Ask HN: Firing an employee under a month before vest?
I'm the founder of an early stage startup, around 10 employees.
One of those (one of the first to join) has been an issue for quite a while. Lots of time off, low effort at work, minimal hours. Felt like squeezing water out of a stone to get a result from them.
Recently, their behavior has gotten worse despite feedback. Taking off without informing team. Found out a lot of past work was plain wrong.
They vest in a few weeks. I don't want to have them on the team anymore, I'm done trying and this employee is negatively affecting me and the company.
Should I let them vest then let them go, or just let them go? Feedback from former founders esp is helpful. Any downsides to having them on the cap table?
308 comments
[ 2.6 ms ] story [ 286 ms ] threadBeing generous and parting on good terms is desirable, even when they suck. Even moreso on a small team.
Learn from the experience and how you can identify, investigate, address and correct future pivots like theirs. Don't let them become the wrong kind of example for how you do business.
And despite his performance, he did earn it.
Since terminating him is a question related directly to his vesting, everyone is going to know he was let go right before vesting to eek out the best possible value from him right before he gets something he’s worked a year to receive.
“Yeah but our contract says” is literally the worst thing you can do with a small company if you want morale to be high.
The desirable part might be what happens to the morale of the rest of the team.
A possibly vindictive boss is going to be on the mind for everyone who is still there and delivering value - you also risk dividing your team's opinions on this topic ("so unfair" vs "good riddance").
As with a lot of startups with a handful of employees, often what an employee thinks they are getting is some percentage of "possibly nothing" & the person might also have come to the same conclusion before underperforming.
So you might be getting some brownie points with the team, the person getting thinks they're getting nothing of value(but not that you're yanking it out of their hands) and the cap table is not going to be affected anymore than hiring someone & them booking it out on the first vest, which happens.
I don’t know the compensation details and I’m not trying to be mean, but if you’re an early stage startup, odds are the options are worth negative dollars (zero minus strike price). It may be insulting to say, “we graciously kept you on so you’d have a chance to buy into the startup that’s firing you.”
What’s chiefly on my mind is that I think you shouldn’t unilaterally decide what’s best for them. Maybe they don’t want your stock and would have preferred you just be honest and prompt.
If you terminate shortly before vesting:
1. You face the prospect of an expensive and distracting wrongful termination suit.
2. You're sending a blindingly obvious signal to all other employees, and potential employees, that you can, will, and have terminated employees immediately before vesting. That may well prove ruinous if you find yourself unable to hire and/or retain talent.
Let the vest happen. Whether you separate from the employee before or after is your call, though if you've made that determination, do so.
PIPs are fugly as hell for all involved but exist for a reason. You should probably look into setting that up as a process.
Fix your recruitment, training, and monitoring processes.
https://en.m.wikipedia.org/wiki/Sorites_paradox
I interpreted the exchange as asking for precision when someone makes a vague statement in the context of a contract that defines things in clear terms.
In this situation, the number of grains of sand (N) to make a heap is defined! It's as if the GGP is debating whether N-1 grains can still be considered a heap regardless of the contractual definition. I think that's what the GP is getting at.
I argue that the line-drawing fallacy misapplied here.
The parent's point is that there is no vagueness as to when you can revoke someone's pre-vested shares per the contractual terms in direct contrast to the GP's claim:
> Denying part of compensation after the fact is a bad look.
By asking the GP for a time, they're raising the fact that the contractual terms allow for the the firing pre-vesting at ANYTIME and the GP is making an out of contract judgment.
The response then operates from that premise, exploring the possibility of a distinct line to draw. In other words, while it is clear that there is no vagueness contractually, the response is focused on the distinct question of a line of appropriateness in the relational context.
In evaluating that possibility, it commits the line-drawing fallacy, rejecting the distinction on the fallacious grounds that there isn’t one clear answer as to where that relational line is.
You nailed it, and ultimately, I'm glad you shared this fallacy/concept.
Re-thinking my reaction, I don't think the line-drawing fallacy is constructive here and maybe in general.
Here's what happened,
1. The original comment said "Denying part of compensation after the fact is bad (sic) look."
2. Then the follow-up asked for a "standard" for what duration of time needs to pass for the decision to be regarded "bad" despite being contractually allowed.
3. Then you said "The claim [in #1] isn't wrong just because there's no universal precise line."
IMO, #2's a constructive question to ask because the answers add information about someone's position and furthers debate. The judicial system uses this all the time with "reasonable-ness" standards by specifying a fuzzy line or a "reasonable person would know it when they see it". And if #1 were to say "I don't know how many days make it good/bad," then it's not compelling reasoning and more opinion-based -- which is fine, but not very compelling because it's so vague.
It seems like a lower order fallacy to use in a debate.
Constructive engagement usually involves proposing answers, not just asking questions, or at least demonstrating an agreement on some underlying premises. The comment could have said "I can understand the expectation that vesting is right around the corner carries some weight. But surely there's a point where it's too far. It seems clear to me that six months in with six months to go shouldn't be a concern. If someone hasn't been there for a year, do you think two months would be socially problematic?"
Maybe it isn't compelling, due to vagueness, but what counts is the social reality—and that's often fuzzy.
Thank you again for the interesting discussion.
That isn't what I wrote.
As others have noted (and I should have considered), pro-rata vesting is another option to consider.
Why those terms aren't standard is ... along with a number of other elements of vesting ... is something I don't fully understand.
You're not appealing to some objective rule here. You're thinking about what would look like shitty behavior to the rest of your employees.
Firing people gracefully is a really, really important part your relationship to your employees. It's about whether people feel like they're being respected as professionals or abused like they work in a sweatshop.
What about that scenario? Not every underperforming employee is the case that you imagine.
I can definitely see wanting someone gone. Been there. But everyone probably hopes they get a soft landing and find a job that suits them better (unless the person's a huge asshole, then maybe not)
However, this entire conundrum points to a flaw in the vesting structure. The one-year cliff might be better composed of a series of smaller monthly vesting events that begin slowly at 9 months, grow to a peak at 12 months and settle down to monthly vesting at month 15.
I treat equity as zero cash value, but that makes it worse because the company is now clawing back something worthless!
That said, I find the whole concept of vesting cliffs to be a bit of nonsense. Vesting I can understand, but why set these cliffs when they are not explicitly tied to regularly-scheduled reviews, performance, or some other checkpoint?
You as the company are always exploiting the worker, people just feel bad about being exploiting when they feel more exploited, and others will also notice.
Your job as the employer is to exploit people without them feeling exploited. It's not unfair to you in any way -- you're getting more value than youre paying for either way
There's no obvious answer to when is it fine to fire someone before vesting. The day before is obviously not OK. 1 day after they started working obviously isn't an issue.
I think usually it's intended to incentivize the employee to not quit, rather than to not be fired.
Trust is an iterated game, and while I'd not argue that you can't fire someone close to their shares vesting, I'd like to be fairly clear on shouldn't. If it's close enough that the political implications are obvious to the owner, it's close enough that the political implications are obvious to the other employees too. And so it becomes a political question.
In a non-iterated game, or one that only involved the employer and the employee, if someone has reached the point of being let go then there's no particular reason not to let them go, vesting or no vesting.
But in an iterated game, and when other employees can see and make inferences about what's happening, it absolutely makes sense to be seen to be generous. You are setting expectations on future behaviour that will make a difference to how the next rounds of the game are played.
(I also think the typical cliff of a year is too high, I know the point is to keep cap tables from getting out of hand, but 6 months seems more reasonable given current average tenures).
You're right that vesting is part of compensation, and completely wrong that this would be getting compensation denied after the fact. He's not vested yet. If he's fired today, he's not due anything.
Even among most wrongful termination suits this would be laughable.
One school of organisational behaviour says that bureaucracy exists to protect both the organisation and participants (e.g., workers, customers, business partners, vendors, ...) by creating structure and process, rather than arbitrary action and judgements. See Charles Perrow's Complex Organizations: A Critical Essay (1986), somewhere in the early chapters.
https://www.worldcat.org/title/complex-organizations-a-criti...
https://archive.org/search.php?query=Complex+organizations+:...
How long of a period was the vesting cliff?
When did their work start having issues?
When did you first talk to the about it?
When did it get to the point they weren’t doing their job?
If they were still doing their job (even to a minimum standard) by the 2/3rds point, I’d let it slide.
Keep in mind as a the boss you should have been on this from day 1. If you do fire them it shouldn’t be a surprise. If it will be, then let them vest.
Someone else mentioned a partial vest, which I love.
Let them go, tell them normally they'd walk away with nothing, but you're making an exception, so they will vest half.
It's a pretty good compromise.
Just being around a long time isn’t something worth rewarding IMHO. If they did something / a lot of effort early on, but are now going off the edge then that would be a different story.
Something like:
* Last day of work is today, all building and system access is revoked.
* Remain employed, on the payroll, full benefits, etc until after vesting (30, 60, etc days).
* Subject to signing an agreement around non-disparagement of the company, not poaching employees, etc, whatever else.
These kinds of things are typical for layoff situations. Trying terminate prior to vesting seems unnecessarily punitive, but you can still get them out of the building immediately.
in this case he's now a headache to keep around
And I don't see any legal ramifications here, but not legal advice
Unless the original poster wanted to give them severance.
I think the stock concerns are making a mountain out of a molehill. They may not even want it. The other legal stuff probably wouldn't be worth the legal costs/headaches of enforcing anyway.
Since that employee being around is an ongoing net loss for the company, you could consider quietly sending them off to garden leave to end on the day after vesting, conditional on signing a severance agreement that's favorable to you (do not disparage, do not solicit etc.)
On the other hand, in some jurisdictions firing an employee a short time before a benefit is due may actually be legally hazardous.
Under the normal employee grant conditions - specifically waiving off power of attorney for governance - there shouldn't be that much that person can do to harm you. (They still might have access to shareholder reports FWIW). If they care about vesting, probably they have at least some interest in the company's success.
A final angle is the optics towards other employees - even if they don't like the person in question, you probably want to appear reasonable - which includes making an effort to part amicably.
So the takeaway here is - consult a lawyer and try to work a quiet solution so that everybody can go back to building that startup you care about so much.
Unfortunately, engineering is more .1x engineers than 10x engineers.
Leadership demands you make hard decisions early, with sometimes only 60% certainty, but firing needs to be done as fast as possible for the sake of the team and product. It can be really hard, I've only had to do a few times and each time it was never easy.
So yes, let them vest, but also inform them that they are also fired immediately after.
Plus you’re going to have to explain to investors who that person is, and why they’re on the cap table and not in the company.
Vesting is a form of trial period. It’s the rules of the game. You warned them. They didn’t react properly. That’s it.
Moreover, firing them allows you to keep those stocks so that you can reward someone else. Someone who’s actuelly been doing the work.
You should definitely fire them right now. You need to control the narrative though. Make sure everyone on the teams understand the move. People shouldn’t be surprised.
I would grant them the equity. It's on you for not firing them earlier - don't make them pay for that mistake.
If the full term is 2 years, pay him 23/24 and let him go.
The best case scenario here is to push some form of compensation agreement.
Also, as a manager, you should build trust, even you people that you don't particularly like, so termination without compensation can have negative lasting effects on teammates.
any number of months waiting after 3-4 IME is months too late. but it feels cruel and it's tough to convince yourself you're right in a specific case. especially when you get to know the person.
1. Are they a danger to others? If no, move to #2. If yes, fire them and don't look back. If anyone gives you grief over it, fire them too just to set the record straight who the boss is, and isn't. This may hurt some reputation you may have, but over time the truth will come to light and things will work themselves out. Usually. Bonus: Future employees will know you don't fuck around.
2. Do ALL the other employees have an issue with this employee? If yes, have a group meeting to determine what the issue is without that employee present. Record everything, and let everyone know that they are being recorded and to be 110% honest about everything. If no, then move on to #3.
3. Is their work amicable or able to be improved at least? If yes, keep them, because coworkers can be backstabbing traitors who deserve worse sometimes. If this is suspected to be the case, move on then refer to other employees track records. If worse than others, fire them. If not the worst; work on improving them. Make it a group thing too so that no one feels singled out, because where there is one bad employee, there are others. Perhaps lesser in some way, but possibly worse as well. If their work is not amicable or capable of being improved upon, move on to #4.
4. Do they have any redeeming quality that helps the startup in a way others cannot manage to do? If yes, keep them regardless of #2 and #3, and find a way to make the scenario work for everyone. If no, continue to #5.
5. Alright, we've reached the final point. At this point it can be determined that the employee has no redeemability, and keeping them on has zero value for the company. Now we come to the question about length of time as implied by your question. The answer is, it doesn't matter. If the employee truly is a problem, cannot be redeemed or improved upon, and is even possibly a danger to others; just get rid of them. If however they can be redeemed somehow, or things can be made to work in the case of some coworkers not getting along and backstabbing each other; then keep them on and work through it.
Your employee could be a complete Wally from Dilbert, but still have some redeeming quality to keep them on the payroll and any benefits included. But if even the other Wally's of the company dislike this person, then it's probably best to just get rid of them and let those other Wally's know they are next if they don't smarten up.
Why do I pose it like this?
Because at the end of the day, you don't want to look like a pushover to the other employees that may be just as useful or useless as this employee. But you don't want to seem like a tyrannical asshole either. So a proper order of things has to be explored. It needs to be determined whether or not there is any potential way to make things work. If things cannot be made to work out somehow, then cut your losses and keep records if possible.
And as far as that vesting goes. Regardless of which ever decision is made to fire them or keep them; pay them out anyways. But make it abundantly clear why they are being fired, or kept.
My experience in the workforce has taught me that other employees will go to ridiculous lengths to get rid of someone they don't like, even if all those other employees are actually the problem. Thing is, groups tend to like to agree with each other, even when wrong. So it needs to be determined who is actually the problem, and who is just a problem to those other problems.
I was the problem for other problems. At one place, I was let go gracefully in a similar manner to how I just explained. And because of it, despite how much I dislike the bosses who fell for those employees bullshit, I don't run them under the bus and sue the shit out of them, because they are just ignorant fools who fell for malicious bullshit.
But there is another job I may be running under some monster busses here soon as soon as I can afford to get a lawyer who is willing to take my case. I've had to deal...
Least some things are still nice on the internet :)
I only have so much experience in management positions; but I have 16 years of work experience and 33 years of life experience. Those last two means I have decades of experience dealing with shitty people. I try to put it to use as best I can, even in this world that placates, coddles and basically all around serves them.
Typically, vesting cliffs are designed to give some breathing room for new hires. If they turn out to be terrible, you can part ways with them without impacting your cap table. If this person had long term performance issues, it's kind of shitty to wait until just before they vest.
I don't know what your company's situation is, but this likely doesn't have to be an "all vesting" or "no vesting" situation. By default, it sounds like you can terminate this employee and provide "no vesting". You can make it clear that you'll be offering them some/most/all of their anticipated vested stock despite you terminating their employment prior to the vesting cliff. This lets you terminate the relationship right now while saving face with the rest of the team.
Would initiate a conversation around performance to set expectations that performance needs to improve or their position is at risk.
Be the hero of the story: treat the employee fairly and raise performance expectations. Hopefully, the equity is a small price to pay.
I kind of doubt it'll even occur to the rest of the team, but even if it did I can't imagine that they wouldn't feel it's justifiable given this employee has been such a consistent issue.
IMO the time to fire someone is as soon as you've decided you're going to fire them.
That said, offering nice severance perks is a nice thing to do.
It means taking ownership of the mistake, even if it does mean that you're effectively apologizing for devaluing the company to the other stockholders and other stakeholders.
Still, there's a little bit of "oh, so when I leave I can expect management to talk shit about my performance", which wouldn't do wonders for my impostor syndrome.
And anyone remotely suspicious of your good will should be mighty suspicious that anything you’ve said was just justification to deny compensation — when is my vesting date again..?
You can and should address this. It would be insane to fire someone and not explain why.
I have to say though, this whole discussion is a fascinating insight into what appears to be the thought process of many managers and/or founders.
* Your perception of your employees' performance is consistent and predictable over time. Not all bosses evaluate based on consistent and predictable criteria.
* Your perception isn't significantly distorted by false beliefs about who has done (or not done) what.
(Needless to say, that's generic 'you', not you specifically.)
If you want, you can say "I hereby define 'good performance' to be any performance that I, the boss, think is good" – but that's just a semantic game.
"I hereby define 'good performance' to be any performance that I, the boss, think is good"
At its most basic level, that's _exactly_ what we as leadership do. All you're now saying is "some bosses suck." Well... yes, news at 11.
> You can and should address this.
Except that you can't address this. You can say whatever you want, but it won't result in onlookers knowing why you did what you did. You were probably lying.
If someone was a bad performer, they team knows it's because of bad performance, but reasons given will be "cost cutting", "personal matters", or "they've moved to a better project."
If someone was fired right before vesting, and the reason given was "bad performance", everyone "knows" that management is just being cheap.
When someone has poor but not terrible performance, it's usually accompanied by a second factor (high salary, absence). In that case, the nicer reason is usually given even though we know they were not faring that.
There also tends to be a bit of theatre before someone is fired for bad performance. "Are you sure you fixed the bug?! Give me a video. Which PR? Which line?"
Ever had a bad boss?
If that's your definition of a "bad colleague" I would be a little concerned. There are situations where it may be necessary to do that struggle, but in my experience there are far fewer than you think, and people often fall into a trap of competing to be the last one standing rather than actually doing good work. If you're struggling in a data center at 2300 you may well be doing more harm than good and going home to sleep (or dance, or whatever you need to refresh yourself and come back focused...) is often a better choice.
The best thing you could have done is fire them 6 months ago. The second best is firing them today. Don't hesitate.
If I had a nickle for every time management used the 'saving team morale' excuse to get rid of someone out of fear of them being promoted faster than thenselves ...
Employee coasted, did bad work and still gets a generous payout at the end? The team could very well be bitter about it, especially considering that it's such a small company and they certainly "know" about this employee's issues.
They might figure it out by reading this AskHN too.
Rather pick what you think is fair based on circumstance and let the team know your reasoning. It's your company after all, show leadership and set the standard that you want based on your values.
Edit. The "you" here is directed at the ask hn poster, not the person I'm replying to.
On the other hand, a boss screwing an employee over stock, for any reason, would set a terrible precedent of greed and untrustworthiness.
Life tip: This also goes for relationships. Don't wait until after xmas, their birthday, whatever…
If: a) other employees did not think the fired person performed poorly b) the decision of firing without compensation just before the vesting period is made by the founder only
then this will be a nightmare for the founder.
If however the contrary is true, ie that most people think the performance of the person being fired was poor, and if the founder discusses compensation options with others who will also be vesting at some point, then it signals that the founder actually cares about and trusts their employees enough to associate them meaningfully to the decision process. It also shows not just a wish but an active effort to ensure fairness for all, both the person being fired, and the others staying on who would be that bit more diluted in the cap table if somebody who shouldn't have vested is allowed to.
Good on you, dear founder, to be seeking advice and to be trying to do the right thing. You don't have to be alone thinking about that decision or making it, and you don't have to be alone living with it afterwards. Allowing your employees to be stakeholders in this is really key.
In my opinion I’d make it clear that the termination and the equity decisions are separate, that it was a bad fit but that you are building a culture of doing right by people. That doesn’t mean eliminating vesting, it means that you approach these exceptions on a case by case basis. I’d say 6 months vest would be fair, given the performance management issues - and it strikes the right balance showing you won’t be pushed around and that low performers will not be treated the same way as high performers.
To go back one step, saying a manager must decide alone otherwise it's an escape from responsibility is quite a bizarre claim to make. Making a decision without consulting your team, when your goal is to establish trust, will 100% backfire. It will come back to haunt you EVEN if people agreed with the decision, simply because that decision was taken arbitrarily. That such important decisions could be arbitrary, without meaningful involvement of the team, signals to the team that they are all at the mercy of such future arbitrary decisions. Finally, consulting the team does not mean that the decision is carried by everyone. A consensus should be sought, and the founder would be foolish to make such a decision against his team, but ultimately, the founder is in charge of the final decision and will bear the responsibility for it.
And letting them vest means you're telling them slacking off is fine, and you'll give them a piece of the company that could have gone to the people who actually work.
Sure, they'll be fired, so the others will see it's not acceptable. But still.
It'll be resentment either way.
> The vesting is compensation for work done and time spent in the role.
We don't know all the facts, and definitely not both sides, but it sounds like it could be overcompensating for work done. OP said this employee "has been an issue for quite a while".
Especially since I have worked for startups that gave me the "we've set the bonus/salary bump/stock budget for this year, so who do you think should get less if you get more?". This guy! This guy should get less! (is what I'd want to say in this situation)
Employers, especially startups, commonly present comp as a zero sum game. Even if this company doesn't, don't expect all employees to believe you if you say it's not the case here. Because they've been lied to before when it comes to money.
And frankly company leadership has an eventual profitability requirement, and even if they say it's not zero sum, it's not totally independent either.
Having spoken to corp lawyers a lot I also recognize this as a legal liability. It sets a precedent, and opens you up to discrimination suits for future firings.
That's a completely fucked up attitude. How does someone else lucking out with more than what they technically deserve influence you in any negative way?
Every dollar wasted on useless coworkers might cost you your future workplace (because the company goes bust).
Which may affect if the whole company gets a year end bonus or not.
It's also insulting in salary negotiations. The company would rather piss away cash than give me what the market would pay me?
Reasons like these are why high performers leave.
In recent years our management let go of two people because of "bad performance". In one case that was probably a fair assessment. The other guy just got stuck with an impossible project with absent leadership and management blamed him when nothing was finished on time.
And here we're only hearing one side of the story.
Anything else may be hard to communicate to the team though (depending on the country/culture you are operating in of course).
One poor-performing employee isn't worth the risk of destroying the morale and trust of all the others.
There's no perfect solution to this problem.
10 employees doing the work and wondering "why is this guy getting paid the same as me?" hurts the company too.
Every action has downsides. Every day they're still there demotivates others, possibly making them look for "better" jobs, since clearly their own can be done by a slacker.
But every firing, even of someone clearly underperforming, will cause a bit of fear in even the best performer.
Agree that slackers ruin morale though. Currently going through this at my place. It’s especially difficult when merely being on the same team as slackers makes the external opinion of everyone on that team horrible. Some might know the better members but on average the reputation can be stained.
I'll go with your opinion being that it may be the best solution, but perfect it is not.
The mere fact that I don't even think it's the best solution means that there may very well be employees here who also don't, which means it's not perfect.
There will be employees who will hear "this fired person's stock was taken out of your end of year bonus". Because it kinda was. Especially at a small company where one employee-month plus their stock can be a significant portion of company yearly profits.
Doing it when the vestment date comes up just reeks of shortsightedness to the point of vindictiveness. Immaturity.
If it’s like the person quit but kept coming to work for the last month before vestment then talk to them and maybe offer to buy them out if they’ve got no good explanations.
Agreed. We don't have all the facts but management is not without blame.
> Doing it when the vestment date comes up just reeks of shortsightedness to the point of vindictiveness. Immaturity.
I've made my point repeatedly that the gains from paying it out are also shortsigted and may not be worth it, so no need to repeat.
Compensating people who don't deserve it pisses people off. Maybe those people are immature, but they do include your best performers too.
Like I said, no perfect solution. Management (arguably) caused the situation, and there's no perfect fix.
not really? if he is unjustly compensated more than he is worth it's kind of funny, but unless you're a child you shouldn't really care about it. this is way different than if you were compensated less than what you are worth.
As I pointed out in another comment that you replied to (though I'm not sure you read it properly, since I've already made this point and did not seem to incorporate it into your reply), while comp is not a zero sum game, it also isn't entirely not a zero sum game.
Management being capricious is basically "news at 11", but management being perceived as hesitant/incompetent can be MUCH worse EVEN from the PoV of an employee (=> because that indicates the company has no future)!
Making the change now:
- won't save the situation
- it might, as others have mention actually undermine any trust the rest of the team has left
- invite legal action on the part of the dismissed employee.
All that aside, giving the rogue employee the benefit of the doubt, it feels like it might be health / mental health related issue. Random time off being the tell.
Sucks for the team. But dismissing someone who needs help is a tough call.
I’d consider firing immediately and granting their vesting as if they stayed through the month as part of the termination package.
If the rest of the team also thinks “this guy sucks” and trusts the leadership there could be no impact to trust.
We’re talking about a team of 10 here rather than 1000. It is possible there is a closer than usual relationship/ fair amount of trust compared to random HNers talking about a company they don’t know.
I'm sure that there will be negative consequences. And you will feel bad. Nothing I/we can say will change that. But I think you'll just have to accept that and do what's right for the company and the people who will continue on.
(Of course, there will be two sides to any story, but you are asking what we would do in your stead, so I think it is okay to base this on your subjective point of view)
Conversely, letting them vest will send a message that this behavior is tolerated.
And yes, firing + giving some percentage of what they would get from vesting corresponding to the time they made an effort sounds not unreasonable.
These are colleagues not children. Using threats will not have a good effect.
Also OP seems to have been tolerating their behavior, which sends the message that behavior will be tolerated. This is the right message to send as well.
We (and possible OP) don't know what the employee was going through, giving them lots of slack and support shows to the other employees that they will be supported. As well as just being a good thing to do, it will improve employee retention, effort, buy in to the company etc.
It's not a threat to fire someone when you pay them money and they don't work as expected. It's setting a standard.
> We (and possible OP) don't know what the employee was going through
That's a very fair point.
But is it unreasonable to request insight into why the person shifted?
Accountability comes at a cost.
Plus if this person is really all over the place, I wonder if they'll actually exercise anyways. (Unless they're RSUs in which case you're probably public, in which case your shares outstanding is likely way too large for the dilution to matter...)
If it's the entire team then get rid of them asap, after checking corresponding labour laws. Imagine you work hard and someone's smooching off your hard work, then they get paid the same to boot! That shit negatively affects everyone.
> Taking off without informing team
You tolerate such a behavior if you let him vest and show weakness. Maybe the guy did worse things, talked behind your back and what not. Maybe there are more people who would appreciate his lay off and then, wonder why he still got the vesting. Letting him vest might make you the nice guy with an easy company to work with but could also frame you as the dumb, weak CEO who doesn't dare or can't make tough decisions. It's a thin line.
Not an easy decision and the majority goes for the easy way but there must be a better solution. Despite of a lot of good advice in this thread, I wonder how many in this thread are founders/employers vs employees.
What I'd do - if this person has been underperforming under bad faith, and you have this well documented, I'd move to terminate right away - vesting or no vesting. If that means they don't get to vest, too bad. Don't be scared of lawsuits - yes it will be unproductive if a lawsuit pops up, but if you've been following the law, and you've been following your contract, and you have been direct about the under-performance, the law will be on your side.
When someone is allowed to operate in a team in bad faith, it also severely demotivates the people who perform well. And when this person is allowed to derive a benefit which they don't deserve, it is unfair to those who are putting in their time. And this employee knows that there is a 1-year cliff with vesting; the whole point of that cliff is to weed out such employees.
If they have been underperforming for personal reasons, or because they're not best fit for the job, or if they have benefited you at some early stage, perhaps with fundraising, initial prototypes etc, and then lost momentum, then some amount of empathy is justified, and you can apply that at your discretion. In this case, I'd immediately send this person on garden leave, and terminate past your vesting date, since that's so close.
As to whether there are any downsides on having them in the cap table - it depends on how much equity they hold, assuming that's very small, then no.
Now you're going to make this even worse by not letting them vest? You're making mistake after mistake. You're going to look like an asshole in front of the other employees and they won't forget that because you could turn around and do it to them.
If you don't people will gossip and hurt employee moral.
As for effect on cap table, theres no issues with a former employee having some common shares. If you raise money it will likely be in the form of preferred shares.
Find a better way to indentify under performers earlier so it doesn't drag out to this point
They put a year of their life into making you rich. I would part ways amicably and be generous.
If you IPO, none of this will matter either way. So if you fire them early, it’s a needless risk.