Its a dicy situation... Here the first step as soon as you be au fait with the employee is employed with another organization then he should be sent an insinuation that he is found to working in secondment and he is liable to be terminated from duties with terms citing that he should pay the company, notice period and if in which case he failed to do so his settlements and clearance (unpaid salary, bonus etc.,) can be withhold.
You may also write a letter to the current employer elucidating that he is working at theirs while in continuance serving your organization without proper clearance and you are contemplating taking legal action against such employee.
These can be the best suggestion as far as the query is concerened coz no legal action can be taken in any case unless he has signed the terms on breaching the same. If you have such evidence, probably you may consult a legal advisor and send a notice to the concerned. I infer that the above points should tweak the issue.
10th September 2012 From India, Visakhapatnam
The employee is not in the same line of business which you are running.
I have seen many employees who are doing multiple jobs in various organizations . Some having their own software development business and same their heading the marketing department of some Corporate Training firm.
If during the work hour ( full time Job) employee is honest and productive you should not have any issue in that.
Even HRs of many organization they do freelancing job even knowing an employee cannot withdraw two salaries but what action can be taken.
You can only give a warning else u can terminate .Legally you need to prove it on paper either business must be in his name or you have the evidence of the employee getting double salary .
10th September 2012 From India, Mumbai