Can employee be fired for rumors that damage employer reputation?

I work for a drug/alcohol rehab in NY State. We have a situation where 3 former clients and several current clients have alleged misconduct by one of our counselors. The counselor denies all this and had a spotless personnel file for the 3 or so years of their employment.

My understanding of the federal statute is that a lie detector test is not permitted in this instance.

RR: True for the employee and perhaps the current clients. You may be allowed to polygraph the former clients, if they voluntarily agree to it. I recommend talking with a polygraph examiner for more information about the law in your state.

Can we fire this employee based on allegations of our clients? Our policy does not have an "at will" clause in it specifically. Can we fire someone based on something we can't prove?

RR: You can fire someone based on allegations that can't be proved, as long as you do an impartial and thorough investigation, and make your decision based on the preponderance of the evidence. You don't have to believe one side or the other "beyond a reasonable doubt," you just have to believe one side a little bit more than the other.

As part of your investigation, one question to ask is "what motive do these clients have to lie?" I would want to know if they are all friends (or drinking buddies) and if they have talked to each other about this situation.

In the event these rumors "get out", our agency could receive "negative consequences".

RR: You cannot fire someone because untrue rumors about them generate negative publicity. The only time you can terminate for negative publicity is if a top person, say the Executive Director of the program, does something which is purely private but illegal and related to the job (e.g. arrested for DUI). In that instance, your agency could terminate the Director due to the resulting negative publicity.

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