I'm changing the story a bit to make it more "balanced" as it happened (more balanced):

I told said employee that I would give him 30% of the profits on the referrals made by this referral source.
I found out that the referral source wanted a full 50% of the profits.
I told my employee several months later that I was no longer able to pay him because I had to pay the referral source so much money. He was upset at that and said that I'm wrong.
I close a deal a year later and now wants to get paid.
He was working as a 1099, not a W9.

Of course, he only agrees to be fired after I closed a deal with the referral partner.

- Are you as an employer allowed to cancel a 1099's employee's agreement with you willy-nilly and never pay him again for work he did?
- Also, how long do residuals generally last after an 1099 employee's contract is cancelled?
- How much is bringing a lead source worth to an employer? If an employee brings in a lead source, should the employer pay him a fee for introducing him to the lead source?

Is there money "owed" or just a "thank you" is due?