The Court of Appeal recently upheld the decision of a lower court who found that a manager who provided a negative reference during a reference check was not liable for defamation.

What Happened?

The employee in question began working at Atomic Energy of Canada Limited (AECL) as a Senior Cost Control Analyst in May 2006. She had been hired by the manager in question. It was not disputed that during her time at AECL the employee worked hard, received positive performance ratings, and received merit-based salary increases.

The employee was laid off in October 2011, along with several other employees, when AECL was sold to another company. Between October 2011 and February 2013, she worked elsewhere and upgraded her skills.

In February 2013, the employee received a conditional offer of employment for a Financial Analyst position from Bruce Power. She accepted the offer several days later. One of the conditions of the offer was a positive reference check.

The manager was contacted about a reference in March 2013. Several days later, Bruce Power revoked its conditional offer of employment on the basis that the employee had “failed to meet the conditions of employment”. Bruce Power subsequently advised the employee that its revocation was based on a negative employment reference provided by the manager.

The employee sued the manager for defamation.

The Law on Defamation in the Workplace

A person claiming defamation in an employment context must establish three things on the balance of probabilities:

1. That the impugned words would lower the person’s reputation in the eyes of a reasonable person;
2. That the words said referred to the person making the defamation claim;
3. That the words were communicated to at least one other person.

If the person claiming defamation can establish these three things, the onus shifts to the person being accused of defamation to establish why they are not liable.

Notably, both statements of opinion and statements of fact can attract the defence of privilege (depending on the circumstances in which they were made). Things such as reference letters or reference checks enjoy what is known as “qualified privilege” which is privilege that can be defeated by showing that the person who wrote the letter or provided the reference was acting with malice.

If qualified privilege is established, the onus shifts back to the person claiming defamation to establish malice.

Proving Defamation in This Case

Based on the current state of the law on defamation, in order for the employee to successfully establish defamation, she had to establish all three elements of the three-part test.

If the court found the statements to be defamatory, the onus would then shift to the manager to establish a defence. If qualified privilege was applicable, the onus would shift back to the employee to establish malice, which would then defeat the privilege.

The court hearing the initial defamation matter had to, therefore, determine the following:

• What did the manager say about the employee to Bruce Power?
• Were these statements defamatory?
• Were these statements made in the context of qualified privilege?
• If the statement were covered by qualified privilege, was that privilege defeated by malice?

What Did the Manager Say About the Employee?

The court found that the manager had said that:

• There was a lot of conflict between the employee, her supervisor, and other employees;
• The employee did not take direction well;
• The employee did not handle stress well;
• The manager would not re-hire the employee in a project control role but would hire her in an autonomous financial position.

Were These Statements Defamatory?

The court found that there was no question that the manager’s statements met the second and third part of the three-part test for defamation (the statements were specifically about the employee, and they were made by the manager to a third party: the person carrying out reference check).

The remaining question was whether these statements, in their plain meaning, would tend to lower the employee’s reputation in the eyes of a reasonable person. The court found that:

…the words spoken would have that effect. Difficulties in getting along with people, in coping with stress, and in taking directions are not positive descriptors of workplace behaviour. Put another way, all are generally considered to be undesirable characteristics in an employee. I therefore conclude that the words spoken by [the manager] were defamatory of the [employee].

Were the Statements Made in the Context of Qualified Privilege?

The manager argued that qualified privilege applied because his remarks had been made as part of an employment reference check, which has been recognized as “a classic occasion of qualified privilege”.

The court noted that the social policy behind protecting employment references through qualified privilege was “clear”:

an employer must be able to give a job reference with candour as to the strengths and weaknesses of an employee, without fear of being sued in defamation for doing so. Without this protection, references would either not be given, or would be given with such edited content as to render them at best unhelpful or at worst misleading to a prospective employer.

In contrast, the employee argued that qualified privilege did not apply since she had not been working with the manager at the time that he gave the reference.

The court did not agree with this position, noting that if qualified privilege was so limited in its applicability in an employment context, anyone with a history of successive employment would only be able to turn to their most recent employer to provide a candid reference. In addition, since many employees do not look for new work until they are no longer employed in their previous position, this would prevent all but one of their previous employers from having the protection needed to provide a candid reference.

The court, therefore, concluded that the manager’s statements had been made in the context of qualified privilege.

Is the Qualified Privilege Defeated by Malice?

Qualified privilege is lost if the person claiming defamation can prove that the dominant motive for the defamatory statements is actual or express malice, which includes:

• Spite or ill will;
• Any indirect motive or ulterior purpose which conflicts with the occasion;
• Speaking dishonestly or in knowing or reckless disregard for the truth.

Legally speaking, malice can be either intrinsic to the words spoken or established by extrinsic evidence. In this case, the defamatory words are not so inflammatory that malice could be inferred from their utterance.

The employee sought to prove, through extrinsic evidence, that the manager had been motivated by malice and spite when he spoke about her. She argued that despite she and the manager getting along seemingly well when they worked together, the manager must have “stored up venom to be used at a later date”, which ended up being expressed through the “untrue and malicious job reference”. She sought to establish that there had been three occasions over the years that she worked at AECL that provided the manager with reasons to be vindictive towards her.

The manager argued that he had spoken in good faith and that the statements he made accurately reflected his managerial appraisal of the employee’s skills.

The court found that the evidence provided did not establish that any of these three incidents that the employee claimed happened had left the manager with any malicious or spiteful feelings towards the employee.

The employee had also claimed that the manager knew or ought to have known that she had been offered the job from Bruce Power when he was called for a reference and that it was malicious of him to criticize her project control skills when those skills had nothing to do with the job in question. The manager had testified that he did not know that the job had already been offered to the employee, and he had been “shocked” to learn, after the fact, that the reference was in relation to a conditional offer of employment. The court found that the manager had not been told that a conditional offer of employment had already been made to the employee, or that the position offered had been a finance role.

The court also commented on the manager’s credibility and reliability, finding that:

• He had testified in a measured and clear manner;
• He had been subjected to a very provoking cross-examination during which his assessment of the employee did not change;
• He readily admitted certain facts that were favourable to the employee, including the defamatory words;
• He was able to explain the basis of his views of the employee’s weaknesses, and did so with specific examples;
• He readily admitted that the employee had strengths and that his overall assessment had both positive and negative components.

The court noted that the totality of the evidence had not established malice on the part of the manager, and that the employee had therefore failed to defeat the defence of qualified privilege.

The employee appealed.

The Court of Appeal

The Court of Appeal found that:

The trial judge gave careful and detailed reasons for her conclusions.  She found that the statements made by the respondent were defamatory but, given that they were made in the context of providing an employment reference, they were subject to a defence of qualified privilege.  The trial judge also concluded that the plaintiff had failed to prove malice in the making of the statements so the defence of qualified privilege was not defeated.

The Court of Appeal further noted that there had been no error made by the trial judge, that her conclusions were based on the facts as she found them, and there was no basis for the Court of Appeal to interfere with her findings.

The appeal was dismissed, and the manager was entitled to costs of $16,000.

Lessons Learned for Employees

Employees should think carefully about who they ask for a reference. If you are seeking a reference, always inquire whether the person you are asking to provide the reference will be willing to provide you with a positive reference. Be aware that employers are not obligated to only say positive things about your employment with them.

If you have been terminated from your job, and require a reference from your most recent employer, consider asking for a positive or complimentary reference letter as part of your overall termination or severance package.

If you are an employee or an employer and have questions about workplace matters, including terminations, reference letters, or any other related matters, do not hesitate to contact the knowledgeable employment lawyers at Rapley & Co. We advise workplace parties about their rights, help them proactively manage their risk, and represent them in mediation or litigation where needed. You can reach us online or at 416- 369-1999.