IN THE WORKPLACE: Job references and the true risks of remaining silent

How ironic that we live in an information-overload world, yet we know so little about newly hired employees.

Most companies follow this hiring sequence: Review resumes, hold interviews, and make the selection. But as a business owner, how much time do you spend with the selected candidates before their first day of work? Do you spend more time researching and buying a new car (or a new TV) than in selecting new employees?

All business owners should want to know as much as possible about a person before making a job offer. After all, the investment you are making is enormous. Consider, too, the huge costs in losing an employee when you factor in the impact of dealing with poor performance, termination risks, finding a replacement, training and trying to reach an acceptable performance level.

Yes, you can do a Google or social-media search on an applicant. But attorneys caution you about discovering too much about a candidate because you risk gaining sensitive information that, if used, can support an unsuccessful candidate’s discrimination claim. I believe employers are excessively alarmed about that risk, as few legal actions are filed for this reason.

You can hire a background-search company. That is especially helpful if it’s relevant to know whether your candidate has a criminal record, as is the case with one in three adults in the United States. But few background-search companies have the expertise to compile useful reports on candidates. Employers should seek out the rare good companies and use them, rather than opting for the least-expensive check available. You should not be penny-wise pound-foolish when hiring a new employee.

The best information about a candidate can come from his or her prior employers. Unfortunately, most employers have “name/rank/serial number” rules about current or former employees and provide minimal information in response to a reference request. Why does this happen? It could be the fear of defamation lawsuits, but that risk is overstated by lawyers who prefer to alarm their clients. Another reason is that, in Indiana and other states, employers fear being sued for “blacklisting.” In Indiana, “blacklisting” was made unlawful in 1889.

What is blacklisting? It is doing anything that prevents a terminated employee from obtaining future employment. But I’m not aware of any prosecutor who has filed a charge for violating the blacklisting law. It might be time for the Legislature to consider whether the law should be amended to delete that anachronistic risk.

Employers need to know that the blacklisting law provides immunity from civil liability if they disclose truthful information in writing about the circumstances of a former employee’s termination. Of course, truth is in the mind of the beholder, isn’t it? This immunity is lost if the former employee proves the former employer knew the information it provided was false. Therefore, while the law seems to give a safe harbor, the risk of a lawsuit still exists—even though such suits are still rare in Indiana.

The law also allows a former employee to obtain copies of written communications provided by the former employer to the prospective employer. This, too, creates a disincentive to provide information about the former employee. This presents another opportunity for the Legislature. Other states have raised the bar higher, requiring a former employee to demonstrate not just falsity but also that the former employer acted with a malicious motive in providing information to the prospective employer.

We should encourage companies to be more forthcoming about their former employees. The fact is that the risk of lawsuits is exceedingly low. From a societal perspective, the free and open exchange of this kind of information would create enormous benefits for all employers. It would lead to better and more informed hiring decisions. An employer’s investment in the new employee would be more secure. The potential for employment terminations due to unsatisfactory performance should diminish as more reliable hiring decisions are made. It should also enhance the ability of talented individuals to gain their desired employment positions.

I realize that what I am suggesting would change firmly established practices, but we should have this discussion. As popular as Yelp is, I wouldn’t count on its creating a five-star employee-rating app. Until then, business leaders can work together to change what has become a culture of frightened silence about former employees.•

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Blickman is a partner in the Labor and Employment Group at Ice Miller LLP.