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Providing a Reference: What Legal Obligations do Employers Face?

02 August 2022

Obligation to provide a reference

Generally there is no legal obligation on an employer to provide a reference for an employee or ex-employee and employers are therefore generally entitled to refuse to provide a reference (Lawton v BOC Transhield Ltd [1987] IRLR 404).

However, an employer's policy on whether or not to give references, and what sort of information to include, should be consistent or it could lead to allegations of discrimination or breach of the implied term of trust and confidence. Care must also be taken to ensure that a refusal to provide a reference is not discriminatory because of any of the protected characteristics under the Equality Act 2010.

There are limited exceptions to the general rule which do require that an employer provide a reference. The Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) are given power by the Financial Services and Markets Act 2000 to exercise control over the employment or engagement of individuals by authorised firms to perform certain prescribed financial services functions. Since the introduction of the senior managers and certification regime (SM&CR) and the senior insurance managers regime (SIMR) on 7 March 2016, and the full introduction of the regulatory reference rules on 7 March 2017, two different systems are in place.

For individuals subject to the senior managers and certification regime (SM&CR) or the senior insurance managers regime (SIMR), a new regulatory reference regime has applied since 7 March 2017. The regime applies to candidates for senior manager or certified roles at relevant firms (banks, building societies, credit unions, PRA-designated investment firms and large insurance and reinsurance companies). These firms must seek references from a candidate's previous employers in the last six years (even if the previous employers are overseas or are not in the financial services sector), and that regulatory references must be issued using a mandatory template.

Requesting a reference for a potential new employee

In the absence of a statutory requirement to do so, which applies in some regulated sectors, there is generally no obligation on an employer to request a reference for a potential new employee. 

Employers may choose to rely on application forms, interviews or tests to evaluate a potential new member of staff. However, it is common to seek at least one reference from a former employer in order to verify the work experience that a prospective employee claims to have had and to make the job offer conditional on the reference being satisfactory.

If the job offer (whether oral or in writing) states that the offer is conditional on receipt of satisfactory references then there is no contractual relationship until the satisfactory reference is received.

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