W e have prepared this Alert to advise you department, which she - PDF document

G Employment Law Alert August 2005 Employee References Employers Beware By Martha L. Lester, Esq. and Stefanie P . Tavaglione, Esq. W e have prepared this Alert to advise you department, which she did until she left Beach of a July 19, 2005, decision by the New Trading in June 2002. Hizami worked as a Jersey Appellate Division that affects customer service representative during the time New Jersey employers. In this case of first that Singer was “overseeing” that department. impression, the issue before the Appellate Division Subsequently, Singer applied for a position as a customer service representative with HRK. The was whether an employer may be held liable for owner of HRK, Henry Kasindorf, offered Singer a “negligent misrepresentation” in providing customer service manager position, based upon the employment references to a current or former professional experience reflected on her resume. employee’s prospective employer. The Appellate Kasindorf claims that shortly after Singer began Division has now answered this question in the her employment, he became dissatisfied with her affirmative, holding that an employer that provides performance and management skills, and references may be held liable for negligent questioned the “validity” of the representations in misrepresentation under certain circumstances. her resume. At this point, he decided to contact Background: Beach Trading purportedly to verify the accuracy In S inger v. Beach T rading Co., Inc. , appellate of those representations. docket number A-1617-04T5, the plaintiff, Marsha In what the court characterized as “needless Singer, sued her former employer, Beach Trading subterfuge,” Kasindorf made a series of telephone Co., Inc., and one of its employees, Eli Hizami, for calls to Beach Trading in which he did not identify defamation, tortious interference, and negligent himself and did not reveal the true nature of his misrepresentation. Singer alleged that she was call. He spoke with several members of the terminated from her position with her subsequent customer service department, including Hizami, all employer, HRK Industries as a result of of whom told Kasindorf that Singer had been a intentionally misleading information that Beach customer service representative at Beach Trading, Trading provided to HRK. and not a manager, supervisor or Vice President. Kasindorf never asked to speak with the owners or The relevant facts of the case are as follows: corporate officers of Beach Trading. Singer claimed that she was hired by Beach Trading in a management position as the Vice President of As a result of the information Kasindorf received during these phone calls, he terminated Daily Operations. At a later juncture, Singer was Singer’s employment. Singer alleges that asked to oversee temporarily the customer service This document is published by Lowenstein Sandler PC to keep clients and friends informed about current issues. It is intended to provide general information only. L Roseland, New Jersey Telephone 973.597.2500 65 Livingston Avenue www.lowenstein.com 07068-1791 Fax 973.597.2400

G Kasindorf informed her that she was being negligent misrepresentation causing economic loss terminated because she had been hired under under the Restatement of Torts Section 552, and fraudulent terms and had misrepresented her found that summary judgment must be reversed because a jury could determine that Kasindorf told professional history. Kasindorf, on the other hand, contended that this alleged misrepresentation Beach Trading that he was calling to verify Singer’s employment, and that Beach Trading, by played a minor role in his decision to terminate voluntarily responding to the inquiry, undertook Singer, that instead he decided to terminate her the duty to exercise reasonable care or competence based upon her poor performance, and that he had in its response to Kasindorf. The court held that reached this decision prior to his making phone the jury then would have to determine whether calls to Beach Trading. Kasindorf further argued Beach Trading breached that duty, based upon the that he intended to use Singer’s alleged disputed facts in the case (particularly, whether or misrepresentation to invalidate her contractual not the Beach Trading employees knew or should right to severance pay. have known of Singer’s actual title at Beach Singer sued Beach Trading and Hizami, alleging Trading). The court determined that although it defamation, tortious interference and negligent had been established that Kasindorf called Beach misrepresentation. The trial court granted Trading to verify Singer’s references and Hizami summary judgment in favor of the defendants on all responded to Kasindorf with erroneous counts of Singer’s complaint. On appeal, the information, it would be for a jury to decide Appellate Division affirmed the dismissal of the whether the defendants’ actions were reasonable or defamation and tortious interference claims, but whether they, instead, constituted negligent reversed on the negligent misrepresentation claim, dissemination of false information. remanding that claim back to the trial court for The court also noted that in this case, there was further consideration. a factual dispute as to whether the employees who provided the information to Kasindorf were acting Negligent Misrepresentation and within the scope of their employment and whether The Court’s Decision they were authorized to respond to inquiries about Typically, negligent misrepresentation arises former employees. Finally, the court noted that when a plaintiff is the direct recipient of the there were other factual disputes concerning the statement alleged to have been provided circumstances of HRK’s hiring of Singer, negligently and the plaintiff relies on that Kasindorf’s decision to make the reference information to his or her own detriment. In Singer inquiries, and Kasindorf’s reasons for terminating v. Beach T rading , however, the court held that even Singer (critical to the issue of whether Kasindorf though Singer was not the direct recipient of the actually relied on the statements by Beach Trading, misinformation, she was nevertheless entitled to and whether Singer was terminated because of that assert a cause of action for negligent reliance). In light of the presence of these material, misrepresentation because she was injured by the disputed facts, the court reversed the motion dissemination of the misinformation. court’s summary judgment on the negligent The court compared this situation to one of misrepresentation claim, concluding that once a

G jury has had an opportunity to hear evidence on indicates those individuals within the company these issues and to make these factual who may respond, what information they may determinations, the jury may find that Beach provide, and to whom such information may be Trading is liable to the plaintiff if: given. (1) the inquiring party clearly identified Employers may want to consider the following the nature of the inquiry; points in making decisions on how best to deal with the issue of employee references: (2) the employer voluntarily decided to respond to the inquiry, and thereafter � Consider adopting a neutral or “name, unreasonably provided false or rank, and serial number” policy where inaccurate information; you disclose only dates of employment, (3) the person providing the inaccurate last position held, and possibly salary information acted within the scope of information (with the consent of the his or her employment; employee or former employee) to (4) the recipient of the incorrect prospective employers. information relied on its accuracy to support an adverse employment action � Whatever policy you choose to adopt against the plaintiff; and with regard to references, be certain that (5) the plaintiff suffered quantifiable you have a strict policy in place that damages proximately caused by the dictates who may disseminate such negligent misrepresentation. information and what these individuals may say. Train your employees on this What Does This Mean to You subject. as an Employer? Employers often have to make the choice � Make sure that your policies and whether to adopt a policy to give positive, neutral, practices with regard to employee or negative references in response to an inquiry references are applied in a fair and from a current or former employee’s prospective consistent way to avoid claims of unfair employer. There has not been a New Jersey court or discriminatory treatment. Likewise, ruling that employers have an affirmative duty to be certain that your actual practices are provide a reference at all. In addition, unlike other consistent with any written policies. states, New Jersey currently has no law providing indemnification to employers for the truthful � Note that there are situations in which disclosure to potential new employers of employers may be required to provide employment-related information. Many employers negative information, so long as such have adopted a policy of giving dates of information is truthful, in order to avoid employment and title/position held only. However, a lawsuit from the subsequent employer many employers choose to provide references, and and/or third parties. For example, when therefore must be prudent in creating a policy that