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SAN FRANCISCO-Employers that have struggled with the liability exposures from giving employee references now may have the added burden of making sure references do not indirectly harm third parties.
The California Supreme Court ruled last week that a school district could be held liable for providing "misleading" information in a positive recommendation for a former educator who had faced allegations of sexual misconduct. The educator molested a student at his new school.
Attorneys on both sides of the case say it is the first time courts have ruled that employers may be found liable for references provided for a past employee when a third party is the victim of the representation.
The case, Randi W. vs. Muroc Joint Unified School District, involves sexual molestation charges brought in 1992 by Randi W., a student at Livingston Middle School in Livingston, Calif., against the school's vice principal, Robert Gadams. Mr. Gadams has since pleaded guilty to a misdemeanor charge of unlawful touching.
The suit alleges Muroc Joint Unified School District and two other school districts did not use reasonable care in recommending Mr. Gadams for employment to a local placement office because they failed to mention prior sexual misconduct complaints against Mr. Gadams.
According to court papers, Muroc Joint Unified School District allegedly had knowledge of disciplinary actions taken against
Mr. Gadams regarding sexual harassment allegations made during his employment with the school district. The allegations, including charges of sexual touching of female students, led to Mr. Gadams' forced resignation.
Similar incidents allegedly occurred earlier with the other two school districts, court papers said.
Muroc's subsequent recommendation, which Livingston Middle School relied on when it hired Mr. Gadams, described him as "an upbeat, enthusiastic administrator who relates well to the students" and who was in a large part responsible for making the campus of one of Muroc's schools "a safe, orderly and clean environment for students and staff." The referral also recommended Mr. Gadams for "an assistant principalship or equivalent position without reservation," court papers said.
In remanding the case to trial court, the California Supreme Court, upholding an appeals court decision, ruled Muroc's letter of recommendation containing "unreserved and unconditional praise" for Mr. Gadams-despite its knowledge of complaints or charges of sexual misconduct with students-constituted misleading statements and could form the basis for liability for fraud or negligent misrepresentation.
The school district, though, argued in a demurrer that even if the sexual molestation charges were proved to be true and that the school district gave Mr. Gadams a good recommendation, Randi W. could not sue the school district because the district owes no duty of care to a third person.
Furthermore, the school district said its letter of recommendation neither discussed nor denied prior complaints of sexual misconduct or impropriety against Mr. Gadams and therefore contained no misrepresentation.
The California Supreme Court, however, ruled the recommendation contained "misleading half-truths" and that the school district was "obliged to complete the picture by disclosing material facts regarding charges and complaints of Gadams' sexual improprieties."
In its unanimous ruling, the high court said: "Although policy considerations dictate that ordinarily a recommending employer should not be held accountable for failing to disclose negative information regarding a former employee, nonetheless liability may be imposed if, as alleged here, the recommendation letter amounts to an affirmative misrepresentation presenting a foreseeable and substantial risk of physical harm to a prospective employer or third person."
"What the Supreme Court suggests, if you can call it a suggestion, is to give no comment at all except dates of employment" on employee references, according to Michael Carrigan, an attorney with Myers & Overstreet in Fresno, Calif., who represented the Muroc School District.
"It's a cause of concern not so much for employers with bad, nasty employees that tend to fly off the handle at the drop of a hat, but with good employees that did their job and did it well but had a rumor going around," he said.
"This decision says that if the rumor is something related to an aspect of employment that could possibly result in future harm," an employer needs to include the rumor in an employee reference, Mr. Carrigan said.
By doing that, employers set themselves up for potential defamation and invasion of privacy suits, he explained.
"Liability is now being allowed for ambiguous speech. You can't just say good things (about a past employee) if that can be interpreted to mean there are no bad things" about the person, he said.
"There is no reasoning that would prevent this case from being applied in other factual situations," Mr. Carrigan added.
Scott Righthand, an attorney with his own firm in San Francisco who represented Randi W., said: "I think that employers need to take (the case) very seriously but not be frightened by it."
In regards to employee references, "the answer is to be as forthright as possible particularly when it comes to the potential physical injury down the road. It's the moral and sanctioned legal road to take," he said.
Employers have expressed much concern over what information should be included in employee references. The concern-which has even reached employers in the United Kingdom (see story, page 31)-resulted in many states enacting legislation that shields employers from civil liability for references they give to former employees' prospective employers, provided those references are true and devoid of malice (BI, June 17, 1996).
Randi W. vs. Muroc Joint Unified School District et al.; California Supreme Court, No. S051441.