Can You Give a Bad Reference Without Being Sued?

Giving a reference for a former employee can feel like walking a tightrope. You want to be fair and honest, but there’s always the fear of potential legal repercussions. Many employers now stick to giving “neutral” references — only confirming dates of employment and job title. This policy is legally safe and helps avoid disputes, particularly with difficult employees. But is there a way to be more transparent while still staying on the right side of the law? Absolutely. Let’s explore how you can manage this delicate balance with a few practical insights and case studies.

The Rise of the “Neutral” Reference (Rather than a Bad Reference)

Rather than give a bad reference, a neutral reference is often the safest route. It provides only the most basic information: dates of employment and job title. Many businesses adopt this policy to mitigate risks, especially in cases where they might have concerns about an employee’s past performance. This approach is legally sound and prevents claims of defamation or discrimination. However, for recruiters and hiring managers, a neutral reference can raise red flags, potentially costing candidates job opportunities.

Case Study: The Impact of Neutral References

A few years ago, a mid-sized tech company in London, facing a wave of litigation threats over giving a bad reference, switched to a strict neutral reference policy. This initially seemed like a good move — the legal department was relieved, and managers avoided difficult conversations. However, the unintended consequence was that it became harder for the company to support its high-performing alumni. Talented employees who had left for new opportunities found it challenging to secure their next roles without the backing of a strong reference. This policy also negatively impacted the company’s reputation as a good employer. Eventually, the company revised its policy to allow more detailed references under controlled conditions, balancing legal safety with fairness.

So, how can you stay transparent while avoiding legal trouble? Here are five ways:

1. Be Honest from the Outset and Don’t See it as a Bad Reference

If you can’t, in good conscience, recommend an employee for a new role, it’s best to be upfront with them. Inform them directly that you’re unable to provide a positive reference (giving a bad reference is probably not a good idea). This gives the employee the chance to seek another reference and prevents any surprises. A case in point is a large retailer in Birmingham that adopted this policy. By having an honest conversation with departing employees, they reduced the number of disputes and set clear expectations, which led to fewer legal claims and smoother exits.

2. Cite Time as a Factor

If the employee worked for you several years ago, you could decline to provide a detailed reference on the grounds that it was too long ago to remember specifics accurately. Many organisations use this approach, citing concerns about providing outdated or potentially misleading information. For example, a financial services firm was once sued for defamation based on an outdated reference. They now refuse all references older than five years, which has successfully shielded them from further legal trouble.

3. Stick to Your Company’s Reference Policy

If you choose to give a neutral reference, be prepared to clarify if this is the company’s standard policy or specific to the individual. In a recent survey by Refind, over 60% of HR professionals reported that reference checkers often asked why a reference was neutral. This demonstrates the importance of consistency. One healthcare organisation found that explaining its neutral reference policy upfront built trust and helped avoid any legal ambiguity.

4. Be Factual and Objective

If you do decide to give a reference that includes feedback, ensure that you stick strictly to facts. Focus on observable behaviour and documented outcomes. For instance, rather than saying, “They were a poor performer,” specify, “They did not meet their sales targets for three consecutive quarters.” An example from a large law firm illustrates this point: after a lawsuit over a subjective reference, they trained their managers to provide only fact-based information, which significantly reduced legal risks.

5. Communicate Performance Regularly

Make sure employees are aware of where they stand regarding their performance well before they leave. If performance issues are addressed regularly, an employee will know what to expect from a reference. A global engineering firm found that by integrating performance feedback into quarterly reviews and keeping records, they were better prepared to provide accurate references. This practice has helped them avoid contentious disputes and maintained their reputation.

Key Takeaways

Navigating references can indeed feel like a minefield, but sticking to these strategies can help you stay clear of legal trouble while remaining honest and transparent:

• Be upfront and clear with employees about their potential reference.
• Use time as a justification to avoid referencing older employees.
• Consistently apply a neutral policy or make clear the context of neutrality.
• Stick to facts and documented evidence to avoid subjective assessments.
• Maintain regular performance communications to set expectations clearly.

By balancing transparency with caution, you protect your organisation from unnecessary legal risk while supporting both past and future employees effectively. In the end, being a good employer isn’t just about avoiding lawsuits — it’s also about maintaining trust and integrity in every step of the employment relationship.

OUR FOCUS ON LONG-TERM PARTNERSHIPS

At re:find we have been in Executive Search for over 20 years. We believe that recruitment is not a one-off transaction but rather a long-term partnership. We aim to build long-term relationships with our clients, providing ongoing support and advice to help them find and retain the best talent for their organisation.

In addition, as a business, we understand that every organisation is unique and that there is no one-size-fits-all solution when it comes to recruitment. That’s why we offer bespoke recruitment solutions that are tailored to meet the specific needs of each client. Whether you need help with a single hire or a full recruitment campaign, we can help.

We are committed to providing our clients with the highest quality service. As part of this, we ensure that we take the time to understand your organisation’s culture and values, as well as the specific skills and experience needed for each role.

For more information on our executive search practice and our CCS framework
please get in touch with our Managing Director, James Cumming.