Employment Law Cases

Hincks v Sense Networks Ltd

Except where there is a ‘red flag’ prompting further inquiry, such as an obvious error in the material or where information has come to light which casts a doubt on the reliability or integrity of the facts or opinions in the underlying material, there was no duty to examine the procedural fairness of investigations upon which facts and opinions in a reference were based.

Save in certain sectors (e.g. education and financial services), employers are not legally obliged to provide a reference. However, if they do, they have a duty to both the individual and the prospective employer to ensure it is true, accurate, fair and not misleading, including my omission. If a reference is not accurate because the employer hasn’t taken sufficient care, a worker can bring a negligence claim in the civil courts for any resulting financial loss. This case considers the duty of care needed when an employer expresses an opinion in a reference.

Background

Mr Hincks was an independent financial adviser working for an ‘umbrella company’ Sense Networks Ltd (Sense). During 2013 and 2014 various issues arose with his work which meant he was subject to very close supervision by Sense. Having successfully got through this period of supervision, he then completed an investment for a client which was in breach of internal processes and for which he was not authorised; he had completed paperwork in his manager’s name but had signed it in his own, albeit illegible, handwriting. This culminated in an investigatory meeting which led to a termination by Sense of his FCA authority to transact business. His appeal was rejected.

Following his termination, he sought a reference from his former employers. The reference provided referred to a finding of the investigation which was critical of his conduct, including the finding that he had ‘knowingly and deliberately’ circumvented processes that required him to seek pre-approval before giving advice and making transactions. It had said that over £12,000 had been repaid to clients but had failed to mention that this was because he missed monthly reviews and not because of poor advice. It had failed to mention that he had successfully passed his supervision.

He brought a claim against his former employer for negligent misstatement and also a contractual claim of acting in bad faith, on the basis the reference had given a misleading impression of him as those opinions were based on a sham investigation with a pre-determined outcome. He argued that where a referee expresses a negative opinion that is based on the findings of an internal investigation, they were required to satisfy themselves that the investigation in question was both procedurally and substantively fair.

High Court decision

The High Court dismissed his claim. It commented that there were ‘formidable difficulties’ with the contention that a reasonable reference writer should inquire into the procedural fairness of earlier investigations. Not only might this not always be possible, but it would also place a considerable burden on the reference writer.

In the court’s opinion, the standard of care to be exercised by a reasonable reference writer should be expressed in broad terms. It wasn’t appropriate to prescribe the specific level of care required in every case, as in each case the nature of the duty will depend on the surrounding facts. It is possible however to identify certain common features of the duty. They are:

• to conduct an objective and rigorous appraisal of facts and opinion, particularly negative opinion, whether those facts and opinions emerge from earlier investigations or otherwise
• to take reasonable care to be satisfied that the facts set out in the reference are accurate and true and that, where an opinion is expressed, there is a proper and legitimate basis for the opinion
• where an opinion is derived from an earlier investigation, to take reasonable care in considering and reviewing the underlying material so that the reference writer is able to understand the basis for the opinion and be satisfied that there is a proper and legitimate basis for the opinion, and
• to take reasonable care to ensure that the reference is fair, in the sense of not being misleading either by reason of what is not included or by implication, nuance or innuendo

There may be instances where the duty goes beyond this. For example, if there are obvious errors on the material available to the reference writer, reasonable care would dictate that these errors are checked. Likewise, if the reference writer has become aware of information which casts a doubt on the reliability or integrity of the facts or opinions in the underlying material, reasonable care would involve further inquiry. However, save where there is a ‘red flag’ prompting further inquiry, there is no duty to examine the procedural fairness of the underlying investigation.

Using the analysis above, the court held that there was evidence to support the statements made by Mr Hincks’ employer and therefore the reference it supplied was neither inaccurate nor misleading. Neither did it uphold his allegations that employees of Sense had acted in bad faith.

Link to judgment: http://www.bailii.org/ew/cases/EWHC/QB/2018/533.html

Comment

If the court had decided in Mr Hinks’ favour then this would have placed a very high burden on employers. If an employee had been dismissed for gross misconduct they would have been required to go back and check the investigation and the processes, even though documents and those involved might no longer be there. The problem for employees is that unless they have been there for two years, they cannot ask a tribunal to consider the fairness of any process followed by their employer, or documents considered and so employers might perhaps have to consider if there are any ‘red flags’ which emerge from subsequent correspondence with the former employee.