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Davis Brown Employment and Labor Law Blog

What Crawled Out from Under That Rock- Negligent References and Reporting Issues - October 13, 2017

Many employers faced with an employment termination decision look for the simplest process for termination, one that causes the least hardship for the employee and mitigates the most litigation risk for the employer.  Basically, employers, like everyone else, are looking for the easy-way out.  As an October 12, 2017, USA Today article about VA Hospital termination showed, the easy-way can sometimes cost you more than you are willing to pay.

The USA Today article spotlights terminations at VA Hospitals across the country, including fining providers apparently accused of poor medical care or in some instances violations of state or federal law. 

Actions questioned by USA Today and public watchdog groups include the employer’s decision to remove negative items from personnel files, allowing resignations instead of terminations, providing neutral references rather than references which fully articulate problems with the employee’s performance, and other potentially more serious allegations, including failure to report to the medical provider National Practitioner’s Data Bank or ethical boards governing the licensure of various providers such as physicians and nurses. On the Health Care Blog, we cover issues specific for healthcare providers in relation to terminations and reporting.

Negligent references

Absent the issues of healthcare providers to report certain problematic conduct, the first question a general employer might face is that of negligent references. Iowa law provides limited immunity for an employer providing references in “good faith” so long as the reference is not made in violation of Iowa’s anti-discrimination laws or in retaliation for asserting a legally protected right. 

This limitation on immunity encompasses a wide array of potential allegations on the part of the terminated employee and creates a substantive number of “what ifs” for the employer providing the reference.  In many instances, you as the employer, may believe that an employee is engaged in a bad act, but cannot prove that belief beyond a reasonable doubt.  In fact, many frustrated employers have had that exact experience when they are fighting unemployment compensation claims.  You believe this employee diverted drugs, stole money, or damaged property but you can’t prove it.  This, and the concern that the employee will allege the reference was a violation of law, leads many employers to give only neutral references or no references at all. 

Reporting criminal activity

In many instances, there is no clear cut legal requirement that employers must report criminal activity on the part of your employees.  If you discover an employee stealing from you, you can terminate the employee regardless of whether you decide to call the police.  Although your insurance company, particularly if you are filing claim, would probably prefer that you file a police report. 

If two employees are engaging in a shoving match, you could certainly report them to the police as well as terminate the employees but again, you are not required to report this under law.  As an employer, how would you begin to discuss that in a generalized reference conversation? The complexity of this issue frequently leaves you with the neutral reference and potentially the statement that this employee is “not eligible for rehire?”  Note that the term “not eligible for rehire” can also carry with it litigation risks, particularly in the circumstance where employees are not eligible for rehire due to substance abuse or similar concerns as this may later implicate ADA questions.

Remember, as an employer, that some items are simply too severe to ignore. This might include general assault, sexual assault, and other conduct of this type.  If faced with a situation involving significant issues on the part of an employee, contact your lawyer to assist you in making a plan and get help navigating the various complexities of a termination of this type. This could include reporting to police or safety planning for other employees.

Personnel files

One issue highlighted in the USA Today article is removing items from a personnel file.  Regardless of whether you are a healthcare provider or another type of employer, this is rarely a good idea. 

First, base level investigative documentation should not generally be in a personnel file.  Such documentation could frequently reveal names or other identifiers as part of the investigative process that may result in HIPAA violations, Red Flag Rule issues, or retaliation by the accused employee if he or she accesses the file. 

Under Iowa law, current employees have a right to access their personnel files, terminated employees do not.  Additionally, no employee has a right to automatically access every piece of documentation that an employer may maintain.  In general, investigative notes are kept in a confidential file as part of the investigation while final determinations such as discipline, are in the personnel file.

Removing items from a personnel file or destroying investigative files leaves the employer open to a wide array of concerns for litigation.  Even if the employee has signed a settlement agreement and has agreed not to participate in a lawsuit involving the employer and his/her termination, the EEOC and Iowa Civil Rights Commission or other agency has the right to file complaints on behalf of the agency for inappropriate conduct on the part of the employer.

If you have destroyed the file you will have no way to prove your defense.  Employees can also be called on to be witnesses of other cases or as comparatives in a different or broader discrimination claim.  Without the documentation, you cannot defend yourself.  There are other instances where such documentation might be needed, including if the employee reapplies for employment.  Many of your employees have long memories and will know about the prior issues but you won’t have the documentation for new managers to review. 

Bottom Line

Employers face a range of issues when terminating an employee. Make sure that you consult with your attorney to craft your termination, documentation, and reporting policies to ensure you are not opening yourself up to a litigation risk.