How should one handle a reference request for a bad former employee?
She wasn't terminated. When her temp employment term expired, I simply told HR not to extend it because she had failed to complete 6 items by deadline.
Years ago, I told her that company policy prohibited references and not to list me as company policy was only to provide dates of employment and job title.
It's been six years, and now that I have a new employer, she started listing me again without even reaching out to me.

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"When I worked at X Company, our policy was to direct reference and employment inquiries to HR. Although I’m no longer employed there, I still think it’s appropriate to respect that process, so I’d recommend contacting X Company’s HR department for any information regarding their prior employment." Keeps matters diplomatic, avoids speaking about the former employee entirely, and provides them objective direction.

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You can simply acknowledge her employment, her job title, and the dates of her employment. If asked about her performance and reason for leaving, you can explain that company policy prevents you from disclosing any additional information.

Give her a glowing recommendation. Who gives a shit. She clearly liked you. There’s no honesty police.

She entered billable hours for work that she never performed. I had to complete the work that she didn't perform after her departure. I will never EVER give her a positive reference.

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