An employee of a church-affiliated college was terminated for not returning a paycheck that had been inadvertently issued to him for a time period in which he had performed no services. The employee applied for work at a local business as a security guard. A company supervisor called the college's personnel department for a reference. A supervisor in the personnel department responded to the reference request with laughter, and then advised the caller that the former employee "has a problem of dishonesty concerning money." Because of this negative reference, the company decided not to hire the individual.
He later sued the college for slander and "interference with business relations." A jury awarded $150,000 in damages, and the college appealed. The state appeals court agreed that there was enough evidence to support a verdict against the college. However, it held that the former employee could recover no more than $20,000 in damages because of a state "charitable immunity" law specifying that "it shall not constitute a defense to any cause of action based on tort brought against a corporation … that said corporation … is or at the time the cause of action arose was a charity; provided, that if the tort was committed in the course of any activity carried on to accomplish directly the charitable purposes of such corporation … liability in any such cause of action shall not exceed the sum of twenty thousand dollars."
This decision is significant for two reasons. First, it illustrates the legal risks that one assumes in providing negative references to other employers. This is particularly so when "opinions," as opposed to mere statement of facts, are expressed. Churches asked to give a reference on a former employee who did not perform satisfactorily should either not respond, or limit their response to statements of fact that can be verified with documents or testimony. In no case should opinions be expressed, since these are notoriously difficult to establish in a court of law. Because laws on these issues vary from state to state, it is also desirable for a church to check with its attorney before making a negative reference.
Second, the case illustrates the continuing effect of the doctrine of "charitable immunity." While this doctrine (which many years ago prevented charitable organizations from being sued for their negligence) has been rejected in many states, it is still recognized in a limited form in other states. The Massachusetts statute limiting awards against charitable organizations to $20,000 is an example of a modern-day limited charitable immunity law.
St. Clair v. Trustees of Boston University, 521 N.E.2d 1044 (Mass. App. 1988)
