Check out this article published in the November 6, 2026, print edition of the Phoenix Business Journal. The article appears as part of the Journal's "Legal Pulse" column.
Many employers get anxious about responding to reference checks, particularly concerning an individual who was terminated because of alleged bad behavior or poor performance. Employers naturally are concerned about saying something negative, only to have the individual sue for “slander” or “defamation of character.”
Statutory Immunity For Certain Responses
Arizona statute actually gives employers significant legal protection when responding to certain reference checks.
First, an employer who provides a prospective employer with information about the “reason for termination of a former employee or about the job performance, professional conduct or evaluation of a current or former employee” is immune from liability for such disclosure. The employer is immune unless the claimant proves that the employer knew that the information it provided was false, or that the employer acted with “reckless disregard” for whether the information was true or false.
One important step in maximizing that protection is to be sure that the employer actually is speaking to a “prospective employer,” and not to just any person or entity. One way employers can do that is to request some written confirmation from the requesting company, such as a letter or email confirming that the individual has applied for employment with them. Another important step is to be sure that the employer only provides information that it knows and can prove is true.
Second, under Arizona law, employers also have protection against defamation or slander claims when the individual has consented to the employer’s statement. If the individual has asked the employer to provide a reference or has otherwise agreed that the employer may provide a reference, the employer generally cannot be held liable for what it then says about that individual. Many companies use application forms that contain just such “authorizations” or “consents” concerning reference checks; the applicant is asked to list references and also authorizes each such reference to provide information concerning his or her employment. Employers who receive reference requests would be well-served to get such a signed authorization in hand before providing any information.
Potential Liability To the Requesting Company When Providing Inaccurate Information
Some employers become so anxious about saying anything negative about a former employee that they veer too far in the other direction and give positive references that are inaccurate. The former employee might not have a legal claim against the employer for saying inaccurate “nice” things. But making an inaccurate statement—overstating the individual’s abilities, for example—can conceivably result in liability to the requesting company. If the requesting company hires the individual on the strength of a positive reference, and that reference turns out to have been false or misleading, the requesting company could argue that the employer is liable for “fraud” or “misrepresentation.”
Agreeing To Provide A Neutral Reference As Part Of A Severance Agreement
It is not unusual for a departing employee to ask for a commitment about how the employer will respond to future reference checks. Claimants often accuse employers of “blackballing” them; employers know that they have no intention of doing so and see no harm in agreeing to refrain from such remarks (perhaps as part of a severance agreement). Many employers also have written policies governing responses to reference checks; some executives naturally might feel that it can’t hurt to agree to follow whatever that policy may be.
But it is important to note that the personnel who respond to reference checks may change over time. The personnel in place at the moment might indeed be conscientious about responding to reference checks in the manner spelled out in some severance agreement. But it could be extremely difficult (if not impossible) to ensure that all future personnel do so. As time passes and institutional memory fades, the likelihood increases that someone who does not know about this particular severance agreement might receive a reference check. If that individual does not respond in precisely the manner called for under the agreement, the employer will be in “breach of contract,” and will be subject to liability for any damages that the former employee sustains as a result.
It also is important to note that in such a situation the individual is asking the company to promise that it will not do something that it has every right to do. As discussed above, Arizona law offers employers significant protection against claims dealing with reference checks. Entering into a severance agreement in which the employer agrees to always say certain things about the departing employee basically waives those significant legal protections.
There is little harm in agreeing to provide a departing employee with a one‑time letter of reference (or “service letter”), perhaps making some mutually agreeable truthful statements. A letter like that can serve the employee’s purpose in trying to obtain new employment. And agreeing to provide such a letter, once, would not tie the employer’s hands when it comes to responding to future reference requests. That is, the employer still would be immune when responding to future requests truthfully.
about the author
Don Johnsen represents employers in matters involving employment discrimination and sexual harassment, wrongful discharge, breach of contract, wage and hour disputes, arbitrations, and labor practice charges. Practicing employment and labor law exclusively, Don advises on employee hiring, discipline and discharge procedures, drug and alcohol testing, non-competition matters, labor relations issues, and other employment-related policies and procedures.