It is true that an employer has no legal obligation to provide a letter of reference on behalf of a past employee. A company may freely decline to provide a reference letter with impunity.

Tombstone Letters

Many companies adopt a policy to either decline to provide references or agree to allow a letter which confirms the dates of employment and positions held. If the employer is, at the same time, facing a lawsuit for wrongful dismissal, such a letter may miss the point. It may well be to the employer’s advantage to assist its past employee find alternate employment as soon as possible.

The Right to be Wrong

An employer also has the right of “fair comment”. That is, as long as the reference it provides for an employee is not fabricated or maliciously made, the company may make statements which may be not be completely accurate, as long as the company is sincere in its belief. This issue was once again recently stated by the Ontario Court of Appeal.[1]

If the employer should cross the  line and provide a knowingly false reference, the employee in question could sue that employer for defamation. The resulting damage claim could be quite severe, including not only compensatory damages for injury to reputation, but also punitive damages to punish the company for such conduct.

The Bargain for a Reference

In cases where an employee has been terminated, it is a good idea for that employee to bargain for a complimentary reference letter to be provided as part of an overall settlement agreement with the employer. Any related minutes of settlement should also state that the company will provide verbal references in a manner consistent with the written reference letter.

Such agreements put the agreed reference letter into a new context. That letter is now part of a larger contractual agreement. The employer no longer has the right of fair comment or the right to be honestly wrong. If the employer departs from the agreed reference, it can be sued, not for defamation, but for breach of contract. That could potentially be a large claim. Assume for example, a new job offer has been made which is contingent upon a satisfactory reference. The employer’s failure to comply with this contractual commitment may expose it to a claim for considerable lost income, plus a possible claim for aggravated damages.

No Strings Attached

An employer’s agreement to provide a reference letter should never be tied to payment of a statutory minimum severance payment or other employment standard. Stating, for example, that “we will give you a reference letter only if you drop your claim for {vacation pay, earned overtime, earned bonus, earned salary, statutory severance}” will not only negate any agreement reached, but also expose the company for bad faith damages.

Serious Misconduct

Employees should note that there may be different considerations at play when the company legitimately believes that a former employee has committed serious wrongdoings. In such cases, the employer may, for good reason, be reluctant to provide an overall positive reference letter for fear that a new employer may seek a remedy against it. Although such claims are rare, both parties may then agree to use a tombstone letter, aided by a statement that such a letter is consistent with its business practice of refusing to provide reference letters.

Looking Outside

It should not be forgotten that the employer is not the sole source of the reference. Often business contacts which have done business with the employee will be able to volunteer positive views to assist the employee in his or her job search. These references are often considered more valuable than that of the employer as they are untainted and unbiased.

Employers’ View

This issue of a reference letter is not as simple as may appear at first blush. Get advice and understand your obligations and your rights.

Employees’ Take Away

If you are facing termination, there will be a need for a positive reference letter to assist you transition to new employment. This issue may be complex. Learn about your rights.

Get Advice Before You Act

This issue is deceptively difficult. It is important to understand all aspects of this question. Contact the offices of Toronto employment and labour lawyers Mallins Law. We regularly advise employees and employers on legal workplace issues. Contact us online or by phone at 647-792-0310 to schedule a consultation.




[1] Kanak v Riggin OCA; Leave to appeal to Supreme Court of Canada denied