Presuming that is his motivation, I have to agree he's being pretty darn heavy-handed and clumsy on how he's going about things.
I do think the potential for a situation like this to get ugly at work is greatly heightened though for obvious reasons.
In the situation you describe, if he did fire you because he was afraid of a possible SH suit, my guess is that you WOULD get benefits, since you were fired for something that he was afraid would happen, not something that had happened, if you get my drift.
It would be a legal firing, but I doubt that benefits would be denied. what if one or both of the parties involved were married? " I assume you mean married to other people and that the two co-workers are having an affair. This isn't about personal morals - what people do in their private lives really isn't the boss's business unless it spills over into the workplace.
It's small comfort for the employer to say to himself "That ridicoulous suit was finally dismissed but it cost me $20,000 in legal bills." Presuming your employer isn't just plan nosey, then he may be concerned about a possible SH exposure.
cbg is right - more than one SH claim/suit has been brought by an employee who had an ugly break-up with a co-worker and now wants to get even by claiming harassment - and get some easy money from the employer to boot.
What people OUGHT to be able to sue for and what they actually DO try to sue for are two different things.
Even a frivolous or meritless suit brought against an employer costs the employer big bucks in legal expenses.
One of the reasons interoffice dating is often frowned upon is because of the potential for sexual harassment issues down the road.
I'm not saying this will happen - obviously I don't know you, your friend, or your relationship.
But it has happened elsewhere, not infrequently, that an interoffice relationship goes sour and THEN one of the parties claims sexual harassment.
Your employer has a right to know about any relationships that could ultimately lead him to be sued under the EEOC down the road, and that is not as farfetched as you may think.