Tell It Like It Is:Minnesota’s New Reference Law
By Linda L. Holstein and Anh T. Le

When it comes to employment references, most employers choose not to talk and to simply provide the inquiring prospective employer with the former employee’s “name, rank and serial number.” Providing the prospective employer with anything beyond the former employee’s dates of employment and positions held with the company potentially exposes an employer to claims for defamation and libel by the former employee.  This reluctance to talk over the fear of being sued has meant that most hiring decisions today are made without knowing the full and truthful employment history of a prospective employee.

In an effort to encourage employers to share important information about an employee’s work history, the Minnesota Legislature passed a new reference law designed to protect an employer from civil liability when the employer chooses to respond to a specific employment reference inquiry from a prospective employer or employment agency. 

Minnesota’s new employment reference law, Minn. Stat. §181.967, went into effect on August 1, 2004.  It limits the ability of a current or former employee to sue an employer for the disclosure of certain information relating to an employee’s work history unless the current or former employee demonstrates by “clear and convincing evidence” that (1) the information was false and defamatory and that (2) the employer knew or should have known that the information was false and acted with malicious intent to injure the employee. 

This heightened standard or “protection” applies to the disclosure of the following five categories of information by a private employer to a prospective employer or employment agency:

1. dates of employment;

2. compensation and wage history;

3. job description and duties;

4. training and education provided by the employer; and

5. acts of violence, theft, harassment, or illegal conduct documented in the personnel record that resulted in disciplinary action or resignation and the employee’s written response, if any, contained in the employee’s personnel record.

If a disclosure is made about any of the behavior described in subparagraphs (5) above, such disclosure must be in writing and a copy sent contemporaneously to the employee’s last known address.

In addition to the above information, a private employer may also disclose — but only with the current or former employee’s prior written authorization — the following information to a prospective employer or employment agency:

1. written employee evaluations conducted before the employee’s separation of employment and the employee’s written response, if any;

2. written disciplinary warnings and actions in the five years before the date of the authorization and the employee’s written response, if any; and

3. written reasons for separation from employment.

If the employee authorization includes the employee’s address, the employer must contemporaneously provide the employee or former employee with a copy of the information disclosed, and to whom it was disclosed, by mailing the information to the employee’s address listed on the authorization.

Should Reference Policies Be Changed? Despite the added protection for employers who answer “reference calls,” it remains unclear how many will actually start “talking” about former employees.  On the other hand, public policy undoubtedly favors the truthful sharing of this information, leading to more careful hiring decisions and a safer working environment for all employees.  If employers want to benefit from information they receive, they must be willing to truthfully share it as well.

Negligent Nondisclosure: A Future Tort?  Although disclosure is not mandatory under Minnesota’s new reference law, there is a possibility that failing to disclose such information when requested could lead to potential liability for the employer if the former employee commits the same wrongdoing at his or her new job. It remains to be seen whether an employer in Minnesota can be held liable to either the second employer or to the victim of the former employee’s bad act for failing to so disclose information enumerated in the statute. While these claims are tenuous, a creative plaintiff’s lawyer could certainly make the argument that the statute is designed to protect employees from workplace violence and other bad acts and that by simply providing the name, rank and serial number of the former employee, the employer purposefully withheld important information that could have prevented the subsequent bad acts. With the statutory protection afforded to employers under the new reference law, the plaintiff could argue that the employer did not act reasonably or prudently in withholding the information.

Things to Consider When Disclosing: Employers should not gain a false sense of security from this new employment reference law.  The law does not give employers unfettered discretion to disclose any information about former employees. Employers who choose to disclose information under the new statute should have internal procedures in place for doing so and should follow the statute carefully. Employers should also keep the following in mind when drafting internal policies and procedures for disclosure of information under the new reference law:

1. Assign One Person to Evaluate Reference Requests and Respond.  Disclosures made by the company are “protected” only if they are made in response to a specific request by a prospective employer or employment agency and only if they comply with the act. 

2. Determine What Information to Disclose.  It is important to determine at the outset what type of information the company will and will not disclose. The statute allows employers to disclose acts of violence, theft, illegal conduct and harassment.  While acts of violence, theft and illegal conduct are easily discernible, the term “acts of harassment” is more difficult to define. 

For example, employers commonly investigate harassment complaints that are ultimately unsubstantiated.  Even when the accused employee is found not to have engaged in harassment, the employer often requires that the parties involved reread and sign again the company’s harassment policy at the close of the investigation.  The acknowledgments are usually then placed in the employees’ respective personnel files. Should an employer disclose this information in response to an employment reference request by a prospective employer or employment agency? 

Although this type of action by the employer could be construed as a “disciplinary action” under the statute, because the harassment complaint was unsubstantiated, the employer should consider not disclosing this information to a prospective employer or employment agency and instead limit disclosures only to harassment complaints that are substantiated after a company investigation.  A disclosure of an unsubstantiated harassment complaint increases the likelihood of a claim against the employer that the disclosure was “false and defamatory.” Plaintiffs could argue that because the employer knew the complaint was unsubstantiated, it acted with a malicious intent to injure the former employee.

3. Authorizations.  If an employer chooses to routinely disclose former employees’ performance evaluations or disciplinary files, it should do so for all employees, and ask employees to authorize such disclosures at the time they are hired.

Minnesota courts will eventually strike the balance between employee privacy and employers’ need for information under the new law.  But it’s fair to presume that most employers will appreciate their new latitude to tell — and be told — it “like it is.”

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LINDA L. HOLSTEIN is the head of the litigation department at Parsinen Kaplan Rosberg & Gotlieb, P.A., concentrating her trial practice in employment and commercial law.  She is a frequent media commentator on employment, business and political issues.

ANH T. LE is an attorney at Parsinen Kaplan Rosberg & Gotlieb, P.A., practicing in the areas of employment law and commercial litigation.  She is a cum laude graduate of William Mitchell College of Law, where she was a member of the Law Review.