Reference checking is a key part of most recruitment processes, but it is also a potentially unreliable source of information about a prospective employee.

Privacy laws are such that employers can only seek references from individuals nominated by the person concerned.  It follows that a previous employer can only provide information about a former employee if expressly authorised to do so.

Experienced recruiters are likely to be able to read the tea leaves if a candidate refuses to allow them to speak to their current employer, or if there are gaps in their CV, but there is still plenty of opportunity for misleading or incomplete information to be provided.

For example things get complicated if an employer and employee have entered into an exit agreement which provides that neither party will disparage the other.  It is also common for such agreements to require the employer to provide a positive reference and for the wording of this to be agreed.  This may seem inappropriate where an employer is effectively paying an employee to leave, and could be seen as passing the problem on to another employer.

How then does a prospective employer know whether they can rely on the reference being provided, and what recourse do they have if they are sold a dud?

The first thing is to ensure that the person providing the reference is who they say they are.  There have been numerous instances of candidates giving the contact details of friends who then masquerade as a previous employer.  Ask the person providing the reference to send you an email from their work email address or provide some other form of authentication.

Second, insist that the candidate allow you to speak to their current (or most recent) employer and preferably, their manager. 

The Public Service Commission (formerly the State Services Commission) recently issued “Workforce Assurance Standards” which set out the expectations on state sector agencies when recruiting employees and dealing with disciplinary matters, employment investigations and exits.  The Standards require that the candidate’s last direct line manager is one of the referees wherever possible.  If this is not possible the recruiting employer must at least speak with the HR Manager of the previous employing organisation.

Third, ask the right questions.  Referees are legally required to be honest when providing a reference, but they are not required to proactively volunteer information, including negative views.  Therefore if a recruiter does not ask the right questions, a misleading impression of the candidate may be formed.  One key question that should always be answered is “Would you hire the person again?”.  Listen carefully to the response - if there is any attempt to qualify the answer to this question, it should be further explored.

The Public Service Commission has also, sensibly, mandated that questions be asked about whether a candidate has ever been subject to a serious misconduct investigation, upheld or currently occurring, or been dismissed from their employment.  This is important because it is not uncommon for an employee to leave their employment, either by reason of resignation or an agreed exit, prior to or part way through an employment investigation. 

Candidates for state sector jobs will now be required to consent to their prospective employer seeking details about any past serious misconduct investigations during their employment with any other state sector employers over the previous three years.

The Standards state that if a candidate does not consent to disclosure of these details, this does not necessarily mean they cannot be employed.  The employing organisation can ask the person why they are refusing to consent and take into account those reasons in deciding whether to progress an application.

Coming back to exit agreements, the Standards caution employers against entering into confidentiality and non-disclosure agreements with employees, and provide that these should be written so that the employer is not prevented from responding openly to reference requests from future employers. 

Further, state sector employers are required to consider what interests need to be protected in the circumstances and whether a non-disclosure statement is genuinely necessary to achieve that protection.  The Standards provide that “any restrictions need to be lawful, proportionate and have justifiable reason”.

It is clear that the Public Service Commission has issued these Standards to reduce the likelihood of non-performing or problematic employees cycling through different state sector employers based on inadequate reference checking and screening.

Whilst the Standards are not binding on other employers, there is a lot to be said for all employers taking a similar approach because whilst passing on a problem might be an immediate fix to a particular problem, that same employer may well be on the receiving end at some point too.

Where an employer has reason to believe that they have received a misleading or false reference they could potentially sue the referee under the Fair Trading Act. Alternatively, if the employee was complicit in the provision of the false reference, there may be grounds for terminating their employment. 

However both of these courses of action are likely to be expensive and time consuming.  The far better approach would be to ensure robust reference checking of prospective employees, before they are offered employment.