It's very hard to comment without making some assumptions here, since we don't know the particulars...

But I don't see anything necessarily underhanded about quitting on day 366. He didn't take the job with the intent to quit at the 366th day. I don't know the whole picture, but let's assume he produced good work, slowly became disillusioned as the job turned out to be something other than what he reasonably believed it would be, and finally decided to leave. If some of your pay is in the form of deferred compensation (ie., for staying a year), and the writer continued to work honestly at the job (even if he was not highly motivated anymore) I don't see anything wrong with deliberately quitting on the 366th day (at my last startup was 25% vesting per year - in this case, this scenario is anticipated as part of the employee agreement).

Similarly, I'd see nothing wrong with you firing an employee prior to vesting if it turned out his performance was far lower than you reasonably expected it would be. The underhanded thing would be intending to do this when you hired him (then again, this seems like such a loser move... I know projects start and stop, but it seems like the startups that are going to make it have the opposite problem with talent - how to I keep this guy here now that he's vested?)

Cliff vesting is deferred compensation. Your concern about an ethical paradox is invalid.

It's not. It's contingent compensation. If it was merely deferred compensation, and you quit early, the company would owe the pro rata amount that you worked (at the 1 year mark).

Quitting after you've vested is 100% honorable. It's unethical to fire someone the day before they vest because that makes it clear you did not intend to ever hold up your end of vesting agreement; it means that you entered the agreement in bad faith and planned to manipulate your way out of paying up.

But in the case of quitting after your options vest, the employee never made any agreement - explicit or implicit - that they would continue working after options had vested. If the agreement is that the employee will receive 1,000 options for 365 days of work, the employee is not obligated to work for 366 days any more than the company is obligated to release 1,001 shares. Somebody who works 365 days has already held up their end of the bargain. They didn't cheat.

> This made me livid. I don't hire engineers with the intention of firing them the day before they vest, why would it be ethical to wait until the day after your cliff to quit?

Ethical is continuous vesting with no cliff, or at most a month or two of cliff.

> A vesting cliff exists so that both parties -- employer and employee -- can have a chance to get to know each other before stock is granted and make sure that they're making the right decision.

It doesn't take a year to make that decision.

Do you really think that cliffs benefit employees or were you just hoping to slip that by?

An understandable response, but if I'm 3 months away from owning stock in a company that will surely go public, it would have been irresponsible of me to quit the job before the hours I'd put in had vested. Had the company not chosen to enact a cliff, I would have gladly walked away with what I'd had accrued up to that point.

I think it would only be dishonorable if the guy:

1. Was slacking off for months and just being a dead weight until he vested--and if the entire time you kept him around out of loyalty.

2. Left you high and dry at a vital moment that just happened to coincide with the vesting period.

Maybe a better idea is to rework vesting.

I don't think this is a very good comparison. Firing is different than quitting. I can come up with a scenario where someone leaves amicably one day after vesting, but I can't think of a nice, friendly parting where someone gets fired one day before their cliff.

Do it to the wrong person and you'll have a mass walk-out on your hands.

If you want a longer vesting cliff you should negotiate one.

Also I'm personally completely against vesting cliffs, much more in favor of a gradually growing stake so that there is no sharp transition like this.

If the employer can't find a way to offer any incentive other than money to earn an employee's loyalty, then they're going to lose talent that way. The vesting cliff isn't a probationary period, it's deferred compensation. Leaving after vesting isn't any less ethical than having a vesting cliff in the first place.

A better question is, if good workers leave after they hit the vesting cliff, what's wrong with the company?

Based on my experience, I'd say that this is endemic to the ass-in-seat... I mean, IT industry.

There's nothing unethical about making the decision early; it would, however, be unethical to make that decision and then not continue to put in the required work while you wait for that vesting day.

Your employment agreements set up the economic incentives for working at your company. If the agreement is 1 year cliff to vest and the employee took advantage of that why would you get mad? You got a years worth of work out of that person and in exchange that person got his/her stock. Sounds like a fair deal to me.

On the other hand, firing an engineer right before he/she vests is unethical because you are getting almost a years worth of work without having to pay out the stock. Also it is a pretty good way to get sued by said employee.

Responding to the grandparent's edit.

I disagree with your premise that a vesting cliff exists as a "getting to know you" period. It is a guarantee of a minimum investment of time for a given amount of equity. The person put in the required time and now wants to do something else. This is not dishonorable in the least.

You seem to be confusing personal relationships with business relationships. This might explain why you see quitting as a sort of betrayal.

Oh, he's not confusing it at all. He's just so used to being able to take advantage of the average employee being the one confusing the biz & personal that when an employee acts like a businessman, it challenges his entire exploitative hustle.

Agreed. Its business. You give me money, I give you work. Beyond that is all figment of your imagination.