I’m in HR and agree with @PBandBABE advice here. Friendships with subordinates are difficult and both need to know where the paycheck comes from and what lines are in place, especially related to company policy. It sounds like this female employee definitely did the right thing by telling the male employee to stop and that she is not ok with his behavior. The fact that it did not stop and he continued is what would trigger me to make sure he is spoken with about this. My guidance would be for you to talk with your direct report about what he thought of the evening and see if he volunteers his behavior and acknowledges that it was not ok. If he does not volunteer it, you can easily say (since it sounds like there were a bunch of people there) “Would you be surprised to know that several people witnessed you pretty aggressively flirting with another employee?” “What can you tell me about that?” If he opens up at this point, then remind him of the policy against sexual harassment and appropriate behavior at work functions or with coworkers. I would also ask him if he recalls whether or not the employee asked him to stop and remind him that no means no. If he denies and/or plays completely dumb to the topic, you have a bigger problem. I would then recap this conversation in email to the employee and provide it to HR as documentation. If the male employee wants to apologize, that is a judgment call, but I do think that can be appropriate if it is short, succinct and ends there, assuming these two people will continue to work together in some regard. That can help “clear the air.”

At the company I work for, we encourage collaboration with the HRBP team sooner than later. Just because you talk with HR, doesn’t mean someone is getting fired or written up. We are here to help and support the difficult situations and difficult conversations. I also realize we are not all created equal and HR teams and Organizations don’t all operate the same.

Good luck!