Sure, look at your employee's contract and see if there are any provisions that would give you direct legal recourse (chances are there are, or should be.) If that isn't the case, you could send a C&D from your lawyer to pressure him to remove the files, which will work in most cases. Good luck..
First thing, make sure you have screen shots of his site. Though ideas cannot be copyrighted, if a site copies another, that is violating copyright. Do as rocketfly suggests, look at your employment agreement and file a C+D. Depending how serious you want to pursue this, have a IP lawyer handy and apply the preassure...
"staff member working for us".
I don't think that accurately describes the relationship, does it?.
Just looking at the two sites, while similar, and with similar layouts, don't seem to be confusingly similar any more than dozens of other hosting sites look to be cookie-cutter copies to me. As well, with the "copied" site being that small/hidden, I think you'd be hard pressed to show any harm done by the "copy" of the site.
At this point, you still have the complete content and design layout of the site left to go - don't sweat it. Get your "staff" to build the rest, and if the "ex-staff" continues to build a copied site, then you have something to work off of.
So he copied your empty site and made his own empty site...congrats to both of you for having excellent empty sites. I don't see the big deal about copying nothing. As if he is really gonna do any business. As a matter of fact have you really done any business? I doubt anyone would even know about his page if you didn't tell us. It's based on a free hosting account at clansservers even. This "employee"...was he paid? Or just someone you had doing stuff with you for a promise of future revenue percentage?.
To break this down...a copy of nothing is...NOTHING...
Looks like the "copy" forwarded the domain elsewhere.... so no more issues....