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How to Include References in Settlement Agreements

Posted by Davenport Solicitors Team on September 29, 2021 in Employment Law, Settlement Agreements

Under a Settlement Agreement, it is likely that an outgoing employee will want to secure a reference for their new employment. There is no requirement on any business to provide a reference to an outgoing employee unless they are in a regulated industry, such as banking, finance, or care. There is no requirement for an employer to provide a favourable reference, the reference must only be true and this is the importance of negotiating an agreed form of reference under a  Settlement Agreement.

In this post, we look at how to include references in settlement agreements.

Why Include References in the Settlement Agreement

An agreed reference commonly forms part of the settlement agreement, but this is one of the things that’s often forgotten. Some employers will only confirm dates of employment and duties, whereas others are willing to comment favourably on an employee. What is agreed will depend on the employer’s usual practice and the circumstances surrounding an employee’s departure.

There is no obligation on any employer to provide a reference and it is one of the advantages of settling a case that a reference can be agreed as part of the agreement. So, if your settlement agreement doesn’t have a specific clause dealing with references, we’d strongly advise that you ask for one.

To ensure that only the agreed reference is provided, you can ask for the clause to say that requests for a telephone reference or a questionnaire will be refused and that any prospective employer will be told that only the written reference will be provided. This guard against an employer giving a bad reference on the phone or in a questionnaire.

Does the Employee have a Right to a Reference?

Unless your business is regulated by the Financial Services Authority, generally there is no legal obligation on an employer to provide a reference for an employee or ex-employee and therefore they are entitled to refuse to provide one.

If an employer does provide a reference, they must take reasonable care to ensure the information contained in the reference is true, accurate, and fair and the other to the individual alone, not to make defamatory statements. The reference must not be compiled maliciously or negligently, and thereby give an impression which is either too negative or misleadingly positive.

Agreeing to a reference can be classed as a settlement agreement benefit for an employee.

What Employers Should Consider Before Refusing a Reference in the Agreement

Where an employer provides references for some employees, it should be consistent in its approach. Employers could face allegations of discrimination, victimisation, breach of contract, or breach of trust and confidence if there are inconsistencies.

There have been recent developments in the law of discrimination. Under the Equality Act 2010, an employer’s refusal or indeed provision of a poor reference can involve unlawful discrimination.

However, the employee would need to establish that any unlawful treatment was on the grounds of one of the protected characteristics. Even if the employee is able to do so, it will usually be too late to deal with the problem of an offer of employment being withdrawn for these reasons. As with many other areas of life, prevention is better than cure.

Furthermore, references, and indeed good references, are an effective tactic to use to encourage an employee to enter negotiations on an exit. The employer and employer usually enter into a settlement agreement which includes an agreed reference. To find out more about entering into an employment settlement agreement, click here.

How to Include a Reference in a Settlement Agreement

There is no reason why an employee invited to enter into a settlement agreement should not request a reference. It is far from unusual to do so and quite commonplace to agree on the terms.

It is even quite possible to negotiate an agreement obliging the employer to respond to any further inquiry in a manner consistent with the agreed form of employment reference.  This can be a considerable benefit to the employee and providing some care is taken with regard to both the nature and timing of the request, providing an agreed reference costs the employer nothing.

An effective reference clause will say something along the lines of “A reference will be provided upon written request in the form annexed to this agreement at Annex A”. Then there will be an agreed reference attached to the back of the settlement agreement itself, headed “Annex A.”

Some settlement agreements will just state that a ‘standard reference’ will be provided upon request. This implies a very simple reference with just job title and dates of employment.

If you would like Davenport Solicitors to support you with further advice on Settlement Agreement references or creating a fair settlement agreement, call 02079 036888 or email contact@davenportsolicitors.com. You can also fill our contact form to request a callback.

The material contained on this website contains general information only and does not constitute legal or other professional advice and should not be relied upon as such. While every care has been taken in the preparation of the information on this site, readers are advised to seek specific legal advice in relation to any decision or course of action.


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