‘Do I really know this person well enough to trust them with confidential information, company assets and above all my reputation?’ This is a question that all organisations should be asking themselves before they open their doors to new employees.

The Guardian recently revealed that 71% of businesses have been faced with CV liars; a problem that is costing 36% of organisations time and money but despite the findings Mori research shows that just 34% of managers check up on applicants.

The need for solid reference information is clear, both from a legal and decision making standpoint. The challenge is to extract accurate information from the previous employer.

Many will verify only a previous employee’s position and employment dates, because they are worried about potential defamation claims by the former employee. Although these claims typically are difficult to win, the implicit threat of such legal action is enough to keep employers from volunteering the needed reference information.

Tips on receiving meaningful references
1. Obtain written releases. Ask the candidate to provide written authorisation in order to conduct background checks and ensure that the form releases both you and any former employers from the legal liability based on information obtained during the check.

2. Verify prior employment status. When conducting telephone checks, ensure the representative is the best person to speak with and verify that the candidate did in fact work for the organsation in question. This step may seem elementary, but it weeds out fraudulent references.

3. Build rapport. Prior to a telephone contact, fax or mail the candidate’s written waiver and authorisation to conduct the check. Give the previous employer your name, position, and telephone number to verify identity. Emphasise that you are looking only for employment-related information about the candidate. In addition, explain that an employer is protected by ‘qualified privilege’ for fair and balanced references given in good faith. This means that the employer will have a defence to any defamation claim brought by the employee if the information turns out to be untrue.

4. Confidentiality References are usually given in confidence and must therefore be received and retained in a confidential place with restricted access. If the reference falls into the hands of a third party that does not have a valid interest in the matter, the defence of ‘qualified principle’ is lost forever.

5. Ask questions based on specific examples the candidate provided in the interview process. For example, “This candidate stated she generated sales of £100,000. Can you verify her function and tell me her contributions to the project?” Inquiring, “What are the candidate’s strengths and weaknesses?” will often yield generalities and little specific information about work habits and behaviour. During the interview ask the candidate to give examples of past work performance with previous employers. Make it clear you will verify this information, and then use the material to formulate your questions to the referee.

6. Verify salary information. Request both the base salary history and any additional compensation. This information will document the candidate’s past earnings progression and may signal future compensation expectations.

7. Document all reference responses. Keep an accurate written record of all the reference discussions to support your hiring decisions.

8. If you still can’t get anyone to talk … At a minimum, verify the position held, employment dates, and salary. Document this information and the lack of cooperation in the applicant’s file. While this limited input will not be of much help in evaluating the candidate, it may protect against negligent hiring claims by showing that you attempted to check the candidate’s references.

9. Use reference “experts.” To minimise concerns about legal claims arising from these checks, use either an internal “expert” on the topic (typically the HR professional) or contract the job out to screening agencies that have the expertise.

10. Minimise risk: Particular care should be taken with references from referees where it appears that applicants may have experienced difficulties arising from their race, sex, disability, political or religious belief, or unrelated criminal convictions.

Tips for providing references
1. Establish and follow a policy on giving references. Share your organisation’s policy on past-employment references with all employees. Remind them that violating the employer’s reference-giving policy can expose both the individual and the employer to liability for defamation charges. If references from line managers are needed, the HR department should guide the process by ensuring that the former employee signed consent forms and that the reference information provided is accurate and objective.

2. Safeguard the organisation When contacted with a reference request, take the requester’s name, company, and phone number and call back to verify the legitimacy of the request. This additional safeguard helps ensure that you share information only with the proper representatives of employers with a legitimate need for the reference.

3. Review before reporting In general references should reflect the employee’s last appraisal notes. Review the employee’s personnel file before answering the reference request. All remarks made to the prospective employer should be supported by the records in the file. Limit remarks to truthful, objective, and well-documented information in the file.

4. Answer only the questions the prospective employer asks. Do not volunteer information. As a general rule state the facts and opinions which can be substantiated, ‘if in doubt, leave it out’.

5. Get it in writing After giving verbal references, document the questions and your responses. Make sure that you have adequate records of the reference conversation in case you have to recreate it at a later date. If you respond in writing, retain a copy for your files.

6. Obtain permission Get the employee’s written consent to give references to all prospective employers. A general consent for should satisfy this requirement. As an alternative, some employers prefer to get a separate consent for each prospective employer to ensure that the employee has granted permission to release information to that particular employer.

7. Be accurate Information given in relation to attendance records must be handled very carefully. When a high absence record is disclosed, it is important that you also disclose any legitimate reason for the absence.

8. Ensure consistency Use standard form letters of recommendation for all employees terminated by redundancy. For each employee, state the business-related reason for the redundancy and note that this does not reflect the employee’s job performance. The letter should indicate that all affected employees were given the form letter and that the employer will release further information with the employee’s express, written consent. Once the employee has given consent, any specific job performance information should be communicated directly to the prospective employer or their authorised representative.

9. Tell the truth Do not disguise a termination for performance related problems as a redundancy.

10. Follow policy Limit remarks to verifiable information.

Responding to reference requests can be either straightforward or troublesome for employers. Organisations should balance the potential liability against a broader concern for providing accurate references in the hope that other employers will reciprocate.

Employers should establish their policy, designate personnel to give references, and confine remarks to objective, truthful information.

These steps may reduce the risk of both defamation and negligent reference claims, help good employees obtain new positions, and prevent bad employees from exposing the organisation to losses, legal liability and unnecessary costs.

Reference checking can eliminate undesirable applicants, identify the best candidate, reduce turnover and training costs, and even prevent liability for negligent hiring. However, it is only one of the many necessary elements to making a good hiring decision.

Employers should also check all information on a candidate’s resume or application including educational history, and consider performing other types of background checks if the nature of the job warrants these.

In addition, skills testing and personality profiling may provide further information on the candidate’s suitability for the job. All of these steps help you make effective hiring decisions and avoid errors that lead to legal claims.

Alexandra Kelly is the MD of Powerchex Ltd., a national background screening company located in London