Yes, your settlement agreement can include a reference, and this can be highly beneficial, especially if you’re leaving under challenging circumstances. A reference clause outlines what your employer will say (or not say) about your role, responsibilities, and performance when contacted by potential future employers. Including this clause provides clarity on the reference content, which can help protect your professional reputation and ensure consistency in how your employment history is presented. Here’s a comprehensive look at how reference clauses work, why they’re important, and what to consider when negotiating one.

1. Why Include a Reference Clause?

Including a reference clause in your settlement agreement offers several benefits:

• Protects Your Professional Reputation: If you’re leaving due to workplace disputes, performance issues, or a redundancy, a reference clause allows you to control what information is shared, reducing the risk of negative or ambiguous remarks impacting your future job prospects.
• Guarantees Consistency: With a reference clause, you ensure that every future reference request is answered in a standard, pre-approved way. This consistency can be reassuring, especially if you had conflicts with a particular supervisor or department.
• Supports Future Job Applications: Some industries require detailed references. By including a reference clause, you’ll have a ready and agreed-upon document to provide as you apply for new positions.

Employers are often open to including a reference clause because it’s a straightforward way to help facilitate your transition to a new role, thus making it easier to reach a mutually agreeable settlement.

2. Types of Reference Clauses

There are several ways to structure a reference clause, depending on your specific needs and the level of detail you’d like included:

a) Basic Reference

This is the simplest type of reference, where the employer agrees to confirm basic details of your employment, such as:

• Job Title
• Employment Dates
• Brief Description of Responsibilities

A basic reference is factual and neutral. It’s ideal if you prefer to keep things simple or if you’re concerned about negative comments impacting your future employment.

b) Detailed Reference

A detailed reference may include additional information about your contributions, skills, and accomplishments. This type of reference can be advantageous if:

• You’ve made significant achievements that could enhance your appeal to future employers.
• You’re moving within a specialized field where a detailed reference is common practice.

Your solicitor can help draft a positive but factual reference to ensure it aligns with your professional goals.

c) Character or Performance Reference

In cases where your performance was strong, a character or performance-based reference may be included. This type of reference could highlight qualities such as teamwork, leadership, or innovation. However, performance-based references are typically only advisable if you and your employer left on good terms, as they require subjective descriptions that both parties must agree upon.

3. Negotiating the Terms of a Reference Clause

Negotiating a reference clause requires careful consideration to ensure the agreed content is appropriate and accurate. Here are some points to keep in mind:

• Drafting the Reference Wording: Work with your solicitor to draft the reference wording that you want included in the agreement. Make sure it is factual and does not exaggerate your role or accomplishments, as employers may push back on overly positive wording.
• Limitations on Future Feedback: The reference clause should specify that any future feedback from the employer will not include negative or subjective commentary beyond what’s in the agreed reference. This way, you can avoid the risk of unfavorable feedback undermining your agreed reference.
• Agreement on Signatories: Specify who within the company will provide the reference. This could be your immediate manager, an HR representative, or a senior executive. This ensures that the reference comes from someone familiar with your work and less likely to deviate from the agreed language.
• Non-Disclosure of Dispute Reasons: If your departure involved a dispute, such as an unfair dismissal claim or redundancy, the reference clause should state that the reasons for your departure won’t be disclosed, preserving your privacy and reputation.

When negotiating, make sure that both parties approve the wording and that it aligns with the tone and accuracy you need for future job applications.

4. Legal Implications of a Reference Clause

Once included in the settlement agreement, a reference clause is a legally binding obligation for your employer. This means:

• Your Employer Must Adhere to It: The employer is legally required to provide only the agreed reference details to anyone who requests a reference about you.
• Failure to Comply Can Lead to Legal Action: If your employer breaches the reference clause—by providing unauthorized information or a negative opinion not covered in the agreement—you may have grounds to claim damages for the impact on your future employment opportunities.

It’s crucial that the clause is clear, specific, and unambiguous to avoid any potential misinterpretations that could lead to a breach.

5. Confidentiality and Reference Clauses

Most settlement agreements contain confidentiality clauses that prevent you from discussing the terms of your agreement with anyone other than close family, a legal advisor, or a tax advisor. Confidentiality doesn’t generally prevent the employer from providing a reference, as long as it’s within the agreed terms of the settlement.

However, it’s essential to confirm that the confidentiality clause won’t interfere with your reference. If needed, ask your solicitor to ensure the confidentiality terms are compatible with the reference clause, particularly if the settlement relates to sensitive situations like a grievance or discrimination claim.

6. Common Challenges and How to Overcome Them

Negotiating a reference clause isn’t always straightforward, especially if you’re leaving due to a dispute or under less favorable conditions. Here’s how to handle common challenges:

• Employer Resistance: Employers may resist providing detailed references, especially if the departure was contentious. In these cases, a simple, factual reference that includes only your job title, dates, and main duties may be the best compromise.
• Disputes Over Reference Content: If the employer disagrees with the content, try to negotiate a balanced approach that highlights positive contributions without embellishment. For example, rather than stating “excellent performance,” use factual descriptions like “fulfilled role requirements effectively.”
• Ensuring Compliance: Include wording in the agreement that clearly states any breach of the reference clause could lead to potential legal consequences for the employer. This helps emphasize the importance of compliance and discourages deviations from the agreed content.

7. Finalizing the Reference Clause

Once the content is agreed upon, make sure the reference clause is clearly written in the settlement agreement, specifying:

• The exact wording of the reference.
• Who is responsible for providing the reference.
• Provisions to prevent any additional commentary that could undermine the agreed reference.

Review the finalized document with your solicitor to ensure it meets your needs and is legally enforceable.

Final Thoughts

Including a reference clause in your settlement agreement is a strategic way to protect your professional reputation and support your future job applications. By carefully drafting and negotiating this clause with your employer, you can secure a positive and consistent reference that aligns with your career goals.

Work closely with your solicitor throughout the process to ensure the reference clause is fair, clear, and enforceable, providing you with peace of mind as you transition to your next role.