The Advisory, Conciliation and Arbitration Service has provided more comprehensive guidance for employers giving employment references in the United Kingdom. Regulated firms are also subject to additional regulatory reference rules.
While the UK Advisory, Conciliation and Arbitration Service (Acas) has previously given limited guidance on employment references in its advisory booklet on recruitment and induction, this is its first comprehensive guidance tailored to employers, particularly on more complex issues such as giving negative references. Regulated firms in the UK, including those subject to the Senior Managers and Certification Regime (SMCR), also need to follow additional regulatory reference rules, as set out further below.
Key Points from the Acas Guidance
- Employment references give important information to potential employers to assist in their decision on whether an applicant is suitable for a position.
- Generally, employers have a choice as to whether they provide references and, if so, how much information to provide.
- Employment references can include basic facts about the job applicant, answer specific questions from the potential employer, and comment on the job applicant’s skills and abilities, character, and strengths and weaknesses. It is generally for the employer to decide how much information it is willing to provide.
- However, employers in certain industries, such as those regulated by the Financial Conduct Authority (FCA), are required to give references by law.
- A potential employer can offer a “conditional job offer,” which can be withdrawn if the employer’s conditions are not met. Receipt of a satisfactory reference is a commonly imposed condition.
- Employers providing references must ensure that the reference is accurate, fair, and not misleading. The job applicant may be able to claim damages in court if he or she can prove the reference was misleading or inaccurate and the applicant suffered loss as a result.
- An employer is entitled to give a reference that states that the job applicant is not suitable for the job he or she is applying for, or that the reason for leaving the job is different from what is stated in the application.
- If a potential employer is unable to obtain references from the nominated referees, it can seek alternative references or may choose to hire the job applicant with a probationary period to assess his or her suitability for the role.
Additional Obligations Under the Regulatory Reference Regime
Prudential Regulation Authority (PRA) investment firms, banks, and insurers have been subject to the regulatory reference regime since March 2017, requiring them to request regulatory references whenever they wish to appoint individuals into various specified roles. From December 2019 this obligation will extend to all firms which will fall within the scope of the extended SMCR. The obligation to provide regulatory references applies to all authorised firms, and it is expected that firms should be able to give references within six weeks of a request.
References must be sought from all former employers for the last six years, regardless of whether the former employer is an authorised firm. Firms must provide the following mandatory information relating to the six years prior to the date of the reference request:
- Details of all roles held, including a summary of responsibilities.
- Any findings that the individual was not fit and proper and the facts which led to that conclusion.
- Details of any disciplinary action taken as a result of a breach of the FCA’s or PRA’s conduct rules. This includes the issue of a formal written warning, suspension (but not suspension pending an investigation), dismissal, and reduction or recovery of remuneration.
All authorised companies will be under a wider obligation to provide “all relevant information” that might be relevant to their assessment of the individual’s fitness and propriety. This is time limited to information within the previous six years, except in respect of serious misconduct. In practice, firms will need to check their records for any serious matters that occurred any time prior to the last six years.
In-scope firms must also revise references given in the last six years to an individual’s current employer if the firm becomes aware of information that would have caused it to draft the reference differently, had it been aware of the information at the time. This should be approached with care to ensure such updates are true, accurate, and fair. In particular, where misconduct has come to light after a former employee departs, the firm should consider how it might give the former employee an opportunity to respond to the allegation before updating the reference.
Importantly, firms must ensure that they do not enter into any arrangements or agreements with employees which limit what can be disclosed.
What Should Employers Do Now?
- Ensure they have a system in place for retaining employee records, particularly in relation to disciplinary actions and misconduct for any future references.
- Conduct full searches through records before providing an employment reference to ensure it is accurate and fair to the job applicant.
- Be mindful to give objective references that are based on fact and suitability to the job role rather than subjective opinions.
- Be aware that whilst the Acas guidance is correct in stating that employers are not generally obliged to give references, an employer should be careful if it deviates from its standard practice of always giving a reference. Depending on the circumstances of that employee’s departure, it could for example be possible for the employee to assert that the refusal of a reference amounts to victimisation.
- For those employers which are subject to the regulatory reference regime, ensure that their obligations are complied with in good time and that appropriate systems are in place to capture all relevant information. This includes ensuring that references issued previously are updated in circumstances where new, relevant information subsequently comes to light.
Contacts
If you have any questions on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:
London
Matt Howse
Louise Skinner