If you care about the rmb or feel injustice was done and feel punitive, then show up with your foreign coworker, their children, and your daughter to the photo studio and demand compensation, or threaten to do so after haranguing your Chinese coworker.
If you don't need the rmb, just chalk this up another China learning experience. Inform you're foreign coworker of how their children were exploited. Then tell your Chinese coworker to stay the f*** away from all foreign kids.
Either way, take the kids for some ice cream. Gompo's right, Dairy Queen is a better choice.