It sounds like "Joe" is literally and figuratively a loose cannon, and it is outrageous that your boss somehow thinks that his threat to harm someone with a sledgehammer is funny. Every threat is deadly serious. You need to take immediate action to deal with this matter.
You and your associates should bypass your boss and go directly to the most senior level person you can access in your company and describe what is happening. Companies have a legal obligation to provide a safe work environment, and there is already major exposure because your boss has been advised of the problem. Someone in a topside position needs to investigate this matter right now. Threatening an employee with bodily harm warrants immediate and severe managerial action.
You may indeed wish to change jobs, but if management takes swift action on this matter, you need not rush the decision. The only rush is to make sure that you and your associates are safe.
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