During an appearance on Tuesday's episode of the Allegedly podcast, McDonald, 45 said that even though she thinks Handler, 40, is a "good person," she doesn't agree with "how she treats relationships in her life."
"I lived in fear, 100 percent lived in fear," she said. "I enjoyed my time there, I was happy, but I mean something would happen and my heart would be beating and I would be like, 'Is this it?' – you know? And then somehow I just managed to keep surviving."
Handler countered McDonald's claims during an appearance on Tuesday's Howard Stern's SiriusXM radio show, where the star said she cut McDonald out of her life years ago when she realized McDonald was selling stories about her to a celebrity gossip magazine. Handler claimed McDonald would sell the stories in exchange for her photograph appearing in print.
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Handler said she continued to employ McDonald after discovering the alleged betrayal because McDonald was good at her job as a writer on the show. But Handler stopped hanging out with her socially.
"I just thought it was a betrayal … I wasn't paranoid, I just withdrew from that whole social scene – I withdrew from her," Handler said. "I wouldn't hang out with her, I wouldn't be alone with her. You know, she's somebody who would love to hear about Jennifer Aniston's house on the weekend. I could never, ever share my personal life with her again."
McDonald also said on Allegedly that she had no idea Lately was ending, and that she only learned about it from Twitter.
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Handler countered that "she's a writer on my show, she's not partner."
Handler also said getting betrayed in this manner "is par for the course" when one first becomes famous. She said she wanted to celebrate employees and others around her by taking them on vacation and doing other nice things, but some people soon came to expect such perks.
"You can do so many things before you sell a story about me to a tabloid – or not sell it, exchange it for a f---ing picture of yourself," Handler told Stern. "I'd rather you sold it, at least then you can make some money."
McDonald worked on Chelsea Lately from 2007–2014.
Earlier this month, Handler opened up to PEOPLE about downsizing her circle of friends.
"A lot of my friendships ended this past year – a lot of work relationships and friendships," she said. "You just get older and grow up."
Handler's new talk show Chelsea Does premieres on Netflix Saturday.