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There once was a time in American enterprise when thorough reference checking was an accepted and widely used practice, before the standard response became only “name, rank and serial number will be provided.” After litigation in the mid- to-late 1980s against firms that provided adverse information about former employees generated widespread publicity and substantial jury verdicts, it became standard practice to refuse to discuss a former employee’s job performance with prospective employers of that employee. The signing of Senate Bill 69 by Gov. Edward G. Rendell last week changes the law, and may encourage a more free exchange of information related to reference checking. What a difference a couple of decades make. In 1987, The New York Times reported that “Increasingly, employees are suing their former bosses, contending that they have been defamed in a job reference � [and] [many] employers have become so frightened of such lawsuits that they will no longer provide references, but will only confirm a worker’s dates of employment and job title.” Newsweek similarly advised its readers in 1987 that they should “warn your ex-boss that he’d better not give you a bad reference or you’ll hit him with a libel and slander suit.” The article also reported on an executive who received $1.9 million award against his prior employer for referring to him as a “Jekyll and Hyde” personality to a prospective employer. Also in the 1980s and early 1990s, appellate court decisions affirming large jury verdicts against employers further demonstrated the economic potential of lawsuits against employers who provided unflattering references. For example, in Sigal Construction Corp. v. Stanbury, the U.S. Court of Appeals for the D.C. Circuit affirmed a $250,000 award to a former employee who alleged that his prior employer had defamed him in a job reference. The prior employer had, in response to a reference check, stated that the employee was “detail-oriented to the point of losing sight of the big picture,” that the employee had a lot of knowledge and experience on big jobs, that with a large staff the employee might be very competent, and that “he no longer worked for us and that might say enough.” These innocuous statements, the court found, were sufficiently egregious to justify the quarter-million dollar award. Similarly, in Geyer v. Steinbronn, the Pennsylvania Superior Court affirmed a $185,000 verdict against an employer who told a prospective employer of its former employee, among other things, that the former employee could not cope with the duties assigned to him, drank while on duty, was fired for failure to obey directives and was being investigated for forging checks. The court, applying Pennsylvania common law to the employer’s claim that its communications were privileged, stated that a conditional privilege may be “defeated upon a showing of either negligence or malice.” Because “plaintiffs introduced sufficient evidence to meet their burden of demonstrating abuse of the conditional privilege,” the jury verdict was sustained. Businesses asked by prospective employers to provide detailed information about a former or current employee, therefore, began to evaluate whether they should assume a risk of, at the least, litigation and, at the worst, a large adverse jury verdict, if their response to these inquiries interfered with the employee’s application for employment with the prospective employer. As a result, many employers adopted a policy of providing only dates of employment and position held where reference information is sought. In response to these developments, by the year 2000, 28 states had enacted a reference immunity statute granting some form of qualified immunity to employers who responded to reference requests. Pennsylvania, therefore, was, prior to June 15, one of only a handful of states which did not provide this statutory protection. With the signing of Senate Bill 69 by Rendell on June 15, the law in Pennsylvania has now been changed. Senate Bill 69 amends Title 42 (Judiciary and Judicial Procedure) of the Pennsylvania statutes by adding a new � 8340.1. This section states that an employer who provides information about a former or current employee’s job performance to a prospective employer, “is immune from civil liability for such disclosure or its consequences” in any case brought by the employee, unless the employee can prove by “clear and convincing evidence” that the employer acted in bad faith. The statute specifically defines the four circumstances in which an employee may rebut the privilege, by adducing sufficient clear and convincing evidence that the employer: disclosed information that it knew was false or should have known was false; knowingly disclosed materially misleading information; recklessly disclosed false information; or disclosed information the disclosure of which was prohibited by law. It seems clear that the most significant change to existing law by the enactment of this statute is the imposition of a “clear and convincing evidence” standard on an employee who attempts to prove bad faith on the part of the prior employer. According to the Pennsylvania Supreme Court, the “clear and convincing evidence” standard “typically” requires evidence that “is ‘so clear, direct, weighty, and convincing as to enable the [trier of fact] to come to a clear conviction, without hesitancy, of the truth of the precise facts [in] issue.’” Therefore, to rebut the statutory immunity, employees will need to produce clear, direct, weighty and convincing evidence that would allow a clear conviction, without any hesitancy, that an employer had provided false information in response to a reference check, and had done so intentionally, recklessly or negligently, or had disclosed information which the employer was required by law to keep confidential. By adopting a clear and convincing evidence standard, the Pennsylvania General Assembly clearly expressed a policy choice to favor the free exchange of information in the job-search context. While other states, such as Illinois, have adopted a preponderance of the evidence standard for rebutting the immunity, Pennsylvania’s choice of a clear and convincing evidence standard reflects a different policy choice and one that should allow for the early disposition of all but the most extreme cases arising out of reference situations. Enhancing the ability of employers to freely exchange information should have the beneficial effects of both reducing the costs that poor performing employees impose on a business and lessening the risk that a subsequent employer would place an applicant who has a record of being a danger to others in a position where the applicant could cause additional harm. In addition, and notably, the statute also bars any civil actions against persons acting on behalf of employers, by defining employers to include “any person acting on behalf of the business enterprise.” The immunity, therefore, when applicable and unrebutted would bar any civil action against any individual — such as a human resources director — who provided information in response to a reference check. There are, however, three important limitations on the statute’s applicability. First, the statute does not privilege an employer to disclose any type of information whatsoever in response to a reference check. Instead, the statute allows an employer only to disclose information about a former employee’s “job performance.” Employers, therefore, should not expect the immunity statute to apply if they disclose information about an employee’s personal life, off-duty activities or character traits unrelated to the performance of a job. Second, because the new statute is a state law, the application of the immunity is unlikely to apply to any federal claims arising out of a reference check situation. For example, the U.S. Supreme Court has held that employers may be liable under the federal anti-discrimination laws if they, for discriminatory or retaliatory reasons, interfere with an employee’s post-employment job opportunities by their response to a request for a job reference. An employer would be hard-pressed to argue in federal court that the state legislature intended to, or could have, privileged the employer to engage in such conduct. Finally, the Pennsylvania statute allows the employee to show “bad faith” on the part of the employer even if the employer acted with the best of intentions, by showing that the employer “should have known” that it was providing false information. In this respect, the Pennsylvania statute allows broader liability than other states that require knowing, intentional or reckless conduct by the employer, and which do not permit the type of 20/20 hindsight allowed by a “should have known” standard. Compare Idaho Code �44-201 (immunity may be rebutted “only” if employer “disclosed the information with actual malice or with deliberate intent to mislead”). Put another way, the statute does not allow an employer to carelessly disclose false information to others and to still claim the protections of the statutory immunity. Even with these caveats, the new employer reference immunity statute represents an important broadening of a legal protection to employers who wish to freely disclose, and receive, information about job applicants. By allowing employers who act with care to so disclose information, the statute should enable Pennsylvania employers to make better and more informed hiring decisions, thereby reducing the risk of harm to the employer and to the customer base served by that employer. Paul D. Snitzer is a labor and employment law partner at Duane Morris. He can be reached at [email protected]

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