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What's the dumbest way you've seen someone get fired?
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The best move for management in this situation is to "promote" him, into a new role that segregates him from the rest of the team. No office space work in the basement thing, but something that makes him distinctly a different role/title, and physically gives him a small office down the hall.
It doesn't sound like much, but any physical distance will be nice for you and others like you. It also removes depression when you know he's the same role but not held to the same standards. Eventually all that crap takes its toll, and good people quit...or worse, they stop caring and don't quit.
The saying one bad apple can ruin the bunch is very true in work situations.