Negligent Misstatements: An Employment Reference Risk

An economic or monetary loss may arise because a statement including an opinion, whether reckless or negligent from another that has been significantly relied upon. These types of case involving former employees are common in the USA and UK albeit there has been some recent activity in Australia.

To prove a negligent misstatement one must show reliance; a connection between the statement and a person’s area of expertise i.e. former employer or supervisor; and economic loss.  Any reliance on advice will potentially depend on the following factors:

• the nature of the relationship between the parties such as whether one has assumed the responsibility of providing advice to the other;
• whether there was any reliance or dependency on the advice given by the other;
• whether the party giving the advice made any representation (actual or implied) as to the quality or reliability of the advice;
• whether the party giving the advice should have expected the other party to rely on it; and
• the circumstances under which the advice was given such as in the course of business.

Security leaders are often approached for advice about former employees as part of reference or background checking for future employment.  Care must be taken and preventative measures adopted to protect individuals and organisations providing advice, if the organisation allows staff to participate in reference or background checks.