Is it legal to pay someone on your payroll as well as an independent contractor? We have an employee who is doing a separate job for us, in which he will be us on a contract.

There is nothing wrong with that format. It is done all the time with independent contractors. Probably because he fills a function that no one else in your company can.

Done all the time, company just needs to be sure it is not a similar job, but I am often both a 1099 and an employee for companies