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I agree that's shitty and there's been more than one law suit over such a thing. I wouldn't do business with the guy if I were the purchaser, but then we're pretty serious about ethics. Once an employee of ours told a webmaster a bullshit excuse why the job took so long. ONCE. I let him know that the next time he said anything untrue he would be fired.
It's probably not worth a law suit, though you'd likely win since the employee was employed WHILE he was screwing you. So all you can do is get a carefully worded non-compete to use with the next employee. The non-compete needs to be pretty limited. You have to allow the employee to earn a living after leaving you, but not allow them to sell your exact type of content to your customers. For example, our non-agreement says they can't market on GFY, but also gives one employee full rights to do any work he pleases for clients in his home country.
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