Earlier quoted context omitted.
A curious parallel to this is a lot of company's "no reference" policies. Due to the fact that a negative reference can have legal ramifications in a lot of jurisdictions a number of companies have adopted a policy where they publicly state that no reference will be given to leaving employees. I've known several companies like this that will then inform employees that are leaving privately that they'll be happy to gi…
I've always given individuals as references, not companies. Not sure the degree to which anyone's ever checked.
Again this is super weird because the only thing that is an issue is giving a negative reference so a lack of a positive reference could be interpreted as a negative reference... thus, not giving everyone a positive reference should be a similar issue.
That entire law is sort of silly in most cases though, but the cases where it isn't (ex. a malicious boss for stupid reasons) are serious enough that I understand why it's around while being sad that we need it.