DRG Memo

By Paul Barada

Reprinted by Permission.

One of the fastest-changing, most misunderstood issues in human resource management is reference checking. Less than 20 years ago, when asked to provide references on former employees, most employers would give only "name, rank and serial number." The rationale: "the less we say, the less anybody will sue."

At the same time, many employers didn't check references of prospective employees, fearing that they would get entangled in defamation or invasion of privacy litigation. As a result, a significant number of employers still don't check references.

The growth in the number of negligent hiring lawsuits over the past few years has compounded the problem of getting and giving good job references. As a result, many HR managers find themselves asking, "What do we do now?"

The first task is to define what the term "reference checking" means. Perhaps the best way to do that is to explain what reference checking is not. It is not merely verifying employment dates. It is not checking credit. It is not talking to friends and neighbors about the candidate. It is not checking court records. It is not testing for drugs. Reference checking is discussing a broad range of topics about the candidate's past job performance as they relate to the position to be filled. In a nutshell, checking references is making sure the candidate is right for the job to be filled.

An unfortunate attitude emerged among employers during the late 1980s. Many, while realizing the need to obtain more information about prospective employees, still maintained a "no comment" policy when asked to provide references for former workers. It was an odd mentality -- they expected other employers to give adequate job references but were unwilling to return the favor.

Frequently, "no comment" policies have a negative effect on former employees who perform well. Many employers won't consider job candidates whose references refuse to talk. Many consider a "no comment" a red flag that something must be wrong. After all, if an employee did a good job, wouldn't a reference be willing to say so?

More and more companies are recognizing the need to check references and to give accurate references. An increasing number of state legislatures have also recognized reference checking as an important employee selection tool. According to the Society for Human Resource Management's Government and Public Affairs Department, at least 26 states have passed laws offering varying degrees of protection to employers who provide good-faith references and who release truthful information about current or former employees.

Concerns about the new laws remain. For example, an employer might abuse them and retaliate against former employees, or a single negative performance review could brand a person as an employment risk. Fortunately, there are safe and easy solutions to both of those problems.

Too many employers seem to feel they are stuck with the references provided by the candidate. HR managers have every right to require each candidate to supply names of specific job-related references, such as former managers, supervisors, co-workers and subordinates -- people the candidate has worked with on a day-to-day basis. Employers should also ask every job candidate to sign a comprehensive waiver, permitting the employer to contact those references.

Job applicants should be asked to provide the names of at least three, preferably four, job-related references. Multiple references help employers evaluate past job performance over time and from more than one perspective. By checking more than one reference, a skilled reference checker can quickly spot a disgruntled boss who wants to retaliate against a former employee. There's also less chance that an employee will be stigmatized for one bad performance review.

Although the reference-checking climate is changing, there are still some people who simply refuse to talk. What can professionals do in those situations?

Most likely, job applicants will ask the appropriate people for their permission to be listed as references. This increases the likelihood of a response. However, if a reference refuses to talk, the reference checker should ask the candidate for other references who will respond, or ask the candidate to convince reluctant references to talk.

Giving accurate information when called as a reference for a former employee is equally important, but many employers refuse to give negative information about former employees, fearing a lawsuit for defamation.

Some employers argue that they have no duty to serve as a reference or to comment about former employees at all, but a court in Florida recently ruled that an employer could be sued for punitive damages for concealing a former employee's violent nature. In the future, more courts will likely be ruling on the duty of former employers to respond to reference calls. In any situation involving references of former employees, honesty really is the best policy.

Telling the truth or giving an honestly held opinion about a former employee is a perfectly lawful thing to do. Defamation suits will not hold water unless a reference intentionally provides false information about a candidate to the prospective employer. Providing a good-faith reference that contains documented facts or honestly held opinions is perfectly safe. Only an employer who intentionally provides misleading information enters dangerous waters.

The careful selection of employees is an important responsibility. A brief telephone call to a reference or perfunctory interview is no longer enough. Thorough reference checking should be central to the hiring process, to provide legal protection for employers and to ensure that the best person is hired for the job.

A REFERENCE CHECKLIST

Following these guidelines can help employers find and select the best candidates and reduce the risk of negligent hiring claims.

Obtain waivers: Have every candidate sign a comprehensive waiver granting the employer or its agents express permission to contact references and anyone else who might be familiar with the candidate's past job performance. Remember that even the most comprehensive waiver does not give prospective employers carte blanche; reasonable care must be used. Employers can still be liable if evidence shows they "knew or should have known" that reference information was false -- an excellent reason to check more than one reference.

Check three references: Always check at least three references. Obtaining multiple references allows prospective employers to look for consistency and to demonstrate that they used reasonable care in the hiring process.

Ask for different types of references: The best references generally come from former supervisors. Peers and subordinates are also excellent references. The best scenario is to gather job performance information from references who have varying perspectives of the job candidate.

Ask about past job performance: When checking references, be sure that all questions relate directly to job performance and nothing else. What job applicants do on their own time should not be an employer's concern, unless it could adversely affect their ability to do the job. One of the best questions to ask is "Would you hire this person again?"

Know the statute of limitation: A reference check should cover a five- to seven-year period. There's not much point in talking to references from ten years ago --most will be hard-pressed to remember much about an individual's job performance, and people do mature and change over time.

Avoid personal references: Personal references are generally a waste of time. Always insist that the candidate provide references who can and will comment on the past job performance.

Verify all licenses and degrees: One of the most common deceptions on resumes and job applications is claiming to hold a degree that was never conferred or a license never issued. Don't take a document or a copy of it at face value. Instead, call the state licensing board or the college or university registrar's office.

Check references by telephone: Mailing a form is better than nothing but not by much. Thorough reference checking includes listening carefully to responses; a person's tone of voice can change the meaning of a response dramatically. Talking directly to references also allows for follow-up questions.

Ask open-ended questions about job performance: Avoid questions that can be answered with a simple "Yes" or "No." Questions such as: "How would you describe Joan's management style?" will provide more information.

Use qualified professionals to check references: People who check references must be trained to listen for the underlying meanings of statements. Whether reference checking is handled internally or by an outside agency, ensure that it is thorough, professional and legal. Never be satisfied with a response such as "She was the best employee we ever had." Follow up with the question: "Could you give examples that show why her performance was so outstanding?"

Avoid these questions at all costs: Never, never, never ask questions about such things as age, race, sex, religion, marital status, health, or national origin. Federal law protects all these categories, and they don't have anything to do with the job performance.

The Fair Credit Reporting Act: Under the latest amendment, 15 USC sec. 1681a(o) excludes from the definition of "consumer reports" communications that are made to prospective employers that are solely for employment purposes. As long as reference reports are prepared only for employment purposes, they are not consumer reports as defined by the act.

Adverse Actions: Employers who prepare, or have an outside agency prepare, reference reports do not have to notify candidates for employment of any adverse action taken as a result of any information contained in the report. Reference reports used strictly for employment purposes fall under the exclusion provided in subsection (o) of the most recent amendment to the Fair Credit Reporting Act and, therefore, are not "consumer reports."

Paul W. Barada is president and founder of Barada Associates Inc., a profesional reference-checking service located in Rushville, Indiana 46173. He is also the author of "Reference Checking for Everyone," published by McGraw-Hill