Hi, I'd like to help you with your question.
No you are not overreacting. Your employee's behavior is quite unusual and does border on sexually inappropriate behavior. No man should be sleeping next to his 14 year old daughter until she falls asleep. He is acting in a partner/husband role and that is never right. And at 14, a girl developmentally needs to have more privacy. There is also the concern that he could eventually be tempted to cross the line into sexual abuse. And since the relationship is already inappropriate, this could be a possibility.
At this point, it is probably a good idea to not comment on what he told you. Treat him as normally as you can, just like you have up to now. What you want to do is leave the lines of communication open. If he ever learns you do not approve, he may stop sharing with you. That lessens the chance he would share any more information with you about his relationship with his daughter, or anything else he is doing for that matter.
You also can contact the local Children and Youth services and ask about what you heard. You do not have to give your name. Just let them know you are unsure what to do and how to handle it if you do discover that this child is being abused. They should be able to give you specifics on how to handle the situation.
I hope this has helped you,
You are welcome! I am glad I could help.
Whenever a child is involved, it is always a good idea to err on the safe side and be cautious. You never know what goes on behind closed doors so playing it safe is a good option.
Your employee does sound like he has some issues. I understand your reluctance to bring the situation up to Human resources but in light of possible future problems maybe a consult is not a bad idea. It never hurts to be prepared.