I know for a fact that it is illegal for a previous employer to give a bad recommendation. Positive is of course ok, and they can refuse to comment or not give one, but they cannot say anything bad about you. I took several classes on industrial and/or organizational psychology when I was in college, and we went over this very point when we were covering human resources and the hiring process. This was in at least two of those classes. I'm not sure of the exact law or act, but yeah, it's on the books.
Besides, if you leave a job on bad terms, it probably wouldn't be a good idea to list them as a reference anyway. Normally you can decline to have a potential employer contact a previous employer, while still listing the job as experience. All it takes on your part is a little explaining to the interviewer as to why you said no.
I thought I would NEVER come back to UPS after I worked there during college. Regardless, I gave them notice well ahead of time that I was leaving, and worked my ass off up until and including my last day on the job. Low and behold, 18 months later I found myself looking for a steady job with benefits, and I was back interviewing at UPS, this time in my hometown. Suprisingly, I had an "ok to rehire" status, which the HR person told me was a rarity. In any case, I think you should always act professionally and not burn bridges when you decide to change employment. You never know when you may want that positive recommendation...or your old job back.
You may have taken psychology courses, but you apparently did not take employment law courses. It is not illegal to for a previous employer to tell the truth.