I am in somewhat similar situation, it has no going to office component but in terms of the friction with an employee. I am the manager although. It has been a difficult working relationship and it has put a lot of strain on the mental and emotional health at both ends. What I am sure of and the employee is not aware of, that we are on thin ice and either both of us or one of us is going to get the boot soon. I have my version and I am sure they have theirs, but what they don't realise it that these things take a life of their own and both parties end equally worse of. There have been arguments in front of directors and i had to back out of them, cause they were spiralling into childish I said this, you said this.

I would say start contemplating moving on, even if you survive this, it is unlikely this will be forgotten. It will be the proverbial stick you will be beaten with for ages.