Despite all the risks, providing other employers with references about your former employees is a good business practice. If you refuse to provide references, eventually you would compromise your ability to find out about applicants you’re considering hiring.
In addition, you can be sued for refusing to give a potential employer information on a former employee’s dangerous or illegal conduct.
As long as the information you provide is objective and well documented, the courts should side with you in the event a former employee files a defamation suit. Give serious consideration to a policy that limits references to basic employment information, such as dates of employment, job duties and salary history.
Another defense: The statements made in the reference are protected by a “qualified privilege”: that is, a libel charge will not stand up in court if the comments were made without malice or deliberate ill-will and were given...(register to read more)
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