How to Write a Reference Letter for an Employee Leaving in Australia: Legal Risks and Best Practice

When an employee resigns (or you part ways on good terms), it’s common for them to ask you for a reference letter. For many small businesses, it can feel like a simple favour - a short note confirming the person worked for you and did a decent job.

But writing a reference letter for an employee who is leaving can create real legal and commercial risk if it’s inaccurate, inconsistent with your records, or (even unintentionally) misleading.

The good news is: you don’t need to overcomplicate it. With a sensible approach and a repeatable structure, you can provide a helpful reference while protecting your business.

In this guide, we’ll step through what to include, what to avoid, and how to handle common tricky situations (like performance issues, dismissals, and “can you mention why they left?” requests).

What Is A Reference Letter For An Employee Leaving (And Why Do Employers Provide One)?

A reference letter for an employee leaving is a written statement from the employer that usually confirms:

• the employee’s identity and role
• their dates of employment
• a high-level summary of duties and skills
• sometimes, comments on performance, conduct, and suitability for future roles

In practice, reference letters are commonly used by employees to support job applications and, sometimes, other applications that require employment confirmation (for example, a rental application or professional registration).

From your perspective as a small business employer, providing a reference can be a positive part of offboarding. It’s also a way to show professionalism and maintain goodwill - especially if the employee is leaving on good terms and may become a client, supplier, or referral source later.

However, it’s important to remember that a reference letter is not just a private “chat” - it’s a document that a third party may rely on.

What Are The Legal Risks Of Writing A Reference Letter In Australia?

Most reference letters are straightforward and low-risk. Problems usually happen when the letter:

• contains factual errors (dates, role title, reason for leaving)
• includes overstated praise that isn’t true or can’t be supported
• includes negative commentary that isn’t fair, accurate, or properly documented
• discloses sensitive information without a proper basis

Here are the main risk areas to keep in mind.

1. Misleading Or Inaccurate Statements

If your reference letter includes statements that are untrue or misleading, the new employer (or another third party) may rely on it and suffer loss.

Even if you didn’t intend to mislead, an overly “glowing” reference that doesn’t match reality can create exposure. This is one reason many employers keep references factual and conservative.

It’s also why you should avoid writing anything you wouldn’t be comfortable backing up later with records (like performance reviews, KPIs, or documented achievements).

2. Defamation Risk (When You Say Something Negative)

If you provide a negative reference and it harms the employee’s reputation, you can face defamation risk if what you said is not defensible.

Truth can be a defence, but defamation disputes can still be time-consuming and expensive even if you ultimately have a defence. As a practical matter, it’s usually safer to stick to objective facts and documented outcomes, and avoid personal opinions.

3. Privacy And Confidentiality Problems

Even if an employee has left, you should be careful about sharing information that could be confidential or sensitive (for example, allegations investigated internally, medical details, or information about other employees).

Also keep in mind that privacy obligations can still apply in some cases. For example, some employers are covered by the Privacy Act 1988 (Cth) and the Australian Privacy Principles, while others may not be (including many small businesses) - and confidentiality obligations can apply regardless through contracts, workplace policies, settlement terms, and general duties.

If you have workplace confidentiality obligations (for example under a contract, policy, or settlement terms), your reference letter needs to stay within those boundaries.

4. Inconsistency With Your Employment Records

Reference letters often end up being compared against other employment documents - especially if a dispute arises later. If the letter says “excellent performance” but your records show repeated warnings, it can undermine your position.

This matters most where the employee’s exit was complicated (performance management, misconduct, redundancy, a disputed resignation, and so on). If you’re currently managing performance issues, having a clear process can reduce risk - including using documents like show cause letters where appropriate.

5. Discrimination And Adverse Action Traps

References can also cause issues if they include (or imply) a reason connected to a “protected attribute” (for example, pregnancy, disability, religion), or if they appear to punish an employee for exercising a workplace right.

For example, saying “they took too much sick leave” can be risky if the leave was legitimate and protected. If you’re unsure about what you can ask for and record around medical issues in the workplace, it helps to be across when employers can request information, such as medical clearance to return to work.

The safest approach is: keep the reference focused on role-related, work-related facts and capabilities.

Best Practice: What To Include In A Reference Letter (A Safe, Employer-Friendly Structure)

If you want a repeatable template, a low-risk reference letter for an employee leaving typically includes the following sections.

1. Business Letter Details

• Date
• Addressee (if known) or “To Whom It May Concern”
• Your business name and contact details

Use company letterhead if you have it, but keep it clean and simple.

2. Your Relationship To The Employee

State your name, title, and how you supervised or worked with the employee. This helps the reader understand the context and credibility of the reference.

Example: “I was [Employee’s] direct manager from [date] to [date].”

3. Employment Details (Keep These Precise)

This is the most important “factual core” of your reference letter. Include:

• Job title
• Employment type (full-time/part-time/casual)
• Dates of employment (start date and end date)
• Work location (if relevant)

If the employee’s new employer mainly needs confirmation of employment (rather than a character reference), you may be better off issuing a formal confirmation document. Many businesses use a standard certificate of employment for this purpose, and only provide a longer reference letter if specifically requested.

4. Key Responsibilities And Skills

Summarise the employee’s main duties in 3–6 bullet points. Keep it aligned to what they actually did.

Good options include:

• customer service and handling enquiries
• operating specific systems or software
• supervising junior staff or training new team members
• meeting deadlines and quality standards
• cash handling or stock management (if applicable)

This section is safer when it describes responsibilities rather than giving broad opinions like “outstanding” or “the best we’ve ever had”.

5. Performance Comments (If You Choose To Include Them)

You don’t have to include a detailed assessment. If you do, keep it:

• specific (tied to real examples)
• balanced (not exaggerated)
• supportable (something you could back up if questioned)

Safer performance phrases often include:

• “reliable and punctual” (if true and documented)
• “worked well within our team environment”
• “communicated clearly with clients and colleagues”
• “met the requirements of their role”

Avoid absolute statements like “always” and “never”, unless you are very confident you can support them.

6. Reason For Leaving (Optional)

This is one of the most common “grey areas”. If you include it, keep it neutral and factual.

Examples:

• “[Employee] resigned from their role on [date].”
• “[Employee] left the business to pursue another opportunity.” (only if you know this is correct)

If the employee was made redundant, you may state that fact - but be careful not to accidentally suggest misconduct or performance issues where redundancy wasn’t the reason. If you’re currently dealing with redundancy processes, it’s important to ensure the offboarding documents and communications are consistent, including any payment in lieu of notice where relevant.

7. Closing And Contact Details

End with an invitation to contact you, but consider limiting it to factual confirmations.

Example: “If you require any further information to confirm [Employee’s] employment details, please contact me on…”

This sets expectations and reduces the likelihood you’ll be pulled into informal, open-ended questioning later.

What To Avoid In A Reference Letter (Common Mistakes Small Businesses Make)

When you’re writing a reference letter for an employee leaving, these are the most common pitfalls we see.

1. Overpromising Or Exaggerating

A “kind” reference can turn into a business risk if it is not accurate. Avoid:

• “They were perfect”
• “No issues ever”
• “We would hire them again in any role” (unless you truly would)

If you want to be positive, it’s better to be specific: “They consistently met deadlines and maintained accurate records.”

2. Detailed Allegations Or Internal Process Notes

A reference letter is not the place to rehearse performance management history or investigations.

Even where those issues are real, including them can create defamation risk, privacy issues, and unnecessary disputes - especially if the employee challenges the fairness of what you’ve written.

3. Sensitive Personal Information

Avoid including:

• health or medical details
• family circumstances
• visa status commentary (unless purely factual and you’re certain)
• anything about protected characteristics

Keep your letter focused on the job and their work performance.

4. Inconsistent Job Titles And Dates

Before sending the reference, cross-check your payroll records and employment contract so the letter is consistent with your documentation.

If your employment documentation needs tightening generally, having the right Employment Contract in place can make these “factual checks” much easier down the track.

How To Handle Tricky Scenarios (Termination, Performance Issues, And “Can You Just Say…” Requests)

Not every departure is a smooth resignation. Here’s how many employers handle common scenarios without inflaming risk.

If The Employee Was Terminated Or Dismissed

You’re generally not obliged to provide a positive reference letter.

If you do choose to provide something, many employers keep it strictly factual and limited to:

• role title
• employment dates
• high-level duties

You can also provide a certificate of employment instead of a narrative reference. This gives the employee something practical, without forcing you to make evaluative statements.

If The Employee Had Performance Issues

You don’t need to rewrite history. But you also shouldn’t create a document that contradicts your own records.

Practical options include:

• provide a factual letter only (employment details and duties)
• avoid performance opinions altogether
• if asked for performance commentary, stick to what you can support with evidence

If you are currently managing performance or considering termination during an early period, ensure your approach aligns with your legal obligations. For example, there are specific considerations around termination during probation.

If The Employee Asks You To Include A Specific Reason For Leaving

This happens a lot, especially for rental applications.

If they ask you to include something like “left due to family reasons” or “left due to illness”, you should be careful. Unless you’re absolutely sure the statement is correct and you have a proper basis to include it, it’s safer to keep it neutral:

• “[Employee] resigned on [date].”
• “[Employee’s] employment ended on [date].”

You can also ask the employee to provide a short written request confirming what they want included, but keep in mind that even if they request it, your business still bears risk if the statement is inaccurate or inappropriate.

If The New Employer Wants A “Phone Reference” Instead

Phone references feel informal, but the same risks apply - and it’s easier to misspeak on a call.

To keep things consistent, consider:

• having one person in the business handle all references
• asking for questions in writing first (where practical)
• answering based on a prepared set of “safe facts”
• keeping a short file note of what was asked and what you said

Having internal processes and policies around workplace communications can help reduce “off the cuff” risk across the business, not just for references.

Should You Have A Workplace Policy On References?

For many small businesses, the biggest risk isn’t the reference letter itself - it’s inconsistency.

One manager writes glowing references, another refuses, and a third shares too much information on the phone. That’s how disputes start.

A simple internal approach can help. Your policy might cover:

• who is authorised to provide references (for example, the business owner or HR/operations manager)
• whether references will be “factual only” or can include performance comments
• what information will never be included (medical info, allegations, etc.)
• record-keeping (keeping a copy of what was provided)

This kind of policy also supports your broader employment compliance. Many businesses embed this into a staff handbook or workplace policies package, so everyone is on the same page.

Key Takeaways

• A reference letter for an employee leaving should be accurate, consistent with your records, and written on the assumption a third party may rely on it.
• The safest structure is factual: employment dates, job title, key duties, and (optionally) conservative, supportable performance comments.
• Avoid exaggerations, sensitive personal information, and detailed negative commentary (especially where it is not well-documented).
• For tricky exits (termination, performance issues, disputes), consider providing a factual-only letter or a certificate of employment instead of a narrative reference.
• A simple internal “references policy” helps keep your business consistent and reduces the chance of a manager creating risk with an off-the-cuff reference.

This article is general information only and not legal advice. If you’d like advice about your specific situation, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.