The New Jersey Appellate Division Rules That an Employer May Be Held Liable For Negligent Misrepresentation for Providing False Information About a Former Employee

New Jersey employers should exercise caution when providing employment references after a recent New Jersey Superior Court Appellate Division decision. In Singer v. Beach Trading Co., Inc., 379 N.J.Super. 63 (App. Div. 2005), the Appellate Division, in a case of first impression, defined the circumstances under which an employer who provides false information regarding a former employee may be held liable for the tort of negligent misrepresentation.

Factual Background

The plaintiff, Marsha Singer, began her employment with Beach Trading Co. on July 1, 2001. Several weeks after she began work she was introduced in a company-wide email as the new Vice President of Daily Operations. At some time thereafter, she was asked to oversee the company’s customer service department on a temporary basis, with no change in her title or salary. In October 2001, defendant Eli Hizami began working in the customer service department at Beach Trading. At that time, plaintiff worked at a desk in the customer service department similar to those of the customer service representatives. Singer continued working in that department until she left Beach Trading in June 2002.

In approximately April 2002, Singer began looking for a new position. The owner of HRK Industries, Inc., Henry Kasindorf, offered Singer the position of customer service manager because, based on the professional experience plaintiff had included on her resume, he believed she might be overqualified for the customer service representative position.

Singer began work at HRK on June 17, 2002. During the first few weeks of her employment, Kasindorf became dissatisfied with plaintiff’s management skills and began to question the veracity of the experience she had listed on her resume. In an effort to allay his concerns, Kasindorf contacted Beach Trading’s customer service department to verify the work experience on Singer’s resume. Kasindorf had not requested a reference from Beach Trading prior to the commencement of Singer’s employment at her request – she did not want HRK to contact Beach Trading while she was still employed there.

Rather than directly requesting Singer’s employment history from Beach Trading’s management, Kasindorf called Beach Trading’s customer service department pretending to be a customer and spoke with several of the representatives in the department. Kasindorf asked each representative if he could speak to Singer, to which each replied that she was no longer with the company. Kasindorf then asked what plaintiff’s position with the company had been, and each representative indicated that she had been a customer service representative. After speaking with a number of customer service representatives, Kasindorf asked for a supervisor and was directed to defendant Eli Hizami, who identified himself as the supervisor of the customer service department. When Kasindorf asked about Singer’s experience in the department, Hizami denied that she had ever been the supervisor of the department or a Vice President at Beach Trading, and stated that Singer had been a customer service representative. Beach Trading’s customer service manager, Chris Diesel, also confirmed for Kasindorf that Singer had not worked in a supervisory role in the department, nor had she been a Vice President.

Kasindorf terminated Singer’s employment based on her misrepresentation of prior work experience on her resume. At the time of her termination, plaintiff had worked for HRK for less than 2 weeks.

Singer filed suit against Beach Trading and Hizami in the New Jersey Superior Court Law Division alleging defamation, tortious interference, and negligent misrepresentation. The Court granted summary judgment in favor of Defendants, but did not refer to Plaintiff’s negligent misrepresentation claim in its ruling. Plaintiff appealed to the Appellate Division.

The Appellate Court’s Decision

The Appellate Division ruled that an employer who chooses to respond to a reference request may be held liable for negligent misrepresentation if the employer provides false or inaccurate information in the reference. The Court first addressed the question of whether Singer had standing to sue in the first place. Recognizing that Singer’s case did not present a classic negligent misrepresentation fact pattern as plaintiff was not the “direct recipient of the statement alleged to have been negligently provided,” the Court nonetheless held that she was entitled to assert her cause of action “because she [fell] within the class of individuals injured by its dissemination.”

The Court then tackled the question of whether an employer owes a former employee a duty to exercise reasonable care when communicating facts about his or her work history to a prospective employer, such that the former employee may state a viable claim for negligence. The Court held that such a duty does exist. Building on the New Jersey Supreme Court’s analysis of negligent misrepresentation in Petrillo v. Bachenberg, 139 N.J. 472 (1995) (which addressed an attorney’s duty to non-clients), the Court decided that an employer owes a duty to a former employee when providing an employment reference because the former employee is not “too remote” from the employer to be entitled to protection.

After finding that an employer has a duty to a former employee in this context, the Court set forth the circumstances under which an employer may be held liable for negligent misrepresentation of a former employee’s work history. An employer may be liable where (1) the inquiring party clearly identifies the nature of the inquiry; (2) the employer voluntarily responds to the inquiry, and then unreasonably provides false or inaccurate information; (3) the individual providing the inaccurate information is acting within the scope of his or her employment; (4) the recipient of the inaccurate information relies on its accuracy to support an adverse employment action against the plaintiff; and (5) the plaintiff experiences quantifiable damages proximately caused by the negligent misrepresentation. The case was remanded to the trial court for further proceedings

Conclusion

In the wake of the Singer decision, employers should exercise caution in responding to requests for information regarding former employees. To minimize exposure to potential negligent misrepresentation claims, employers should adopt and enforce a written policy regarding the provision of work history or references to anyone outside of the company. The policy should clearly articulate the company’s policy regarding providing references and explain what information may be given, by whom, to whom, and in what format. The policy should permit only designated supervisory or human resources employees to comment on a former employee’s work history. All employees should be made aware of who the designated person is and should be instructed to refer all requests for employment references to that person. It should be noted that many employers will advise inquiring parties that it is their policy to divulge only the dates of employment and job titles of former employees.