A thorough reference check could be your best defence against a bad hire, but be wary of legal pitfalls that could arise.

You’ve probably heard the horror stories before. A promising candidate makes it all the way through the recruitment process only to be chronically absent from work one month in, or you notice they’re perpetually slacking off or not performing well.

And you know this probably could have been avoided, if only the recruiter had conducted a thorough reference check and found out the truth about your new hire (assuming the former employer is willing to spill the beans, that is).

But even the most comprehensive of reference checks come with their own issues. HRM asked Andrew Jewell, Principal Lawyer at Jewell Hancock Employment Lawyers, how to conduct a thorough reference check and what legal pitfalls employers should look out for. 

Why conduct reference checks?

 Reference checks can help organisations avoid making a bad hire by providing insight into a candidate’s personality, skill set and work ethic.

“They can be done for positive reasons to try and work out what an employee is like, and whether they’re going to fit into the organisation,” says Jewell. “They’re also a good way to check the accuracy of the information they’ve provided you [during an interview].”

“You’re really just making sure there wasn’t anything that’s been fabricated, exaggerated and that there aren’t any real red flags,” says Jewell. 

Depending on the role, a police check might be appropriate as part of a background check. 

You can read HRM’s recent article on when you can conduct a police check, and how to go about conducting one, here.

What do you ask a referee?

 When conducting a reference check, reach out to multiple contacts, says Jewell. He advises reaching out to at least two referees, if not more.

“You can be quite extensive when you’re asking about personality, performance and their capabilities,” says Jewell.  

You might find that the questions you ask during a background check are surprisingly similar to what you might ask the candidate during an interview.

Jewell says you could ask:

• • How does the candidate fit into a team?
  • How do they respond under pressure?
  • How do they respond to feedback?
  • How punctual are they?
  • Would you rehire them?

You’re also looking for information to verify a candidate’s education and qualifications, their challenge areas and growth opportunities, their abilities to embrace change and work in agile ways and, perhaps, how well they operate in a virtual environment (e.g. does their work quality slip when they’re working from home?).

Similar to illegal interview questions, there are some areas you cannot ask about, as this could be considered discriminatory.

“You wouldn’t want to be asking about things to do with [uptake of] parental leave or sick leave, or anything like that,” says Jewell. 

You also need to avoid asking questions about any protected qualities. Section 351 of the Fair Work Act 2009 (Cth) prohibits employers from discriminating against both employees and prospective employees on the basis of  the following factors: race, skin colour, gender, sexual orientation, age, physical or mental disability, marital status, family or carer responsibilities, pregnancy, religion, national extraction or social origin.

“I have experienced employers performing a reference check after the offer has been made and the candidate has already quit their current job. If the background check is unfavourable and they withdraw the offer, the candidate is left stranded.” – Andrew Jewell, Principal Lawyer at Jewell Hancock Employment Lawyers

 While it’s not a legal requirement, Jewell recommends that you inform the candidate that you’re conducting a reference check. He also suggests sticking to the referees the candidate has provided. 

“There’s an element of trust building and it’s not a good way to start an employment relationship if you go behind their back,” he says. “I would only recommend going beyond the provided references if there was doubt or concern.”

You can, of course, ask the candidate why they haven’t included their most recent employer because they might have a legitimate reason. 

“It could be as simple as their current employer doesn’t know they’re looking for a new job so they wouldn’t include them as a reference,” says Jewell. 

When to conduct reference checks

It might sound obvious, but make sure you’ve conducted the reference checks before you extend an offer of employment.

“I have experienced employers performing a reference check after the offer has been made and the candidate has already quit their current job,” he says. “If the background check is unfavourable and they withdraw the offer, the candidate is left stranded.” 

To give the candidate some assurance that you are interested in progressing to an offer, only offer the role “pending a background check”, says Jewell. That way, the candidate is less likely to leave their current role and if something goes wrong, no one is left high and dry.

In the current job market (skills shortages and the potential of mass resignations), managers may be more inclined to bypass critical steps due to operational pressures. HR professionals can demonstrate further value here by reminding those recruiting for their teams not to skip over important processes and therefore introducing risk into the company, such as reputational damage.

Is it illegal to provide a negative reference?

In addition to conducting a reference check for potential new employees, you or another employee in your organisation could be asked to provide a reference for a current or former employee.

There are a host of legal considerations that could crop up when providing a reference, so it’s important to stay abreast of these.

While there’s a common misconception that you can’t provide a ‘negative’ reference, if you’re honest there shouldn’t be an issue, says Jewell. But he caveats this by emphasising the importance of backing up your answers.

For example, if you think the employee’s performance was poor and you’re sharing that information in a reference check, make sure your opinion is reflected in their most recent performance review.

“The only real restriction is that you cannot go to the point of defaming someone,” he says.

To avoid potential legal issues, some employers ban managers from providing references for former employees. 

Jewell says that although this is probably overkill, it does reduce legal risk.

This situation could arise when there is a settlement reached which requires the employer to not say anything negative about a former employee, and many employers take the approach that it’s easier to just not provide references, he says.

If you do need to provide a less-than-favourable reference, the best way to do so is say something like ‘I wouldn’t rehire them,’ adds Jewell. You don’t need to provide more information than that.

Looking to upskill in the recruitment processes, such as your interviewing, reference checks and onboarding skills? AHRI’s comprehensive two-day recruitment and workplace relations course is designed to help you and your team nail every process of the employee experience. Click here for more details.