I work part-time as a school bus driver. My dispatcher frequently brings in subs because we are short of drivers. I'm one of the more reliable and versatile drivers and my job evals reflect that.

When the dispatcher learned that I had applied for a full-time position in the district warehouse, he said to me, "I'll have to tell [the purchasing manager] that you're a flake". I passed the warehouse written exam and interview but came in
8th on the eligibility list. When I told my dispatcher the news he said, "That's too bad, but it's good for us".

Is it illegal for him to defame me to prevent me from being hired somewhere else? What recourse do I have?

You would have to prove; #1 you are not a flake #2 the dispatcher knew you were not a flake #3 that the dispatcher actually said this to the School District manager #4 this comment caused your eligibility to drop. BTW you can pass an examine but you don't pass an interview. The person doing the interview makes an assessment of you based on your answers and fit for their position. How do you know that your answers did not cause your low eligibility?