5 September 2014: The Perils of Giving References:

The recent case of Playboy Club London Ltd v Banca Nazionale del Lavaro [2014] is a warning to all employers whose staff may give references without approval.

It is well established (in Spring v Guardian Assurance) that an employer who provides a reference about an ex- employee is under a duty to take reasonable care in the preparation of that reference and may be negligent if the reference is inaccurate and the employee suffers a loss as a result.
In the Playboy case, the Casino claimed that the Bank was negligent because one of its employees gave a reference to the casino for a customer called Mr Barakat saying he was trustworthy up to £1,6m. Playboy Casino accepted Mr Barakat’s cheques and he lost £1.25 million, owever his cheques bounced. The Bank employee should never have given the reference.

The casino claimed that it relied on the Bank reference: the Bank owed a duty to exercise reasonable skill and care and failed to do so. The High Court held that, whether as ‘apparent authority’ or ‘vicarious authority’, the Bank was responsible for the reference which it issued through a conventional channel even though the employee should not have given it. The Bank breached its duty of care to the Casino.

Employers could end up being vicariously liable for references issued by managers beyond the extent of their authority, especially if the employee loses a job offer because of a poor reference. It would be sensible to either a) ensure that managers refer any reference requests to HR or b) get draft references checked by HR before issue. If in doubt, confirm job title and dates of employment only.

Call today on 0207 118 0950 for more information. Reculver Solicitors is a firm of employment solicitors based in Central London. See www.reculversolicitors.co.uk for more information.