Error when amending a lookup value: The UPDATE statement conflicted with the REFERENCE constraint

If the value is already being used in employee records, the error message is going to be generated when trying to change the lookup value. This is an expected behaviour for any lookup.
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To overcome this, you would need to run a data export the records where the lookup value you want to change is being used and remove it from there. Then, you can amend the lookup value in order to replace the old value in the employees' records.