There is an exemption from the Data Protection Act for the suppliers of references.
But the recipient of a reference may be required to disclose the content of a reference if they receive a Subject Access Request.
There is no legal requirement to provide a reference, but it is important to have a consistent policy, so that an employee cannot claim that they suffered discrimination by a failure to provide a reference.
The website of ACAS in the UK provides a great deal of useful information and guidance on employing staff and taking up references, and also includes many templates which can be used to make employing and managing staff a simpler process.
The Chartered Institute of Personnel and Development (CIPD) publish an extensive set of FAQs relating to references. Although these refer to UK law, the principles are also relevant to the Isle of Man. You must be a member of the CIPD to access this information.
* Source – Isle of Man Office of the Data Protection Supervisor accessed 22nd October 2013.