Hm. Whether it is true or not saying "sue for defamation" isn't much help. Sometimes in cases such as this, if the matter is found to be baseless the person making the accusations has insufficient means to make suing them practical. This is sometimes why cases are settled out of court: because the cost of defending them is higher than paying the plaintiff off - even if the accusation is unfounded - and there will be no way to recover costs if the person making the accusations hasn't the means to pay.
I do wonder how a person can be employed for 10 years or more and then genuinely decide it is no longer tolerable.