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If you can’t give someone a positive reference, then try to decline. This can be difficult. You might never have been honest with the person that you didn’t think they were a good employee and now you find it difficult to let them know.  Claim to be too busy. Apologize but state you’re swamped and can’t handle a reference right now. This is a good excuse if you’re asked to write a reference. If the person no longer works with you, gently remind them that more recent employers would make better references. Ideally, you will simply say, “I’m sorry, I can’t give you a positive reference, John” or something to that effect. This puts the person on notice that they shouldn’t put you down as a reference. You can always agree to provide only basic information. This is the easiest information to provide and protects you legally from a lawsuit. For example, agree to provide only the following:  job titles dates of employment final salary Some employers have been sued for defamation for providing negative reviews which cost someone a job. Defamation is a false statement that intentionally harms someone’s reputation. If a bad employee has asked for a reference, you should meet with your lawyer.  If your business doesn’t have a lawyer, then get a referral from your local or bar association. Ask for a lawyer who specializes in labor and employment. Discuss your options with the lawyer. Your options will be limited based on the law in your area. Truth is a defense to defamation, so you can protect yourself by always being accurate. Look through the employee’s performance reviews and personnel file to see if there are notes about the employee’s bad behavior. This evidence can help back up what you are writing. The hiring manager is also entitled to an accurate reference. In fact, if you commit a misrepresentation, you could be sued. For example, you can’t accidentally claim an employee was a supervisor when she wasn’t. You can protect yourself legally by requiring the candidate to sign a release of liability. You can find samples online. With a release, the person agrees not to hold you responsible if they don’t get the job. The key language in a release is the following: “I hereby release ABC Corporation, and its employees and officers, from any claims, damages, or liabilities of any kind, that may directly or indirectly result from the release, use, or disclosure of such information by any person or party arising from the employment reference.” Your employees should know your reference policy. Draft one and publish it in your employee handbook or manual. For example, you might create a company policy only to provide basic information about employment unless the person signs a waiver form.  Consult with a labor and employment lawyer to discuss the ideal policy for your company. For example, you might want all references to come through one person in Human Resources. This person should enter reference requests in a log so that you can track them.
Try to get out of providing a negative reference. Agree to provide basic information. Consult with an attorney. Be accurate. Have the candidate sign a release. Draft a company reference policy.