GF, the lawyers are probably right about small claims court because I had a landlord who clearly violated MN law. He didn't mail me notice of withholding my security deposit and then just sent me to collections claiming I owed an extra month's rent. In court, they showed an invoice they claimed they mailed me with the wrong address on it, which shouldn't count. The judge didn't seem to care and sided with the landlord. It was a huge hassle for nothing.
With that being said, it is definitely in the lawyers' best interest to go with the longer, more drawn out process.
Sonick, that sucks. One good thing about my previous employer was they would do the layoff notices and give you ~1 month of notice, but they would give you 2 weeks of severance for every year of service with a minimum of 8 weeks.