The only ethically right way to handle this is to pay the amount that would have vested prorated to the time spent vesting. Perhaps combine it with a non-dispar

The only ethically right way to handle this is to pay the amount that would have vested prorated to the time spent vesting. Perhaps combine it with a non-disparagement and non-disclosure agreement as well as a promise not give negative references. Equity based compensation is a bargain between you and an employee that they forgo immediate salary and supplement your cashflow in agreement to be repaid for that at a later date. Anything less than that means you're displaying that you don't respect agreed bargain on behalf of all your employees. You also burn a bridge forever of someone that was there at the beginning. You lose an investor, but gain a permanent detractor. I'd strongly consider never joining your company if it was known you'd done this to an employee, so you need to fix that in your favor (by either vesting or paying the employee). You may find this is acceptable to the employee as a way to save face and leave a job that they're either not enjoying, is past the point where they care about, or even where there are concerns that you are unaware of that are causing this behavior (health, relationship, life etc).