This quest automatically initiates after one week has passed since completing the 'A Friend In Need…' quest. Go to Ledetchko and speak with Matthew and Fritz about how they are getting on with their new job.
Note: Keep in mind that you should complete the quest as soon as it is activated in your log. If you fail to do so, the quest will expire within a few days.
Once you have discovered that things are not going well for Matthew and Fritz, you have a number of options to help your friends. The first is by arranging a beating for Old Thomas. This can be done either by suggesting an organised brawl (with dialogue option 'Actually, no. They’ve had enough of you.') or by ambushing him in the woods (with dialogue option 'The Wren of course.').
The second option involves diplomacy. You can speak with Old Thomas about the problem and suggest a couple of parting conditions; that he give Matthew and Fritz a few extra Groschen when their job is done, providing it is done well, and that they stay away from Jane (with dialogue option 'I want there to be peace in the mill.').
The third is more complicated, but results in Old Thomas leaving the mill altogether. Speak with Miller Oliver about how things are going with Matthew and Fritz. While he knows they are good carpenters, he is also aware of the trouble with Old Thomas. Exhaust the dialogue options until you learn about the death of the miller’s son. When you are done, Jane, the miller’s daughter, will speak to you and confirm your suspicions that Thomas is up to something.
You can now pickpocket Old Thomas to find a grubby scarf which once belonged to the miller’s son. This is enough evidence to incriminate him, causing Jane to confront him and ask him to leave the mill for good. Alternatively, you can avoid telling Jane first and demand that he leave yourself, but Jane will not be very happy that you did not tell her first.
Note: If you choose to help Matthew and Fritz by incriminating Old Thomas, they will stay on and work at the mill for a short while. If you help them by fighting with Old Thomas or agreeing that they should leave after their job is done, they will leave within a few days. Either way, they will end up at the Inn in the Glade, where you can speak to them for more quests.