DVS is mostly right in everything he said in his original post. Guys like me and DVS have had stupid threats like this happen to us several times over the years. Most people who have had employees for longer than a decade have had something similar to this happen, eventually.
I wouldn't necessarily say he can't sue you, because he doesn't have the money to hire an attorney. I would just say there's a 90% chance he won't. There's a small chance some attorney would take this case without a retainer. That happens sometimes - taking a case on "contingency basis". That is, the attorney is pretty sure they're going to win and get a good settlement so he is willing to take the risk and cover the expenses to sue, just so her can get his 30% commission in the end. But this is by no means a slam dunk case and I think most any attorney that looked at the facts would agree, and therefor not take the case on contingency.
Then again, you never know. The kids uncle or cousin could be an attorney and just be willing to help him out for free. So you're smart to cover your bases no matter what.
First thing you need to know is that IA is a right to work state. That means you are free to fire the employee for any reason - with certain exceptions. For instance, you cannot fire someone for sexual discrimination, racial discrimination, because they got injured, because they got pregnant, etc. But aside from that, you can fire someone for any reason you want - or for no reason at all. In a state that has right to work laws, your best bet whenever you fire someone is to NEVER tell them why they are being fire. You simply say, "I'm sorry John. But your services are no longer needed here with our company." He replies, "What??? Why???" And you say, "I'm sorry. We just no longer need your services at our company." And he says, "So I'm being fired? You're not even going to tell me why?" And again you repeat, "Your services are no longer needed here. I'm sorry. I'll have a final check ready for you tomorrow."
By doing this, you are perfectly within your rights. You have no obligation to explain to anyone why they're being fired. BUT, if you do tell them why they're being fired and then they come up with some evidence to refute that reason, then you could be subjecting yourself to liability (a law suit). For instance, you fire someone because they were late 2 days in a row. But then that guy gets his buddy at your company to go with him and say that he wasn't late. Now he can sue you and say you fired him for inaccurate reasons and get his job back! Or get money from you!
So first thing you should learn is to fire people this way. Always. Let them think what they want. But you don't say why they were fired. To anyone at your company. You just let them go and move on. Then you're protecting yourself.
Second thing is document what happened. Make some sort of form, put it in his company file. Record one form for every day something negative happened (didn't show up to work, showed up late, etc.)
Third thing is if you ever hear of any kind of injury, you need to file a worker's comp. claim immediately. Even if it's 3 weeks later. Even if you think he's making it up. You do your part. Then you are protected.
Don't worry about the worker's comp. claim. Those insurance companies are good at what they do and will figure out exactly what happened. If he's trying to scam them, they'll usually figure it out. Typically, they end up settling for a few grand. Sometimes nothing at all. Then your rates go up slightly and the kid eventually realizes he's not going to get too much out of them and just takes his settlement offer and goes and finds another job. That's it. But you just do your part and file the claim. Let them worry about whether he was really injured on the job. You'll get a call from the adjuster once the claim is filed and you'll have plenty of opportunity to explain that he never notified you of being injured, that you think the claim is total B.S. and that you fired him BEFORE he made the claim. Once the adjuster hears all that, he'll know how to handle it. Trust me, they are good at what they do. And that kid is probably desperate for a few grand $$. He'll take the quick payout and it will be over. But first, the insurance company will do everything they can to make sure there is no loss altogether. Just file, tell the truth, and let them handle it.
Don't say anything more to this guy. Don't worry about it. If he ever does sue, you'll be fine. Just get yourself a good attorney. But until then, I wouldn't worry too much.
I've been threatened to be sued from employees and clients several times over the years. Not as much from clients. But there are a few crazies out there. If you do enough volume, you'll eventually run into some nut case customer who is impossible to please, an alcoholic, a bully or whatever and will threaten to sue you too. Out of the dozen or so times someone has said they were going to sue me, it has NEVER happened. Most of the time people are just talking a big game and then later they cool down or when they look into it and the attorney explains to them what the retainer will be or that they really don't have a case, they drop it. Unless you've done something really egregious, you normally don't have much to worry about.
Don't talk to the kid anymore except to handle the claim form for the worker's comp. - if he still wants to pursue it. Any other negative comments or threats he has, just deflect them. If he threatens to sue, you say, "I understand. If that's what you feel you need to do, that's you're right." Don't do anything to make him more angry or feed the fire. You just maintain the upper hand, be the professional one, and I'm pretty sure you'll get through this just fine.