I have heard that someone that works for my previous employer is slandering my name. What should I do?

OK your question and title are not matching too well. Is this person employed at your old job or is it your old employer? Have you been damaged by this persons statement? What exactly was said and to whom was it said?

Your employer can say anything they want about you as long as they don't lie.

If someone is telling lies about you that are damaging you, causing monetary harm then hire a lawyer and sue.

Well, I've decided to take the high ground here. I'm as bad as this person is, if I perpetuate the hearsay. Anyone I've ever worked for, or done business with, knows who I really am and the things I've done. I probably don't want to work for any company or person that would listen to the negative dribble anyway.