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That's a tough one. I've face a similar situation.
(Sidebar story)
I was doing training with about 8 team members on a competitive shooting team. We were about half-way through a full day's syllabus. We had been working some live fire pistol drills. Then, we unloaded and moved to some dry fire rifle drills. After that, we started dry fire transition drills. The first iteration goes fine. Observer and participants switch, we start the drill and BANG! We all turn toward the guy who just transitioned to a LOADED pistol. He sat out the rest of the day (maybe week, I don't remember). We elected to keep him on the team. Eventually we let him go, but mainly for other reasons.
(end sidebar story)
You've got to ask yourselves if you think he is ever going to be unsafe again. If he had the "Fear of God" put into him by this event, maybe you can keep him. If he is going to do things while distracted or isn't 110% on board with STRICT safety rules, you should probably let him go.
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