I'm a Michigan licensed attorney and my practice focuses on assisting employers with addressing employment law and litigation issues. While Avvo is a good resource for general legal inquiries, it is not a good forum for addressing the fact and legal specific issue raised in your question. To fully address your situation and evaluate what strategy makes sense for that situation, you should contact an experienced employment attorney. As part of that discussion, it will be important to evaluate the applicable contract, the circumstances giving rise to the injury, to clarify whether the person is an employee or a contractor (and whether that determination will hold up if it were legally challenged), the circumstances and/or reasons for terminating the relationship, etc.
I hope this helps and because of the sensitive nature of the issues involved with your question, be cautious about what information is disclosed on public forums like this in order to avoid loss of applicable confidentiality privileges that may exist.
I'm licensed to practice law in Michigan (www.shinnlegal.com). My response is provided only to educate the public about general issues that should be discussed with competent legal counsel in your state. Under no circumstances should you consider my response as a substitute for consulting an attorney in order to fully understand how the law may apply to your specific and unique circumstances.
Honor your contract.
When people try to circumvent
a contract . . . that's when problems
THIS ANSWER IS PURELY FOR ACADEMIC DISCUSSION ONLY AND DOES NOT CONSTITUTE ANY TYPE OF LEGAL ADVICE OR LEGAL REPRESENTATION.
You should tread carefully and consulting an employment attorney ahead of time is a good idea. What you need to avoid is giving this person the idea that his or her non-renewal of contract has anything to do with the injury. Couple of things an attorney would need to know is: whether someone else will be hired to replace this PA, was the injury work related, and what specifically does the contract say about renewal. To be honest, I don't think you can ever structure a termination to insure there won't be litigation. That's just not how people think. What you can do is position yourself so that any potential litigation will fail. By hiring a replacement that fits all of the same characteristics that the leaving PA has, such as gender, race, age, etc., you position yourself to defeat any type of claim.
Each employment situation has unique facts and circumstances. This means that information and advice cannot be taken literally and should be used as only informational. The information provided here is not legal advice and should not be interpreted as such.