What reason or law makes this illegal or legal?

I think that this should be legal but this is truly the manager's fault. He or she should have looked into it. He/she can't just trust what anyone says and fires the person. The manager should have checked if there was evidence behind the complaint and then decide whether he/she should fire the person or not.

i think it can have both positive and negative effects on businesses.

for example:

lets say you own a small business and taxes go up 4% that means it is going to cost your business more money to buy product to sell. but at the same time you make more money from the tax rise.

that is my theory.