Legal Briefing

Cost of careless talk

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Human Resources | 01 September 2011

In Spring v Guardian Assurance [1995], the House of Lords held that an employer who provided a reference owed an employee a duty to take reasonable care in the preparation of that reference. Therefore, failure to do so could lead to a claim for negligence if the employee suffers damage as a result.

HR departments and in-house legal teams often have safeguards and checks in place to ensure that care is taken when providing a reference. Of course, it is only right that a personal reference should be composed thoughtfully and fairly. Those safeguards are also a sensible measure against the potential threat posed by disgruntled ex-employees.

This article focuses on a recent case that extends the circumstances in which an employer might be held to owe a former employee a duty of care when communicating with the individual’s new employer. It is now clear that the level of care taken by many businesses when preparing references should also be adopted for wider communications that refer to former employees.

MCKIE V SWINDON COLLEGE [2011]

Background

The legal principles examined and the conclusions reached in McKie are important for all employers. However, it is helpful to first review the facts of McKie to recognise the type of circumstances faced by Swindon College, the employer.

Between 1995 and 2002, Robert McKie was employed by Swindon College, a further education college, as a contextual studies co-ordinator. During this period, McKie was relatively successful and earned two promotions. In 2002 McKie left Swindon College and took up a post at another college. In 2007 he moved to a different college. A year later, in May 2008, he accepted a post at the University of Bath.

The University of Bath oversees degree courses in several local further education colleges. Part of McKie’s new role at the university was to work closely with those colleges, including Swindon College.

Soon after McKie started his new job, the HR manager at the University of Bath received an e-mail from the HR manager at Swindon College. As a result of the contents of that e-mail, McKie was summarily dismissed by the university.

The judge commented that both the decision to dismiss McKie and the procedures adopted in reaching the decision were unfair. However, at the time of his dismissal McKie had only been employed by the University of Bath for a few weeks and was still in his probationary period. As a result, he was not protected by the unfair dismissal provisions of the Employment Rights Act 1996. (To bring a claim for unfair dismissal, an individual must usually have been employed at the organisation for at least one year.) Therefore, the University of Bath could dismiss McKie with relative impunity.

Seeking redress for what he perceived as a wrong, McKie therefore brought a claim against Swindon College in relation to the e-mail that its HR manager had sent to the University of Bath.

The e-mail

The relevant e-mail was sent to the University of Bath in June 2008. It read:

‘Further to our telephone conversation, I can confirm to you that we would be unable to accept Rob McKie on our premises or delivering to our students. The reason for this is that we had very real safeguarding concerns for our students and there were serious staff relationship problems during his employment at this College. No formal action was taken against Mr McKie because he had left our employment before this was instigated. I understand that similar issues arose at the City of Bath College.’

Despite the apparent lack of any detail in the e-mail, the University of Bath clearly considered Swindon College’s allegations of ‘very real safeguarding issues’ and ‘serious staff relationship problems’, and Swindon College’s refusal to allow McKie on to the premises, to be sufficient grounds to summarily dismiss McKie.

Witness evidence

Both parties relied on witness evidence to demonstrate their arguments about the accuracy of the e-mail.

The court was impressed by the evidence of witnesses in support of McKie. Colleagues, senior management and even the then principal of Swindon College testified that McKie was a well-regarded, highly respected member of staff. Nobody appeared to be aware of any particular problems arising between McKie and students or staff. McKie had received an excellent reference from Swindon College when he left in 2002.

By contrast, the evidence of witnesses in support of Swindon College was openly criticised by the judge. Witnesses were reduced to claiming, for example, that students ‘did not like’ McKie and that he was in the habit of deliberately moving post from one pigeon hole to another. The court described some of this evidence as ‘bordering on the ludicrous’.

Swindon College also relied on the evidence of a psychologist, who claimed to have written a report about McKie at the time he was employed by the college. However, the court noted that the alleged report appeared to have been lost and that nobody employed by the college at the relevant time had been made aware that such a report existed.

Unsurprisingly, the court decided that the contents of the e-mail sent by Swindon College were not supported by any evidence. The court also concluded that the circumstances surrounding the sending of the e-mail ‘flouted elementary standards of fairness, diligence, proper enquiry, natural justice’.

It is worth considering the nature of the evidence that Swindon College relied upon. The main impediment Swindon College faced was that it could produce very little (if any) contemporaneous evidence to support its position. In those circumstances, relying on witness evidence alone is a risk. Human memory is often unreliable, despite the best efforts of witnesses. The court’s approach to oral evidence was described by Lord Pearce in Onassis v Vergottis [1968]:

‘It is a truism… that with every day that passes the memory becomes fainter and the imagination becomes more active. For that reason a witness, however honest, rarely persuades a judge that his present recollection is preferable to that which was taken down in writing immediately after [the event] occurred. Therefore, contemporary documents are always of the utmost importance.’

In McKie, a contemporaneous record of McKie’s alleged transgressions (for example, a written warning on his personnel file) may have been sufficient to entirely reverse the conclusions that the court reached on the basis of witness evidence alone.

Formulating a claim

The court accepted that McKie had suffered damage in the form of lost income as a result of the e-mail. As stated above, the court also accepted that the e-mail was inaccurate. Therefore, the key question before the court was whether the law provided a remedy for McKie.

Defamation

Firstly, the court considered defamation. An untrue statement that disparages an individual’s reputation may amount to defamation. In a written form, this is known as libel. However, one defence to a claim for defamation is that the communication attracts ‘qualified privilege’, which means that the person making the statement has a legal, social or moral duty or interest to make the statement and the person receiving the statement has a corresponding duty or interest to receive it. However, the privilege is lost if the statement is made with malice.

Applying those criteria here, the court considered that the e-mail may well attract ‘qualified privilege’. McKie also rightly accepted that there was no malice in the e-mail, at least in the legal sense. In the circumstances, the court considered it unlikely that the e-mail could amount to defamation.

Negligent misstatement

Liability for negligent misstatement was first recognised by the courts in Hedley Byrne & Co Ltd v Heller & Partners Ltd [1963]. Essentially, where there is a special relationship between two parties, party A will owe party B a duty of care to not carelessly make a false statement to party B. If party A breaches that duty and party B relies on the statement and suffers loss, a claim may be brought by party B.

However, in McKie Swindon College had made a statement to the University of Bath. The university relied on this statement to dismiss McKie. As the recipient of the statement, the university had not suffered any loss. The party that suffered loss was McKie, the subject of the statement. Therefore, the question before the court was whether the college owed a duty to the claimant in respect of the information provided in the e-mail.

Duty of care?

The court considered whether or not the e-mail constituted a reference, or at least a quasi-reference, which would mean that Swindon College owed McKie a duty to exercise reasonable care in the preparation of that reference, in accordance with the decision of the House of Lords in Guardian Assurance. However, the court determined that this was not a reference scenario. The relevant e-mail from the college was not part of the process by which McKie had applied for and been offered a job by the University of Bath.

Therefore, the court acknowledged, that it faced a novel situation. In those circumstances, the law has developed the following overlapping tests to determine whether or not a duty of care is owed:

  1. The incremental approach, whereby the court will recognise a duty of care by analogy to other cases where it has already been established that a duty of care is owed.
  2. The three-stage test established in Caparo Industries plc v Dickman & ors [1990].
  3. Where there has been an assumption of responsibility to exercise reasonable skill and care.

In the circumstances of McKie, the court considered that the starting point was the test set out in Caparo.

Was the damage suffered foreseeable?

The HR manager of Swindon College accepted that it was inevitable that the e-mail would have an impact on McKie’s employment. The court described this as ‘blindingly obvious’. Therefore, it was relatively straightforward for the court to conclude that the damage suffered by McKie was ’eminently foreseeable’.

Is there a sufficiently proximate relationship between the parties?

Nearly six years had elapsed since McKie had been employed by Swindon College. The court had to consider whether or not there remained a sufficiently close relationship between the parties that Swindon College could still owe McKie a duty of care. Unsurprisingly, the court took a robust view. The college chose to act in the way it did, purporting to rely on historic information about its relationship with McKie. As a result, in sending the e-mail it had established the necessary degree of proximity.

Is it fair, just and reasonable in all the circumstances to impose a duty of care?

The court concluded that, in the circumstances of the case and consistent with previous case law, it was fair, just and reasonable to impose a duty of care on Swindon College.

As a result, the court acknowledged for the first time that an employer can, outside a reference situation, owe a former employee a duty of care when communicating with their new employer. Of course, such communications might arise in many different situations and for many different reasons. However, if the former employee suffers loss as a result of the communication, they may be entitled to bring a claim of negligence against their former employer.

Causation

Swindon College’s last throw of the dice was to argue that, even if elements of the e-mail were inaccurate and resulted in a breach of the duty of care that it owed to McKie, they had not caused McKie loss.

Rather optimistically, Swindon College tried to argue that the only reason that McKie lost his job was because he could not perform his role at the University of Bath, which included liaising with and visiting the college.

However, the court dismissed this argument, holding that the e-mail had to be read as a whole, including all of the reasons given by Swindon College purporting to justify its decision to ban McKie from the premises.

COMMENT

McKie signals a warning to all employers about the risks of poor communication concerning former employees. No business wants its internal procedures described in public by the High Court as ‘slapdash, sloppy, [and] failing to comply with any sort of minimum standards of fairness’.

What can HR departments and in-house legal teams do to avoid or mitigate the risk of such claims by former employees? In McKie, the court expected the employer to exercise elementary standards of fairness, diligence, proper enquiry and natural justice. This means:

  • educating members of staff, particularly those in senior positions, about the inherent risks of referring to former employees when communicating with third parties;
  • if there is a genuine concern about the performance of a former employee, making sure that this is carefully documented and that records are maintained;
  • carefully considering whether or not it is necessary and in the best interests of your business to refer to former employees in communications with third parties; and
  • if there is a good reason to refer to former employees in communications with third parties:
  • be prepared to support your position. (A claim might be brought years after the relevant events have taken place and, as can be seen in McKie, it is risky to rely solely on witness testimonies.);
  • carefully review the relevant personnel files and critically consider whether or not it supports your position. You will be assisted in this respect if personnel files are reviewed and updated regularly; and
  • consider adopting similar procedures and safeguards to those used when providing personal references.