What risks are involved w/employee discipline (involving illness issues) in a small company?

From a strictly legal vantage point, you face little liability. From an employee relations vantage point your liability could be quite high. Since you have less than 15 employees you are not covered by any federal ati-discrimination laws such as the ADA or the ADAAA. Since you ahve less than 50 employees you have no liabilty under the Family Medical Leave Act, regardless of your decision. While you are not likely to suffer any legal liability from any dcecision you make regarding the employee, your decision could result in significant "costs"  in terms of your relationship with your employees. In employee relations cases the employees' perceptions about your fairness, consideration, and loyalty to employees is just as (or even more) important as the reality. If the employees perceive that you are uncaring, high handed, capricious, or utterly insensitive to the needs of fellow employees they may react in negative ways that will have definite adverse impacts upon your bottom line, and even open you to unionization or protected concerted activities by employees. if you know about the mental health issues the employee is facing with his/her spouse, chances are the other employees know a lot more about it than you do.If they identify their issues with their fellow employee, that means that they will see any adverse action you take against the employee in a negative light. This tends to alienate employees from management and the company. Alienation leads to loss of productivity, lower profits and lowered morale. It even could lead to unionization if the employee is popular with his or her co-workers. Your best bet is to be as flexible as you can with the employee's working conditions such as, for example, by allowing the employee to work to make up for any times when they need to be out. You might need to transfer the employee to another position where her absences won't create as much of a hardship for fellow employees or the company. But making adjustments to help an employee through a rough period can pay you dividends later.   It's not enough to be legally correct. You must be regarded in your employees' eyes as morally right too. Your employees' loyalty and trust is the most important resource that you have. Don't squander it needlessly on rigid formalisms.