How Universities should investigate a complaint under the disciplinary procedure
The High Court has dismissed a claim brought by a former employee for negligent misstatement, following receipt of a negative reference provided by his employer. This case serves as a useful reminder for employers about the detail which can be included within a reference and the risks associated with expressing opinions, as well as the competing duties which a reference writer owes to the departing employee and to any prospective employer.
The Claimant was an independent financial advisor employed by Co-operative Independent Financial Solutions (CIFS). Sense Network Ltd (Sense Network) acted as CIFS’s compliance department, and was responsible for handling CIFS’s compliance and regulatory matters, as well as issues relating to the discipline, suspension and termination of staff.
In 2013, following concerns having been raised about advice which he had given to two clients, the Claimant was required to seek pre-approval from Sense Network’s case review team, before giving certain advice or transacting final sales.
It was then discovered that the Claimant had been re-registering existing client files onto financial platforms, in relation to which he needed pre-approval but did not have. For various reasons, it was accepted, in this instance, that the Claimant’s “misconduct” was the result of an administrative error on his part and a misunderstanding of the relevant procedures. Sense Network decided not to terminate the Claimant’s authorisation as an independent financial advisor, and instead suspended him for non-compliance.
In 2014, the Claimant returned to work on a phased basis, albeit he remained subject to the pre-approval process. The Claimant failed to comply with these pre-approval requirements in November 2014 when he sold an investment to a client without sign off. Following an investigation into his activities by Sense Network, the Claimant’s authorisation to act as an independent financial advisor was terminated by Sense Network’s Compliance Director, who treated the Claimant’s failure as a repeated breach.
Thereafter, the Claimant was unable to secure work as a financial advisor with other firms, two of which had requested a reference from Sense Network.
The Claimant’s reference contained negative statements and opinions. It referred to the Claimant’s suspension, the re-registration of client files, the fact that compensation had been offered to certain clients and a business review which had been conducted of the Claimant’s activities.
In particular, the reference writer (Sense Network’s Compliance Director—who was involved in the investigation of the Claimant’s conduct) had explained in the reference that on the basis of that investigation, and “in spite of the explanations offered by [the Claimant], it was reasonable to conclude that [the Claimant] had knowingly and deliberately circumvented the agreed process” with Sense Network, regarding the requirement for pre-approval.
At trial, the Claimant sought to argue that the reference amounted to negligent misstatement, was deliberately negatively misleading, and had been written in bad faith.
It was accepted by both parties that a reference writer owes the subject of a reference a duty of care, and that the nature of this duty is to exercise reasonable skill and care in providing a reference which is true, accurate and fair.
It was similarly accepted by both parties that, in discharging this duty, a reference writer must take reasonable care to ensure that a reference is not misleading either by reason of omission or by the inclusion of information which could, without full and proper context, generate a misleading picture either through nuance or innuendo.
However, the Claimant tried to argue that if a reference is to include negative opinions, then the reference writer must satisfy him/herself that those opinions are reasonable and are premised upon a reasonable belief. In this case then, it was incumbent (the Claimant alleged) on the reference writer to satisfy him/herself that the investigation into the Claimant’s conduct had been procedurally fair and consistent with the standard to be expected of a reasonable employer.
The Judge disagreed. He noted that in some instances, a request for a reference might be made months or even years after an investigation has taken place, in circumstances where the reference writer may have very limited (or no) access to relevant documentation or information. Employees involved in the investigation may have left the business, for example. The only way that a reference writer could satisfy him/herself on the Claimant’s argument, would be to conduct a reinvestigation of the facts or provide a summary of the information available to him/her, with competing views and hedged conclusions in the reference. This would take a significant amount of time and resource which, in turn, would result in delay and would stultify the business of reference writing.
The Judge held that references can include frank and honest views where the reference writer has taken reasonable care as to the factual content of the reference and any opinions expressed within it. He identified certain features of this duty, as follows:
The Judge noted that if there are obvious errors in the material available to the reference writer, or where there is information which casts doubt upon the reliability or integrity of the facts or opinions being expressed, then reasonable care would dictate that such matters are checked and further enquiry is undertaken. However, where there are no such “red flags”, there is no duty on the reference writer to examine the procedural fairness of any earlier investigation.
There are a number of important points for employers to consider.
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