Spotlight on references—Obligations and risks for employers

It is common for employers to receive requests for the provision of a reference when an employee is leaving, or has left, the company. References are of benefit to both employees and employers operating in the labour market. It is important that employers are aware of their rights, obligations and the potential risks that are involved when providing references to employees or a third party.

There is no general legal obligation for employers to provide references, however some industries may require the provision of prescribed information as part of their compliance obligations. Any refusal by an employer to provide a reference should not be made on a discriminatory basis—gender, race, marital status, pregnancy, family status or disability. Furthermore, not providing a reference because of complaints regarding alleged discrimination could amount to an act of victimisation.

If an employer chooses to provide a reference, they must ensure that the information provided is accurate and not misleading. Inaccurate or misleading information could expose an employer to legal action for reimbursement of economic loss by the employee and potentially by the company or individual who relied on the reference.

In the 1994 English House of Lords case of Spring v Guardian Assurance plc & others, an employee brought a claim in respect of a reference that was negligently provided by his previous employer. The reference described him as "a man of little or no integrity and could not be regarded as honest.". As a result of this reference, the employee had difficulties obtaining employment. The House of Lords held that if an employer is prepared to provide a reference, the employer owes a duty of care in its preparation because the employer possesses special knowledge of the employee's character, skill and diligence during employment. Accordingly, the reference should be accurate, honest and not negligently written. The House of Lords held that it was reasonably foreseeable that damage would be suffered if the reference was prepared without reasonable care. Furthermore, it was held that there was enough "proximity" between the provider of the reference and the employee to permit the recovery of the employee's economic loss. It is likely that this authority would be followed in Hong Kong.

There are no legal requirements as to what should or should not be included in a reference, however, in light of the decision in Spring, employers may prefer to keep the reference succinct. Some employers only provide information relating to the employee's job title and the period of employment with the company. If an employer wishes to include additional information, care should be taken to ensure that the content is accurate.

When considering the content of the reference, employers should be aware that an employee can make a data access request under the Personal Data (Privacy) Ordinance (PD(P)O) for a copy of the reference. The only exemption from the requirement to provide a copy of a reference is limited to personal references and only until the individual has been informed about the outcome of their application for a new role. Therefore, where an employer provides the reference on the company's behalf, the reference will fall outside the scope of the exemption and will need to be disclosed to the employee.

Where a personal reference is provided, it should be made clear that it does not represent the views of the company and is provided in a personal capacity only. To avoid confusion, the personal reference should not be printed on the company's letterhead. In contrast, if the reference is provided on the company's behalf, it should be printed with the company's letterhead and signed by a person with the authority to provide such a reference.

When providing a reference to an ex-employee's potential new employer, an employer should be aware of its obligations under Data Protection Principle 3 of the PD(P)O. This requires that personal data must not be used by an employer for any purpose other than the purpose for which the data was to be used at the time of collection, without the employee's consent. This consent should be broad enough to cover provision of specific information, such as the employee's salary. Failure to adhere to this requirement may render the employer in breach of the PD(P)O and the ex-employee may bring a civil action seeking compensation or file a complaint with the Privacy Commissioner.

The Privacy Commissioner has issued guidelines for the provision of references under the Code of Practice on Human Resource Management. Although the Code does not have the force of law, a failure to adhere to its terms will adversely affect the employer in any proceedings for a breach of the PD(P)O. The Code recommends that references should only be provided if the employee has consented or if a third party requesting the reference has obtained the prior consent of the employee.

Keep proper employment records including the employees' commencement dates, employment contracts and payroll records, to ensure that the facts stated in the references are true and accurate.

Consider implementing a reference policy, which contains a consistent approach to the handling of references—including the contents of the reference and who will have authority to sign. Put in place a review mechanism whereby the contents of references can be checked to ensure they are true and accurate.

Ensure that members of staff are aware that if they provide references in their personal capacity, such references should make it clear that they do not represent the views of the company and are not printed on the letterhead of the company.

Before providing a reference to an ex-employee's potential employer, obtain the prescribed consent of the employee. In particular, ascertain what facts can or cannot be disclosed to the potential employer in the reference. A written record of this to guide those providing references would be recommended.