Aside from the matter of personal integrity, there is also the whole idea that you are trying to work above your level. Your manager or team lead is the one who has to worry about the impact to your team, not you. I hate using football analogies, but here goes:
You're a lineman. It's not your concern as to whether it's a pass play left or right, or whether the QB is going to run to the side. Your job is to take that defensive lineman and either stop him, or push him left or right. You're not the QB, you're not the offensive coordinator, and you're certainly not the head coach. You're a lineman. Concentrate on your assignment and do it well, and let the rest of the team worry about their assignments.
Realistically, play it out:
1) You tell your boss. The employee gives notice. Boss gets angry, "Yeah, John already told me. Thanks for keeping me in the loop."
2) You tell your boss. The employee decides to stay, but your boss already recruited the replacement. Boss has a budget problem with you to thank for it.
3) You tell your boss. The boss confronts the employee. Maybe even fires the employee (Thank you HLGEM). Now the employee is angry and will let all your coworkers know that you can't be trusted. Good luck on the team from now on.
NOTHING good will come from telling your boss. Best advice I ever got: "Never let a good opportunity to shut up pass you by." Sounds personal, but it's not.
The only thing you should take away from this is that you should get familiar with your coworker's responsibilities to your project, and do it quietly.