I have a former business associate who is using my s-corp to run payroll for his employees. Am I liable for his employees?

Without more facts, it is difficult to figure out (a) how this situation came to exist and why you have permitted it to continue, (b) the extent of your liability, or (c) how you best can resolve this problem. In the worst case, you might be able to dissolve the corporation, though there is no way (based on the limited information provided) to know whether that is feasible or advisable. You should retain an experienced business lawyer to advise you.