What are we allowed to say when a prospective employer calls our office for a reference for one of our ex-employees who was dismissed or resigned?

This question certainly raises a dilemma, and in today's litigious society, one to carefully think through. According to the Arizona Industrial Commission and Labor Board, no laws govern this issue in our state. Following basic guidelines will help one decide how to disclose information about former employees and avoid litigation.
An employer may fear that if any negative statements are made one could be sued for libel (written) or slander (spoken). It is best to stick with the facts and lay aside personal feelings. Basic information that may be disclosed would be dates of employment, job title and description, rates of pay both at the beginning and end of employment, and if the employee resigned or was terminated.
In order to avoid defamation, a former employee must prove that information given out was false and that the information harmed his or her reputation. Proving the information given was true dismisses these types of lawsuits. For example, disclosing disciplinary action taken during the employment period is justified provided that documentation signed by the ex-employee is on record. Make sure personnel files reflect fairness, objectivity and honesty; free of unproven gossip.
My recommendation is to speak only to the doctor, or the owner of the practice. Ultimately, these people are responsible for hiring, training, reviewing performance, and dismissing employees.
It also pays to be discrete while attending informal gatherings. Don't speak freely at a meeting or other functions where social and/or business chatter may take place. Among colleagues and employees, disclose the reasons for firing strictly on a need-to-know basis. Limit the announcements to, "Sally has left the practice and we're seeking a replacement." Either 'speak well of the dead', or say nothing at all. For example, if one believes nothing positive can be said of a former employee, simply state that it is the policy of the practice not to comment on former employees with prospective employers. Airing grievances about someone will likely spread, potentially causing legal complications.
The "Crown Jewel" of all questions that will tell a person most all they need to know about a former or prospective employee is, "Given the opportunity, would you hire the employee again?" A "yes" or "no" answer speaks volumes. Take it from there.