Client Alert

Contact:
Steven B. Harz, Esq., Chairman
Holly C. Peterson, Esq., Associate
Labor & Employment Law Group
201-342-6000

NEW JERSEY APPELLATE COURT HOLDS THAT EMPLOYERS WHO GIVE INFORMATION FOR REFERENCE INQUIRIES MAY BE HELD LIABLE FOR NEGLIGENT MISPREPRESENTATION

Dear Clients and Friends:

On July 19, 2005, the Appellate Division of the Superior Court of New Jersey issued a major decision holding that employers who provide information about an employee (including responses to reference inquiries) may be held liable for negligent misrepresentation. The Court's decision in Singer v. Beach Trading Co., Inc., et al., imposes a duty on employers to take reasonable steps to ensure that any information provided to a third party about an employee is accurate. As a result of this case, a prudent employer should strongly consider establishing a formal policy with respect to the release of employment information to minimize the potential for such liability in lawsuits brought by former employees.

Singer worked for South Beach Trading Co., Inc., a/k/a/ Beach Camera, a family-owned company, from July 2001 to June 2002. Although her position at the beginning of her employment was unclear to the Court, within three weeks she was introduced to other employees as the Vice President of Daily Operations. Singer also assumed a temporary position supervising the customer service department during the Christmas holiday season. Neither her title nor salary changed during this period. After working in this department for less than one year, Singer began looking for a position outside Beach Trading and applied for a customer service representative position with HRK Industries, Inc. Noting the supervisory experience listed on her resume, HRK owner Henry Kasindorf offered Singer a management position in the customer service department because he believed she may have been overqualified for the advertised position.

Although the quality of Singer's work performance was contested by the parties, Kasindorf testified that he became dissatisfied with Singer's management skills and made numerous telephone calls to Singer's former employer, South Beach Trading, intentionally misrepresenting himself and the purpose of his call. Each time, he first asked to speak to Singer, and when informed that she no longer worked there, inquired as to her former job title and description. Each employee stated that Singer served as a customer service representative and never held a managerial position nor the title of Vice President. Kasindorf terminated Singer within ten days of her hiring date. Although he asserted that she was fired for poor work performance (and that he made the telephone calls after becoming suspicious that she misrepresented her previous experience), Singer claims that inaccurate information communicated to Kasindorf during his communications with the current South Beach Trading employees was the basis for termination. Singer filed suit against South Beach Trading alleging, among other things, negligent misrepresentation based upon Kasindorf's conversations with the various South Beach Trading employees.

Prior to this case, no court in New Jersey ever addressed the issue of whether to hold an employer liable for the tort of negligent misrepresentation in providing employment references or information. The Appellate Division made it clear that a former employer may be held liable for negligently conveying inaccurate information in response to any inquiry regarding a former employee. Although the Court disapproved of the “subterfuge” in which Henry Kasindorf engaged, and noted that he did not speak to any South Beach Trading corporate officer, the Court nonetheless determined that under these facts, an employee may successfully sue their former employer.

In light of this case, employers face an increasing burden relative to providing employment information. As this case demonstrates, a misunderstanding, miscommunication or general lack of knowledge on the part of any employee while providing information about former employees while acting in the course and scope of their employment (including responses to reference inquiries) may now open the door to a claim for monetary damages. Employers should establish a policy with regard to providing information, including references, setting forth a formal procedure to be followed with respect to any employment inquiry.

If you have any questions with regard to the application of this case to your Company or with respect to any other labor and employment law matter, please do not hesitate to contact Steven Harz, Esq, at (201) 342-6000, or via email at sharz@hertenburstein.com.