And, in most states, you wouldn't have a restaurant any longer (it would now belong to the employee.) You can't fire someone for making a police report of illegal material, even if you don't feel that it is good customer service to do so.

P.S. - The employee is not obligated to report most illegal material. But, you can't fire an employee to making a truthful report to law enforcement. So you need to do a better job of selecting the employees, not in disciplining them.