17 November, 2016
Employers are often asked to provide references for current and former employees. Providing references can present risks, particularly if the employee is joining a competitor or is otherwise departing on acrimonious terms. In Ramesh s/o Krishnan v AXA Life Insurance Singapore Pte Ltd [2016] SGCA 47, Singapore’s Court of Appeal considered the standard of care required of employers when issuing employee references.
What Happened?
Mr Ramesh was engaged by AXA in 2005. From late 2010, the parties’ relationship deteriorated. After negotiations, AXA agreed to record Mr Ramesh’s departure from AXA as a resignation.
Shortly after, Mr Ramesh applied for a position at Prudential and received an employment offer subject to conditions, including a successful reference check. Prudential sought a Representative Notification Framework Licence (RNF Licence) from the Monetary Authority of Singapore (MAS) and asked AXA to complete an industry standard Reference Check Form (Form) in respect of Mr Ramesh’s appointment, in accordance with regulatory requirements.
Prudential requested further details from AXA about its Form, which contained details about compliance issues and Mr Ramesh’s performance ratings. AXA did not address Prudential’s queries, but referred to a separate complaint made about Mr Ramesh’s “aggressive” behaviour. Thereafter, Prudential continued to seek clarification from AXA of the information provided on the Form. Three months later, AXA sent a letter to Prudential about certain aspects of Mr Ramesh’s performance, but still did not answer Prudential’s question about how certain ratings had been calculated.
Further, AXA expressed adverse opinions about Mr Ramesh which suggested unethical practices that were detrimental to clients’ interests. Two months later, the MAS advised Prudential that it was prepared to issue a conditional RNF Licence in respect of Mr Ramesh, but Prudential decided that it did not want to proceed with its application for the RNF Licence, or with Mr Ramesh’s employment offer.
At first instance Mr Ramesh brought proceedings against AXA for defamation, malicious falsehood and negligence.
The court dismissed all claims, and Mr Ramesh appealed on the negligence claim only.
The decision – standard of care
The Court of Appeal summarised the standard of care required of employers in preparing references for current and former employees as follows:
- employers must exercise reasonable care to:
- ensure that the facts in the reference are true and any opinions are based on and supported by true facts
- ensure that the reference does not give an unfair or misleading overall impression of the employee, e.g. where the manner in which facts and opinions have been presented gives rise to a false or mistaken impression, even if the discrete pieces of information are correct; and
- disclose additional information relating to information that has been shared, where withholding such additional information would render the disclosed information incomplete, inaccurate or unfair
- employers are not required to give a full and comprehensive reference, including all material facts about the employee
- in assessing what constitutes “reasonable care”, the courts will consider the gravity of an adverse suggestion or inference in a reference, such that the greater the gravity, the more closely an employer’s conduct will be scrutinised to see whether it took reasonable care to ensure that the suggestion or inference is based on true facts and is fair
- and reasonable; and
- employers should generally not disclose an allegation against an employee that:
- the employee had no knowledge of and had not been given an opportunity to respond to; or
- was not conveyed to the employee because it was found to be baseless unless it is obliged to do so, in which case the employer should state in both the reference and to the employee that the allegation was dismissed as baseless and that the employee was not informed of it.
The Court confirmed that these principles also apply to principals and agents, such as AXA and Mr Ramesh.
Breach of duty of care
The Court found that AXA had breached its duty of care to Mr Ramesh in preparing its reference, for reasons including that AXA had:
- referred to different performance measures in its answers, the outcome of which would cause a reasonable person to mistakenly perceive Mr Ramesh as not competent
- withheld relevant information and failed to respond to Prudential’s requests for information
- provided information on compliance issues that was incomplete, misleading and inaccurate, and which unfairly gave rise to the inference that Mr Ramesh had been involved in serious misconduct and that the conduct had been investigated by AXA; and
- made serious allegations of, and allusions to, potential ethical violations by Mr Ramesh and the advisers under him which did not appear to be substantiated.
Causation
To establish causation, Mr Ramesh had to show that “… by reason of that negligence he has lost a reasonable chance of employment … he does not have to prove that, but for the negligent reference, [the prospective employer] would have employed him.” The Court found that Prudential’s eventual decision not to hire Mr Ramesh arose from delays concerning his job application and RNF Licence, which in turn had been caused by AXA’s delays in replying to Prudential’s requests for information regarding the Form and subsequent correspondence with Prudential and the MAS. The appeal was allowed.
Implications
This decision is the first time that the Court has laid down a definitive statement on the duty of care that employers must satisfy when issuing references. It is a timely reminder that an ill-prepared reference can have significant consequences for employers, particularly in highly regulated industries. On receiving a request for a reference, employers should take care in preparing a response, involve relevant stakeholders, such as HR or Legal, early on, and respond swiftly.
Ashurst gratefully acknowledges the contributions of Stephanie Wee and Carl Lim of Shook Lin & Bok in preparing this article.
For further information, please contact:
Sumin Ahn, Ashurst
sumin.ahn@ashurst.com
