Legal Question in Employment Law in Michigan

If an employer personally loans an employee/friend some money towards the purchase of a car (not the whole amount of the car, just some), and it isn't tied to the employment...its a personal loan...and there is no documentation, no loan agreement signed, no lien on the title, then the employee months later gives a resignation notice because they've found a better job. Now the employer is disgruntled, says they are not going to give the employee their last paycheck (employee is a 1099 employee), and that they are also now going to sue the employee for the loan amount. Also, the employer is now trying to collect a much higher number than the original loan amount. The loan was originally in cash. They should not keep the employee's final paycheck as well.

Can they still win in court since the amount loaned is now in dispute, there is no documentation of it, and there is no signed agreement....even though the employer is saying there was...which there wasn't. Help????

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