SnuggyBuggy
People are only human and if someone looks and sounds like a man you will instinctively use a male pronoun.
TBH I wouldn't believe a word of the other employee's story. I think she was being a shit on purpose, and winding up her co-worker. Of course the knife incident was wrong, but personally I'd be careful about needling anyone who had a knife in their hand.
I can see that employee 'innocently' making remarks if one of her co-workers wore a bad wig, or dressed too young for their age, or did anything that could be a focus for subtle bullying.