be liable for its statements if the facts and circumstances warrant. Here, defendants (medical group) were recommending an anesthesiologist, who had the lives of patients in his hands every day. Policy considerations dictate that the defendants had a duty to avoid misrepresentations in their referral letters if they mislead plaintiffs into thinking that Dr. Berry was an “excellent” anesthesiologist, where they had information that he was a drug addict.

The Second Employer — No Liability For Silence on Negative Information in Response to Reference Check

The situation with the the second previous employer, a hospital, however, was more complicated. This hospital knew that Dr. Berry was a potential danger, yet chose to say nothing in response to the inquiring hospital’s reference check, hiding behind a claim that it was too busy to provide more details.

The Court noted that it found no case requiring a past employer to reveal negative past information, absent a situation where the past employer made some sort of affirmative misrepresentation. In other words, the hospital did not have a legal duty to voluntarily step up and give negative information, as long as it limited its response to the reference check to basic factual employment data such as dates and job title.

The court stated:

[A]lthough the (hospital) might have had an ethical obligation to disclose their knowledge of Dr. Berry’s drug problems, they were also rightly concerned about a possible defamation claim if they communicated negative information about Dr. Berry.

The Court noted that if such an obligation were imposed upon employers, there would not only be privacy concerns, but it would also create a burden if employers had to investigate each time they received a request for an employment reference check, to determine whether negative information about a past employee was the type that had to be disclosed.

The Bottom Line on the Two Employers’ Responses to Reference Checks

The difference in the way the court viewed the conduct of the two previous employers suggests the following:

• An employer that gives a glowing recommendation knowing it is completely untrue could be liable for misrepresentation.
• An employer that keeps its mouth shut about details would likely not be liable, even thought it knew damaging facts about the employee.
• So if an employer limits its response to a reference check to just dates of employment and job title, a court may find it had no obligation to warn of future dangerousness, provided the employer did not falsely mislead the new employer.

This is why so many employers choose to not say anything specific about an employee’s job performance in response to a reference check.

Certainly, many employers follow the principle “if you don’t have something good to say, then don’t say anything at all.”

About 40 states have laws that give employers specific protection for statements about past employees in response to reference checking requests that are made in good faith and are factual and non-malicious. But employers are still often advised to stick to the facts only (e.g., name, position(s), and dates of employment).

Despite frequently running into such minimally helpful responses, contacting past employers to check applicant references is still one of the most vital aspects of due diligence in the hiring process. It can be as important as doing criminal record checks. Some employers make a costly mistake by not checking past employment because of the expectation that past employers will not give any information but dates of employment and job title. This expectation is not always true.

Moreover, just documenting the fact that a reference checking effort was made will demonstrate due diligence that could be helpful in, for example, a negligent hiring case.

Additionally, verification of dates of employment and job titles is also critical, because an employer must be concerned about unexplained gaps in the employment history — and about any misrepresentations of an applicant’s qualifications. Although there can be many reasons for a gap in employment, if an applicant cannot account for a significant period of time, that can be a red flag.

It is also critical to verify where an applicant has been employed and living in the past because of the way criminal records are maintained in the United States.

Contrary to popular belief, there is no national criminal database available to most private employers. Searches must be conducted at each relevant courthouse, and there are over 10,000 courthouses in America. If an employer knows where an applicant has been as a result of conducting proper reference checks, it increases the accuracy of a criminal records search, and decreases the possibility that an applicant has served time for a serious offense.

The case discussed above is Kadlec Medical vs. Lakeview, 527 F.3d 412 (5th Cir. 2008)

This is a guest post courtesy of ESR, Inc. (Employment Screening Resources), providing online pre-employment screening services for firms of all sizes across numerous industries. For more information on employment screening background checks, see: www.ESRcheck.com

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George Lenard

George Lenard, the originator of George’s Employment Blawg,has over twenty years of experience in all aspects of labor and employment law, including preventive law as well as litigation. His special interests include employment discrimination, sexual harassment, and noncompetition agreements. He is currently a managing partner with Harris, Harris, Dowell, Fisher & Harris, L.C.,., in St. Louis, Missouri, and lives in the suburb of University City with his wife, one daughter and two sons.

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