HOWEVER...
a) It's a small industry, and at least among freelancers it's common knowledge that you shouldn't annoy anyone, because everyone talks to everyone else (of course, maybe as the 800 lb gorilla, WotC doesn't care who they annoy, which brings us to b)
b) It's an industry largely run by and selling to "fanboys" (to use the cliche), and the community has gotten worked up into a tizzy over even less.
Oh, and c) They did it for years while they worked on the 4e ruleset. Just how many members of the Paizo staff had their names on WotC books over the last few years, not to mention nearly every freelancer who worked for them probably worked for other competitors. If they think it changes now with Pathfinder RPG and 4e being an edition war, then it's one that they themselves will create.
Maybe I'm too nice to run a multi-million dollar business, but given the size of the industry and the kinds of passions that can fly around, I would really avoid doing this.
That being said, I could understand not wanting to work with him on 4e work since he was just hired as an employee of another company that hasn't been given permission to see the new rules - but that would be a temporary thing (until Paizo can finally see the rules) and only for 4e work, not 3.5 (of course, I doubt they are buying much if any 3.5 work at this point). To me, that seems reasonable.
If they are saying "you support 3.5, so you can never work for us again", well, then I personally think that's stupidity and pettiness trying to masquerade as good business sense. However, I have no idea what WotC actually said or even what they intended to say (because with how heated things are right now, their intended message doesn't always match the interpreted one).