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I think it all boils down to one question.
Is the employee doing the job as required?
If not, fire them. If so, don't fire them. Doesn't matter what they do in their private time.
It gets sticky when you consider what a police officer's job is. Clodfobble has a good point that the cop endangers all fellow cops by being in KKK. On that point alone, he isn't doing his job. Fire him.
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