It can be. Letters of recommendation aren't as valuable as someone offering to speak on your behalf when contacted. But it very well might be that your employer simply doesn't understand that.
Either way, simply ask and get clarification. There are a myriad of reasons why an employer might offer a letter of recommendation instead of allowing him/herself to be a reference that can be contacted. A lot of those reasons have nothing to do with an employee personally. But you don't know until you communicate with your employer.
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