Founder of a late-stage start-up here. Firing people is never fun, and pretty much always I (and most of my founder friends) drag it out. With some people, PIP would work. For most people it doesn't. You don't need to put them on a formal PIP as long as you've been direct with feedback, and your legal environment allows at-will termination. As an early-stage company, especially in this economy, you don't have the time in engage in this luxury.
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.
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.