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It’s in quotes because it’s not a literal file, per se. But HR will keep records of termination reasons.

So, if a prospective employer contacts Cloudflare and asks why she was terminated and Cloudflare says “performance” when that’s not actually the case, it’s detrimental to the potential employer’s perception of her.

Never heard that a company tell the reason got dismissed. they will confirm they worked there. saying performance or similar things can cause legal issues. At least in Europe. in some countries even code sentences are not allowed.

Usually companies now ask the question "would this candidate be eligible for rehire in the future". If someone is fired for performance or other cause, the answer is more likely to be "no".

This works around potential libel issues associated with giving specific reasons.

It affects her response when her next interviewer asks her why she left her last job.

Presumably HR would keep some record of you after you're fired?