Being fired for good reason (sometimes called “for cause”) means the employee’s behavior lead to a management decision to fire the person. Performance-related issues are the most common. If there is a performance issue, the individual must be given a chance to correct his behavior. I recommend at least two warnings with a clear outline of the performance issue and what needs to be done to correct it. It’s not fair to fire someone for performance-related issues without first giving them the chance to correct their behavior. After all, they may not know what they are doing wrong. Or they may not know the impact their behavior is having on the firm.

Other good reasons to fire someone would be stealing, sexual harassment, threatening coworkers, drug abuse, and other extreme behavior.

When an employee is fired for good reason, their decisions negatively impact the company. Consequently, he will lose any slices allocated from contributions except supplies, equipment and cash contributions which would be recalculated without the multipliers. Additionally, the company has the right (but, not the obligation) to buy back the equity in an amount of cash equal to the outstanding slices.

Lastly, the employee should agree not to compete directly with the company or cause the other employees to leave. It doesn’t matter if a non-compete or non-solicitation isn’t enforceable by law in your market, it’s not fair to be fired and then go work for a direct competitor or steal employees.

In this case, removing the multipliers has created a consequence for the employee. Knowing that this is the consequence forces employees to think twice before slacking off and hurting the company, or choosing to engage in other negative behaviors.

If this seems harsh, remember that startups are fragile businesses and they can’t afford to have deadbeat employees who do bad things.