Tough economic times often mean worker layoffs. In any environment, demanding standards can spell dismissals for poor performers. Either way, the employees must move on. Worried about what to say when you provide a reference to a prospective employer?

If a worker is let go simply because a business changes hands or downsizes, the information provided might not be hurtful. An employer or manager may regret that a departing employee couldn’t be retained and may even feel guilty about how things turned out. As a result, he or she may go overboard in lauding the person’s abilities and accomplishments. On the other hand, if the departure stemmed from less sympathetic or less congenial circumstances, then what a former manager says, and how he or she says it, can make the difference between an offer and a rejection.

Some states allow a former employer to give a reference to a prospective employer under certain circumstances, but shield the reference-giver from legal action. For example, an employer in Texas, if asked by a discharged employee or by someone considering the ex-employee for a position, may give a written truthful statement of the reason for the discharge. The contents of the statement cannot be used in a civil or criminal defamation action against the person or company furnishing the statement.

Under California law, a business owner or someone else in the organization may furnish, if specifically requested to do so, a truthful explanation of why an employee was let go or why an employee quit. Although the California law says nothing about truth being a defense to a defamation lawsuit, the laws in many states protect an employer who in good faith discloses information the employer believes is true to someone who has a legitimate interest in getting the information. A well-founded belief in the truth of the statements is essential. Another provision of California law makes it a misdemeanor to give false information to a prospective employer in order to interfere with a former employee’s job prospects.

A reference request creates a dilemma. On the one hand, an honest and credible statement of the employee’s performance informs the hiring decision. Every employer being, at one time or another, a prospective employer, it’s easy to see oneself in the next guy’s shoes. Why not help a necessary and legitimate inquiry? When sizing up a job candidate, what’s wrong with having as complete a picture as possible? Better to discover sooner rather than later that an individual, if not potentially dangerous, is ill-suited for the position. On the other hand, a departing employee may view any less-than-favorable information (particularly if it coincides with a job rejection) as false and damaging to his or her reputation. Unless state law has minimized or eliminated the risk, employers may be forced to defend a lawsuit based on reference-related defamation. Successful cases can result in awards reflecting lost earnings, mental distress, and, in extreme cases, punitive damages.

Faced with potential lawsuits, many employers flatly refuse to provide references, limiting the information to dates of employment, job titles and salary. That works — unless the law requires disclosure of information about an employee. Best to consult with an employment law specialist to determine what, if anything, you may be obliged to reveal.

If your company has a limited-information policy, apply it consistently. If, now and then, you make exceptions for high-performing, well-liked employees, some might interpret a bare-facts reference as a code for a “bad” employee.

If, by law or conscience, you feel compelled to provide some information about an employee’s performance, you may be well served by obtaining written consent from departing employees about the release of information. Be sure to discuss with the employee, at the time he or she signs a waiver or release, what you are willing to say when responding to a reference request.

Barry Shanoff is a Rockville, Md., attorney and general counsel of the Solid Waste Association of North America.

The legal editor welcomes comments from readers. Contact Barry Shanoff via e-mail:[email protected].