I am the owner of a small business with 9 employees and 1 manager. I recently (within past 4 days) became aware of a statement my manager made two months ago to a team member while at work: "If you make it appear like I'm doing something wrong or not doing what I should be, it will be like hell at work." Needless to say, I was disgusted and outraged by this hostility and confronted my manager. My manager stated that she said it, jokingly, while the group was drinking at a bar. In private, the team member reiterated that it was said to her while on the job. I tell my Manager that one of them is lying and now is the time to set the record straight. She proceeds to say, "How dare I not believe her…yada yada yada." So I say I will meet with each of them again in the morning. I then get a call from my team member stating that my manager had just called her and stated my manager, "was in trouble and possibly could be terminated and to please go along with the story about being at a bar."
So I've got a few issues here:
1) Manager that makes threat and creates hostile work environment
2) I'm just learning about this past incident and need to address it now
3) I only have he said/she said to go by in terms of where the comment was made
4) I potentially have a lying manager or team member
5) How I handle this can set the tone for the rest of the team in terms of me supporting them when they have a frustration/concern regarding manager
Is is appropriate to demote my manager to team member? Is it more appropriate to terminate?