What obligations do law firms have when preparing references for departing or former members of staff? While they may owe duties to the recipient of the reference - typically a prospective new employer - they also owe duties to the individual former employee.

The principle was established ten years ago in a claim brought by a Mr Spring, who was given a reference described by the High Court as the 'kiss of death' to his career in insurance.

The case went to the House of Lords, which ruled that Mr Spring's ex-employer, Guardian Assurance, had breached its duty of care to him by negligently preparing an inaccurate reference that harmed his employment prospects.

Subsequent decisions have gone further by suggesting the duty is to take reasonable care to provide a reference that is 'substantially true, accurate and fair' - even if the reference is factually correct, it must not give a misleading impression overall.

Some employers seek to minimise their potential liability in respect of references by doing one or more of the following:

- Confining the reference purely to facts (for example, dates of employment and position(s) held).

- Taking all reasonable care to ensure the accuracy of the contents.

Making proper enquiries to verify the information on which the reference is based.

- Making sure the reference gives a balanced assessment.

- Stating the parameters within which the reference is given.

In Spring, the Lords said employers could reduce the chances of being found negligent by stating the nature and extent of their acquaintance with the individual.

- Including an express disclaimer of liability in respect of any negligent mis-statement - although such an exclusion will fall foul of the Unfair Contract Terms Act if it is deemed unreasonable in scope.

The same principles apply to oral references given, for example, over the telephone.

In practical terms, it would be more difficult for the subject or recipient to prove that it was negligent, but firms should still prepare a telephone reference as carefully as a written one, and keep an accurate note of the main facts and opinions expressed.

Firms that are tempted to wash their hands of the whole process by refusing to provide references altogether still risk legal challenge on the basis that an individual has an implied contractual right to be given a reference.

More to the point, firms that get a reputation for being unhelpful in respect of providing references may find this has an adverse impact on retaining and recruiting staff.

Severance agreements often provide that a reference will be given in an agreed form.

Firms may be tempted to pitch the text favourably in order to facilitate agreement - but again they need to bear in mind their duty of care to the recipient(s) of the reference.

That said, it is not quite a case of the devil and the deep blue sea.

An employee is far more likely to sue than a prospective employer, so if there is erring to be done, firms are better off erring on being kind about the employee.

Gareth Brahams is a partner in the employment and incentives department of City law firm Lewis Silkin