Lawyer lawyer lawyer LAWYER lawyer LAWYER . I think the consensus in the grown-up business world is "fire immediately for cause." I would bet substantial money that when you lawyer lawyer lawyer they will advise you to do that and document the heck out of it. The calculus is really, really simple: if you don't, then you will with probability approaching one get this incident or a similar incident cited during a threa…
Oh God, yes, lawyer. And yes, fire him. In regards to OPs confusion about the innocent employees trepidation -- there is a reasonable fear of reprisals here. From you, from others on the team, and from the sexual harasser. Reprisals are often not easily identified -- they can be subtle and social in nature. What often happens is that the person who reports harassment is then punished because people no longer want to…
I think this really depends on your team dynamic, and I wouldn't necessarily be concerned about this point (as valid as it is.)
On my team, I know if this happened, the person who reported the harassment would be totally supported. Inappropriate advances like that are just totally not tolerated, and if anything, the team would feel MORE comfortable knowing that their teammate doesn't stand for that crap. There'd be no shunning here. But of course YMMV.