However, I certainly CAN make them look like bad people just wanting cheap labor, because that's just what it sounds like. If you are a reasonable, rational, and respectful employer, you don't suddenly go bi-polar on a longtime employee that has always received glowing reviews, even as recently as a few months ago. That is not professional in the least, and it makes it sound like something is up (financial troubles, mismanagment, etc.).
I understand perfectly why they would want to ask what his plans are. I don't have a problem with that. But I do have a problem with them treating him the way they are in what appears to be an attempt to force him out. Do YOU think that's the way to go?