Im in australia and I went out on stress leave as I was getting harassed and treated badly at my previous employer. I had a lot of trouble finding a job after leaving due to stress and was in and out of work for around 2 years I have since found out my previous employer is going around saying I sue him for 35 thousand dollars to other potential employers. I have a job now and my previous employer is still telling my current employer and other workers that I sued him What can I do

Do you have proof that will hold up in court? If you never sued your previous employer then you may have a claim. What is it you really want to do? You might also be able to get a order of restraint for your former employer to silence them.

So what's the problem? I don't see that such an allegation, even if false, would damage your reputation.

Prior restraint, being contitutionally suspect, is very difficult to obtain in the U.S. Of course since you are in Australia, the law on prior restraint may well be different.