EU Family Permits don't fall under the Immigration Law, and even if they are expired people with such permits have the right to work and stay in the UK as they get this right through being married and living with EU citizens. THis right doesn't depend on administrative permission as they have this right under EU law. If you dismissed her, and this case went to a tribunual or court, you most likely will loose because it will become aparent that family members of eu citizens have the right to work regardless of having this permit or residence card. In fact the European Caseworking insructions of the Home Office say that they can apply for a valid residence card if they wish, but they are not legally required. If I was you, I wouldn't suspend the worker, but ask her to submit application for FMRS or Residence Card depending on her situation. THen, in a few weeks the home office will send her a letter that has received her application. In that letter it is stressed again that she can work even before she receives her stamp. It could take up to 6 months before she gets her stamp.
Check the following:
http://www.bia.homeoffice.gov.uk/siteco ... iew=Binary
Look at page 3, point 1.1:
The UK currently imposes no requirement for the non-EEA national family member of
an EEA national to obtain a residence card. However such persons may be
inconvenienced if they do not obtain a residence card for the following reasons:
• They may have difficulty proving they are lawfully resident.
• If they leave the UK, they will need to obtain an EEA Family Permit before
returning (see Chapter 3 for further details).
• They may find it difficult to obtain/change employment without a residence
card confirming their entitlement to take employment in the UK.
So to conclude, even with expired Family Permit she is entitled to be here and work, and even if you dismiss her in good faith, you would have broken the law once it is established that she does have the right to work, and under EU law is not required to apply for confirmation (it is optional.)