Providing references for former employees is easy if you parted on good terms. If you had to fire an employee, however, it can be a difficult decision about how honest you should be with the former employee's potential new employer. If you tell that potential employer anything about the former employee that you can't verify as factually accurate, you may be facing a lawsuit.
To prove a defamation case, a former employee must show that you intentionally damaged his or her reputation by making harmful statements that you knew weren't true. Pretty much any negative comment you make can qualify as a harmful statement that intentionally damaged the employee's reputation. If you had to fire someone, the reasons behind it almost assuredly damage the employee's reputation and by communicating those reasons to a new employer, it becomes intentional.
Defamation isn't just limited to factually untrue statements about a former employee. If you tell the potential employer things that you suspect or strongly think are true, but can't actually prove, then that may qualify as a statement that you "didn't know was true". Keep unflattering comments to yourself, and really just stick to the verifiable facts.
What to Do When Firing an Employee
First, when you fire an employee, tell them up front that you won't be able to provide positive references. This alone can avoid a bad situation, since only a really daft employee would request references from you after being told that you would give him or her negative references. If it comes down to a lawsuit later on, it will be helpful to show that you in fact told the employee that you would not give them a positive reference, so make sure you tell the employee in writing and keep a copy.
Second, tell other employees that you simply had to "let the employee go" and don't go into any detail. If you need to make a statement, make it brief, neutral in tone and let the existing employees know who will be taking over the former employee's duties.
Finally, consider having the employee sign a release to protect yourself against lawsuits. Include a clause where the employee grants you permission to provide information to prospective employers and promises not to sue you for providing such information.
What to Say to Potential Employers
If a potential employer calls asking for a reference, do your best to stick to the facts and avoid making unflattering comments that make come back to haunt you. Here are some simple guidelines to remember:
Concerned About Being an Employment Reference? Talk to an Attorney
When serving as a reference for a former employee, it's important to know what you can and can't say about him or her. This is especially important if you've been asked to serve as a reference for an employee that you had to fire. It's a good idea to talk to skilled employment law attorney to ask any questions you may have about what you're legally allowed to say as an employment reference.