Appellate decision confirms employer not liable for providing unfavourable reference

In 2017, the Ontario Superior Court of Justice dismissed a claim against an employer and its president for defamation on the basis that a negative reference provided for a former employee was substantially true. That decision was recently upheld on appeal in Papp v. Stokes et al, 2018 ONSC 1598.

On March 14, 2011, Mr. Papp was hired by Stokes Economic Consulting Inc. (“Stokes”) as a staff economist. He was terminated without cause on December 19, 2013. Following his termination, Mr. Papp emailed Dr. Ernest Stokes, president and secretary/treasurer of the company, and asked if he could use him as a reference. Dr. Stokes replied: “That is okay”. Subsequently, Dr. Stokes discussed Mr. Papp with other company employees and became aware that there had been some issues between Mr. Papp and his co-workers while he had worked there.

Several months later, Mr. Papp applied for a job with a territorial government. When the prospective employer conducted a reference check with the company, Dr. Stokes stated that Mr. Papp did not get along well in a team setting. He also confirmed that Mr. Papp was “okay in computing”. As a result of the negative reference, the government “de-certified” Mr. Papp for the position and hired a different person for the job.

Mr. Papp brought a claim for wrongful dismissal, and sought damages in the amount of $65,000, plus $500,000 for defamation, $200,000 for punitive, exemplary and aggravated damages, and $30,000 for intentional infliction of mental suffering.

At trial, the trial judge found that Mr. Stokes’ statements about Mr. Papp during the reference check were “substantially true”, and that Mr. Stokes had not acted with malice. Accordingly, the court found that the defendants had a complete defence to the defamation claim, and there was no basis for additional damages. The court awarded Mr. Papp four months’ reasonable notice less payments already made, for a total of $17,192.57.

Mr. Papp appealed the trial judge’s decision to the Ontario Divisional Court on five grounds: (1) the trial judge erred in not specifying the defamatory words or their meaning; (2) the trial judge erred in accepting unpleaded defences of justification and qualified privilege; (3) the trial judge failed to provide adequate reasons for credibility findings; (4) the trial judge failed to adequately address the claims of intentional infliction of mental suffering, bad faith in the manner of dismissal, aggravated damages and punitive damages; and (5) the trial judge erred in principle in respect of the cost award or rendered a clearly wrong award.

The Divisional Court dismissed all grounds of appeal, other than on the issue of “costs” which was remitted back to the trial judge.

This case offers encouraging news for employers. While employers generally have no legal obligation to provide departing employees with a reference, where they choose to do so, this decision re-enforces that an unfavourable reference may be provided to a prospective employer if it is truthful. Prior to giving a reference, however, employers should confirm information about the departing employee, act in good faith, and be honest with the employee about what will be said to the prospective employer.