Accounting for Law
Employment & Labour

Courts clarify law on references, benefits for former employees

In recent posts on his Canadian HR law blog, Ontario employment lawyer Stuart Rudner discussed why there is generally no reason not to provide substantive references for former employees and why employers should not roll the dice and leave dismissed employees uninsured during the notice period.

As Rudner explains, providing references for former employees has been a topic of debate in recent years, with the majority of employment lawyers encouraging employers to do so.

“I understand that the concern driving the ‘no references’ policy is one of perceived potential liability. However, this fear is largely baseless and does not support a blanket policy prohibiting positive or negative commentary regarding former employees,” writes Rudner.

Although some employers are concerned about defamation claims with respect to negative commentary in a reference check or other potential claims if the reference costs the individual a job, “as long as the organization providing the reference is acting honestly and in good faith, they will not be subject to liability,” says Rudner. 

Indeed, he writes, a recent Ontario Superior Court of Justice ruling confirmed that truth is a defence to an allegation of defamation and individuals/organizations providing a reference enjoy a qualified privilege that also provides protection as long as they acted in good faith.

“In other words, the reference provider should not be dishonest, vindictive, or otherwise act in bad faith and out of motivation to harm the subject of the reference check. However, as long as they're acting on seeing in good faith, they will not be exposed to liability even if they say negative things,” writes Rudner.

Although some employers also fear liability when providing good references, as if a potential employer subsequently finds that the individual is unsuitable, it might make a claim against the reference provider for misrepresentation, Rudner says liability for a positive reference is extremely unlikely.

“Such a claim has never succeeded in Canada. Again, however, reference providers should act in good faith. If their view is that the subject of the reference check was dishonest and untrustworthy, they should not suggest otherwise. That said, in most cases, employers can find some positive things to say about a former employee,” he writes.

Ultimately, Rudner says employers should also have clear policies that set out who is permitted to provide references, so they can control the information that is being disseminated.

Also upon dismissal, Rudner says it is not at all unusual for people to have their benefits, and particularly their disability coverage, immediately cut off. However, he explains, that is a breach of the common law in many cases, and also a statutory breach in some.

“Some employment standards legislation, such as Ontario’s, requires that all benefits continue during the statutory notice period. And while many insurers will not continue disability coverage for employees who are not ‘actively employed,’ Ontario’s legislation deems the statutory notice period to be active employment,” writes Rudner.

In recent years, he says, courts have confirmed that all benefits, including disability, must continue during the notice period unless there is wording in the employment agreement that provides otherwise.

As Rudner explains, this can be a significant liability for employers, who should take steps to mitigate it.

“Ideally, they would have contracts signed by all employees that limit their rights at termination. If not, then it is even more important to obtain a full and final release post-dismissal. If that is not possible, then the employer may want to consider obtaining alternate coverage for the dismissed employee in order to mitigate their potential liability,” he writes.

Although the law in this regard is clear, says Rudner, many organizations “continue to knowingly roll the dice, leaving dismissed employees uninsured and counting on the fact that they will either not need their benefits, or will not know their rights.

“That is risky business,” he says.

To Read More Stuart Rudner Posts Click Here
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