The Playboy Club and the dodgy reference

This month we had a glimpse into the world of high stakes gambling and a reminder of the risks an employer can face when giving a reference.

In Playboy Club London Limited v Banca Nazionale Del Lavoro SPA, an Italian bank gave a reference to the Playboy Club casino in Mayfair. The reference was in respect of one of the bank’s customers and assured the casino that he was “trustworthy up to the extent of £1.6 million in any one week”. On the strength of this statement, the casino allowed the customer credit of over £1 million.

It turned out that the customer had never held any money with the bank and the reference had been sent by a bank employee who was not authorised to give them.

The court found that the bank was negligent for providing an inaccurate reference. It did not matter that the bank employee did not have authority: the casino was entitled to rely on her apparent authority and she was acting in the course of her employment so the bank was liable.

Disputes over employment references are fairly common. Typically an individual hands in their notice, eager to start a new job, but then finds that the job offer has been withdrawn because their references aren’t satisfactory. They cannot withdraw their resignation (unless their employer agrees) and they no longer have a new job lined up. With the prospect of no income on the horizon, the individual will be assessing their losses and considering the merits of a claim against the business that provided the reference.

Here are five pointers to bear in mind when it comes to references:

• There are several claims available to either the recipient or the subject of an inaccurate reference. They include negligent misstatement, malicious falsehood, breach of contract and even discrimination – so be careful what you say.

• You don’t have to give a reference at all – unless you have a contractual obligation to do so (perhaps as part of a settlement agreement) or a refusal might amount to unlawful discrimination. There are also separate rules for those working in the financial services sector.

• Many employers have a strict policy of providing only factual references (just dates of employment and job title) to avoid the risks of a claim.  Also known as the “If you can’t say anything nice, don’t say anything at all” policy.

• Ensure that only authorised members of senior management give references. As the Playboy Club case shows, a reference from a wayward junior employee could still leave the employer picking up the bill.

• Include a disclaimer with any reference.

If you would like to discuss these issues or you would like help introducing a reference policy, please contact one of the employment team on 020 7234 0200 or email employment@waterfront.law