Instead of the traditionally detailed employment reference, employers are increasingly being asked to provide a letter of reference for departing employees in the form of a Certificate of Termination ("the Certificate") in accordance with the Employment Act 2000 ("the Act").

Section 22 of the Act provides that upon request from an employee, an employer must provide the employee with a Certificate indicating the name and address of the employer, the nature of the employer's business, the length of the employee's period of continuous employment, the capacity in which the employee was employed, the wages and other remuneration payable at the date of termination of the contract and where requested by the employee, the reason for the termination.

Apart from the information required by section 22, there is no other obligation under Bermudian law to provide an employment reference. This does not, however, prevent some employers from providing more details about an existing/former employee's employment history and performance.

But employers should be aware that there are pitfalls ? and are advised to bear them in mind when preparing a detailed reference.

The employer owes a legal duty to the existing/former employee to take reasonable care in the preparation of the reference. The employer does not have to warrant absolutely the accuracy of facts or the validity of the opinions expressed. The employer does, however, have to verify the facts and opinions contained in a reference and ensure that a reference is true, accurate and fair.

Employers should be careful about referring to complaints about the current/former employee where the matter has not first been raised with the person and where a proper investigation has not taken place. This could expose the employer to a claim in negligent misstatement if a prospective employer relies upon the reference and the employee has suffered financial loss as a result e.g. loss arising from a missed job opportunity. Prospective employers could also claim loss (e.g. the cost of recruiting a replacement or the cost of rectifying any mischief) arising out of a negligent misstatement made by the former employer.

Where an employer does not provide an accurate and fair reference to an existing employee the employer may be in breach of the implied duty of trust and confidence owed to the employee. This could allow the employee to resign and claim constructive dismissal under the Act.

An employer may also face an action for defamation where a reference contains a false or unsubstantiated statement that damages the reputation of the existing/former employee. However, for the employee to succeed, he/she must show that the employer was motivated by malice. Practically speaking this is difficult to prove and often costly. Effectively, where an employer gives an honest opinion the employer is protected despite carelessness, impulsiveness or irrationality.

Employers should also avoid giving inflated references. An employer wanting to get rid of an employee may provide a reference that overstates the employee's ability, encouraging the employee to depart on amicable terms. The impact could be grave where, for example, a former employee claims to have been unfairly dismissed and the employer seeks to bring evidence of unsatisfactory performance.

Also, a new employer relying on such a reference may suffer loss where the employee's competence is nowhere near what the former employer represented.

The former employer could potentially be liable for losses incurred by the new employer, especially where the employee is placed in a responsible position.

Although it has become commonplace to provide a section 22 Certificate, employers who intend to provide something more detailed should think carefully about what kind of reference they provide.

The following guidance may be of assistance:

Pick one person from your business who is responsible for providing references. This avoids any inaccurate statements being made.

Ensure references are fair and accurate. Keeping personnel files up to date will assist.

Avoid subjective personal views, particularly those that are malicious.

Avoid making complaints that have not already been investigated and of which the existing/former employee is unaware.

Avoid providing inflated references.

Mark the reference "strictly private and confidential".

Be just as cautious when providing oral references.

The best practice is to adhere to the section 22 Certificate, but even that course of action has its downside. A telephone call from the prospective employer may lead to the former employer providing a more detailed oral reference. Accordingly it is worth keeping the above points in mind even if you are an employer who does not provide detailed references.

Fozeia Rana-Fahy is an attorney in the Litigation Department at Appleby Spurling Hunter. A copy of Mrs. Rana-Fahy's column can be found on the Appleby Spurling Hunter website at www.applebyglobal.com.

@EDITRULE:

This column should not be used as a substitute for professional legal advice. Before proceeding with any matters described herein, persons are advised to consult with a lawyer.