A former co-worker of mine was terminated recently. As she left the office she indicated that she had been sexually harassed by me. My boss investigated and found that it was only some mutual flirting that was happening. She is now telling our clients that she quit because she was sexually harassed. She also told the Department of Labor the same thing when she filed for unemployment. I have been told that if she sues our company that any legal fees will come out of my bonuses. How can i get her to stop making her comments and furthermore, how can I insure that i am not responsible for any potential legal fees.
You need to meet with a local attorney in Durango as soon as possible. Durango has a lot of great attorneys like Nancy Agro, Michael Chapman, and James Casey. You need to initially focus on the defensive and creating a chronological record of what happened and then start worrying about going on the offensive. First things first. Set up a consultation with a local attorney in Durango and go from there. They can talk with your employer or their HR department.
The information provided in this answer does not create an attorney-client relationship and is not considered to be legal advice.
To answer your question, "yes, you quite possibly have a case."
If someone engages in untrue speech with actual malice and that speech injures your, then you may have a claim for defamation. The truth of the speech is an absolute defense to defamation. Thus a trial regarding your situation would involve highlighting the nitty-gritty of you interactions with this former co-worker. Further, your case would likely be complex, as almost all defamation cases are, because of the definitional issues in what constitutes sexual harassment. Of course, if all that was going on was mutual innocent flirting, then there is probably no basis for voicing sexual harassment allegations.
I agree with Mr. Leroi: you need to consult with an attorney as soon as possible. I recommend setting up multiple free consultations in order to gain perspective not only on your situation but also on the attorney's varying personalities and approaches. You can find attorneys offering free consultations using the find-a-lawyer tool here on Avvo.com or by using the directory on cobra.org.
I hope that this answer provided some helpful guidance.