I don't know the details of this case, but I must say that I have always found aviation companies, especially small GA outfits, have always seemed to think they existed in some kind of time warp, immune from the harsh realities of modern employment law and litigation.
IF the pilot in question DID have problems, the employer could have followed a proper course of retraining, disciplinery procedures, official warnings and finally dismissal. Particularly in flying, you'd find the employee would usually leave before it got to dismissal, saving everybody the hassle.
Right or wrong, the days of "I'm the boss, you're fired" is over, and dealing with employees such that you cover yourself is just a (considerable!!) cost of doing business.