FMLA question

My husband has worked for a local auto dealer for 32 years, he's 53 years old. He has held key management positions for approx 20 years. February 5, 2008 he stayed home from work, which was rare, thought he had the flu. Several days and doctors later he was diagnosed with severe mononucleosis which also affected his thyroid. He was extremely sick. We kept in touch with his employer and submitted doctor's slips to be excused from work. All in all his recovery time was 8 weeks. My husband was planning on returning to work Monday Apr 7th. He got a call on Friday Apr. 4th from his employer stating that he needed to see him before he returned on Monday. His employer stated that he had given my husbands job to an underling, much younger,with less than a year experience in the auto industry to be in the management position. My husband could return to work only as a service writer or car washer. My questions...can this be done legally? Can he be denied unemployment. Does he have to submit a letter of resignation or sign termination papers? No one in our small town seems to have any answers. My husband was the key income for our family. Your answer would be greatly appreciated.