Job detectives dig deep for defamation

HR Magazine,  Oct, 2004  by Diane Cadrain

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Kelli Bowers couldn't believe her ears when she called a New York state business to get a job reference for one of her customers. The employer told her that the only job for which he could recommend the woman was in a brothel or a strip joint. As a result, Bowers' client sued her former employer for defamation, asking for $85 million in damages. The case is still in litigation.

Bowers is the office manager for Referencesetc, a five-employee firm in Hiram, Maine, that is part of a niche industry: organizations that, in exchange for a fee of roughly $80 to $90, will pose as a prospective employer, call a prior employer on an employee's behalf, and find out what the former employer is saying.

Other such firms include Documented Reference Check of Diamond Bar, Calif.; its subsidiary badreferences.com; Allison and Taylor of Rochester, Mich.; and its subsidiary jobreferences.com.

These organizations say they typically use the name of a different affiliated firm when they make their calls so that the person on the other end of the line--who could be an HR manager, but is always someone designated by the client--won't suspect the real motive for the inquiry.

The existence of these firms should raise a huge red flag for HR.

"Everyone who works here is a certified court reporter," said Guy Fowler, marketing director for badreferences.com. "They sit there with their equipment and document everything."

"The fact that these firms are in business suggests that employers have to be super-careful with any request for a reference," said Mark Burak, an attorney with Waltham, Mass., law firm Morse, Barnes-Brown and Pendleton.

"People usually use our services when they don't get jobs they've applied for and are told, 'Your references didn't check out,'" said Bowers. Sometimes the former employer's phone number has changed, and the recruiter gave up trying to find the reference. But about 40 percent of the time, the fact that an employee can't find another job can be traced to a former employer passing on negative information.

What They Do, And How They Do It

Fowler said that when his company calls employers, it uses several different names, depending on the type of company being called. "We may say we're an accounting firm, financial services, legal services ... whatever kind of company we're calling. And we change the names of the companies every year, so we can't be tracked down," he added. "We're very straightforward. We ask the same questions any HR manager would ask. All our employees have backgrounds in HR."

Employees ask for information and listen for subtle clues.

"Sometimes it's not what they say that's negative, it's the way they say it," said Bowers. "It could be their tone of voice, the fact that they hesitate about what to say, or the fact that they refer us to their attorneys."

Then what happens? "About 5 percent of our customers end up in litigation," said Bowers.

Employees can bring two types of claims against bad-mouthing former employers. One is defamation. Or, if the employee is already involved in a discrimination case, the bad reference could be framed as retaliation.

An employer shoots itself in the foot if it slams a former employee who's suing for discrimination, said Gary Phelan, an attorney with Outten and Golden in New York and Stamford, Conn. "Plaintiff employees have a duty to mitigate their damages," said Phelan, explaining that they must look for alternative income while their cases are pending. If the employee can't find another job, the employer potentially winds up paying more in damages.

On the other hand, when employers give only neutral references, the company risks potential liability for not warning other employers that a bad actor is coming their way. Michael Losey, SPHR, former president and CEO of the Society for Human Resource Management, tells of a case in which an employee was asked to resign after bringing a gun to work. His employer gave him a reference that said that he was let go in a corporate restructuring and did not mention the gun incident. When the former employee shot and killed three supervisors at his new job, the estates of the slain co-workers sued the first employer successfully for fraud and misrepresentation in failing to pass on vital information. That case, Jerner v. Allstate Insurance Co., No. 93-09472 (Florida Circuit Court, Aug. 10, 1995), was settled for an undisclosed sum.

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Advice for HR Pros

Job detectives like Fowler, Bowers and Heidi Allison, managing director of jobreferences.com, can offer guidance to HR managers. Here are their recommendations, along with those of employment attorneys:

* Don't allow middle managers to talk to reference checkers. "Middle managers ... don't talk to attorneys, they don't talk to HR, they aren't trained, and sometimes the company has no policy about what to say in response to a call like mine," said Bowers. "One person told me that the ex-employee had an affair with someone at the company, they had a baby together, and the male partner's wife divorced him."