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Employment Law Blog: To Reference or Not to Reference? - That is Almost Always the Question - March 6, 2014

The area of providing a reference for prior employees can be a mine field for employers. There is a wide array of conflicting requirements, thought processes and goals whenever we talk about references. Give a bad reference and you may open yourself up to claims of defamation, or as is true of many of our smaller employers, PR backlash from community members and the family of the person that was terminated. Fail to let your peers know that an employee was a bad employee and you may find yourself alone at a table at the next trade association meeting. Failure to let somebody know that someone was a predator or violent may lead to tort claims. Further, if you do not give a professional employee or someone in upper level management an actual reference he/she may never be able to get another job and you may be paying job service for the absolute maximum period of time.

This mass of conflicting needs, potentials and requirements creates difficulty for employers in trying to determine when and how to give references. Many employers in Iowa simply opt for the name, rank and serial number process where all employees are simply listed with their prior job title and dates of employment with no additional information provided.  Some employers stretch a little bit and provide a statement as to whether or not someone is eligible for re-hire, hoping to skirt concerns by not providing details but instead providing just enough information to let a future employer know there is a potential red flag. Based on a new case filed against Finley Hospital, “not eligible for re-hire” may have more far reaching consequences than previously anticipated. In the case, Flanagan, et al. v. Finley Hospital filed in the Iowa District Court for Dubuque County, two nurses filed suit alleging blacklisting under Iowa Code §730.2, as well as intentional interference with a prospective contractual relationship. The basic claim here is that Finley Hospital placed these nurses’ names into a database with a note never to rehire them. The nurses believe that the database is accessible by several hospitals and clinics across the state of Iowa and that as a result of the note of no rehire they have been unable to obtain employment in Iowa.

Iowa Code §730.2 is fairly succinct. It states it is illegal “for a company or corporation to blacklist, or attempt by word or writing or other means whatever to prevent a discharged employee from obtaining employment with another person or company. If a company is guilty of blacklisting, that company is liable for treble damages.” Taken on its face, this section would essentially prohibit any form of negative reference for employees. Any negative statement could be viewed as attempting to prevent the discharged employee from obtaining employment. However, Iowa Code §730.1 authorizes an employer to disclose the reason for an employee’s discharge so long as this reason is furnished in writing, on request from the prospective employer, and is “a truthful statement as to the cause of the person’s discharge . . .” However, truth is frequently in the eye of the beholder and very few terminated employees agree with their employer as to the reasons for such termination. Iowa Code §91(b)(2) also applies and adds an additional wrinkle by changing the idea of the statement being protected if it is truthful to one where the employer’s representative must have acted reasonably “in providing the work-related information.” The statute goes on to define unreasonable action as any statement or information which violates a civil right of the current or former employee, if the information is provided to someone who doesn’t have a legitimate need to know or the work-related information “is not relevant to the inquiry being made, is provided with malice or is provided with no good faith belief that it is true.” This leaves an employer to determine relevance, truthfulness and whether or not more than the minimum necessary information has been provided. No wonder employers stick to name, rank and serial number.  The statutory language in practice isn’t much of a safe harbor.

The issues in this case may hinge on whether or not another hospitals’ ability to review a record or place an inquiry into a system where an employee is listed is in fact a request. It would be difficult to argue that the information is not “in writing” but what constitutes a request may be in question. From an employer’s standpoint, if another employer accesses a system and reviews it, the employer might reasonably presume that this is a “request.” Further the idea of listing an employee as not eligible for re-hire has some significant value to many employers. It helps assist the employer from avoiding rehire in a different division or department when supervisors haven’t properly communicated that a prior employee has been terminated. It can also provide valuable historical information to help create consistent policy application. Still, pending the outcome of this case, employers need to think carefully about their reference process and how they share the information relating to discharged employees.