I was terminated from my job a few weeks ago and was told the reason was that I didn't have the proper skills to do what they needed. (Actually they got rid of me and hired someone making $4 less an hour) The problem is, when people that I apply with call in for references and to check employment, they are told lies about why I was let go. Is this legal in Colorado?

Depends on what you mean by lies.

I was sent out to install a furnace humidifier. I told them that I was surprised that they were sending me out because I 1)am a technician and not an installer, and 2)I had never installed one of these before. When people are calling for references, they are being told that I was terminated because I installed a humidifier incorrectly and told them I knew how to do it and lied to them. The story was even different to the unemployment office. They told unemployment that I didn't do what I was told, and that I lied about my technical skills when I was hired. I had just come from Florida, was hired by a supervisor that no longer workes there, and EVERYONE at that shop knew I had never worked on heating systems before I got there and I constantly told everyone I had a lot to learn still. Makes for a bad reference!