Is this normal,
Yes
Will Device 2 get damaged due to this.
Yes
It is called parasitic powering and can cause latch up and damage the unpowered device.
what are the solutions to avoid this
- Do not apply active signals to an unpowered chip.
If you must then an opto isolator will prevent the parasitic powering but it will not work with analog signals. A cheaper but less effective solution is to have something like a 10K resistor in series with the signal lines.