The legal aspect is another interesting part of this problem. We have reviewed the legal statutes by state and our terms and conditions make sure our references comply with the law. We require that our references give their feedback without malice and to the best of their knowledge.

That won't stop a former employee from suing me though. I might win the case, but I'd still have to pay a fortune to defend myself.

Yeah, my business law professor told the entire class to just never give references period. There is no gain, and everything to lose.

Even saying positive things like 'Employee X was fantastic; she was really good at Y' can be grounds for libel. The employee will claim standing based on the fact that, by saying she was good at 'Y' and not 'Z' (which is what the employer really wanted), it was libel by omission.

This is a good point about reference checks in general.