When is it slander, and what steps can I take?

I sold my business to stay home with my new baby. I stayed on to help the new owner, but she wanted to change my days last fall. I told her very nice that I could not teach those days. Next thing I know she sends me a letter saying I'm fired. After that the other students, teachers and parents called to tell me they were worried by the things she was saying. One teacher, who was my bridesmaid, said the new owner said I had "acted inappropriately" and that "she was worried about students contacting me, that she was scared for them." Like one parent said, this can be taken in such a way that could paint me in a very ugly light. The parents, and other employees, said they would testify in court she said these things. I tried to confront her and she denies everything. I hate going the legal route, but what else is there? My reputation has been hurt, and I was Educator of The Year and Teacher of the Week in my home. I can't allow this unfair lie and tainting of my person.