Ask HN: Startup stopped paying my salary
18 comments
You're not going to get the money back. 'grellas may hop on and set me straight on that, but what I expect will happen in the best case is that by pursuing a wage claim you start the machinery that finally puts your employer into bankruptcy, whereupon you become a creditor, lining up with all the rest of the creditors who aren't going to get paid either.
Don't let my belief here imply that you shouldn't do anything; all three of your options are valid. However, in each of them, before you (a) get emotional, (b) burn any potential bridges (even treacherous, slippery ones), or (c) contemplate investing serious time or any money in this process, keep in mind that your outlook on this probably isn't good.
Don't let my belief here imply that you shouldn't do anything; all three of your options are valid. However, in each of them, before you (a) get emotional, (b) burn any potential bridges (even treacherous, slippery ones), or (c) contemplate investing serious time or any money in this process, keep in mind that your outlook on this probably isn't good.
> You're not going to get the money back.
Indeed, that's my read too, but he shouldn't just shrug his shoulders and give up.
An option: Call them up, tell them you're short on cash and really need the money, and offer to take 1/4th of the salary you're owed if they can pay you shortly and it'd be a huge favor to you and you'd appreciate it.
This removes the small chance of getting the full amount, but it gives the very-important closure and gets the pay off the top idea on your mind - http://www.paulgraham.com/top.html
The cost to thinking about bullshit like this isn't considered enough. Offer to take two weeks pay and sign away the rest. Then be very, very grateful about it, thank them and say it's a big favor to you and you're rooting for them. You lose the small chance of getting full pay, but you get something and can move on with your life and devote your mental energy to other things.
Edit: The other nice thing about this route is that after going through that process, you're no longer a creditor to them and can call them up more freely without them tensing up and feeling the pressure. Depending on how valuable the contact/reference is for you, that could be better than going more hostile. If you did want to go hostile, small claims court might be a better bet than the wage board, depending on what the cap is in California. Small claims doesn't require a lawyer and is pretty straightforward to navigate on your own.
Indeed, that's my read too, but he shouldn't just shrug his shoulders and give up.
An option: Call them up, tell them you're short on cash and really need the money, and offer to take 1/4th of the salary you're owed if they can pay you shortly and it'd be a huge favor to you and you'd appreciate it.
This removes the small chance of getting the full amount, but it gives the very-important closure and gets the pay off the top idea on your mind - http://www.paulgraham.com/top.html
The cost to thinking about bullshit like this isn't considered enough. Offer to take two weeks pay and sign away the rest. Then be very, very grateful about it, thank them and say it's a big favor to you and you're rooting for them. You lose the small chance of getting full pay, but you get something and can move on with your life and devote your mental energy to other things.
Edit: The other nice thing about this route is that after going through that process, you're no longer a creditor to them and can call them up more freely without them tensing up and feeling the pressure. Depending on how valuable the contact/reference is for you, that could be better than going more hostile. If you did want to go hostile, small claims court might be a better bet than the wage board, depending on what the cap is in California. Small claims doesn't require a lawyer and is pretty straightforward to navigate on your own.
Why would they give him 1/4th the salary? Could he sign away his right to demand the full salary, or would any such agreement be unenforceable if he decided to come after them later?
I'd support the legal system allowing him to sign an agreement accepting a lower amount and making that final, but I wonder if it works like the minimum wage, where workers can't sign away their right to be paid at least the minimum wage.
I'd support the legal system allowing him to sign an agreement accepting a lower amount and making that final, but I wonder if it works like the minimum wage, where workers can't sign away their right to be paid at least the minimum wage.
(IANAL, but my business law professor was...) Contract law says that if you say you'll take X paid "shortly" instead of the full amount Y in a situation like the OP describes, it does not prohibit you from collecting the remaining amount later. Even if you sign a contract that agrees to settle the debt, that contract isn't valid because the employer is not providing any consideration in that instance.
Having said that, I was in a similar situation and basically just gave up ever seeing the money for the same reasons others have already given.
Having said that, I was in a similar situation and basically just gave up ever seeing the money for the same reasons others have already given.
Thanks for your input tptacek. When I spoke with one of the VP's he also said that there wasn't much I could do to go after the money. But I thought he might be trying to prevent me from doing anything against the company.
What you described about kicking off the bankruptcy process is pretty much how I pictured it. They have implicitly made me an interest-free lender.
One of the hard lessons of life here for me is that I am really hesitant to trust any people in business now. I now understand why unions exist.
What you described about kicking off the bankruptcy process is pretty much how I pictured it. They have implicitly made me an interest-free lender.
One of the hard lessons of life here for me is that I am really hesitant to trust any people in business now. I now understand why unions exist.
"whereupon you become a creditor, lining up with all the rest of the creditors who aren't going to get paid either"
I was under the impression that employees owed wages are paid before other creditors, which means OP would have a better chance of getting something.
I was under the impression that employees owed wages are paid before other creditors, which means OP would have a better chance of getting something.
I've heard that through the grapevine, and other commenters have concurred, but I've never confirmed it.
Update: according to 11 USC Section 507, wages fall in 3rd place. I am not a lawyer so I may be reading this all wrong, but it goes "administrative expenses", "unsecured claims", then wages up to $4000 (about half of what I'm owed) and earned within 90 days of the bankruptcy filing. It's been about a year since I quit the company, and the wage claim through the labor board has a 3-year statute of limitations. I wonder what would happen if I filed a wage claim on a bankrupt company...
(http://www.lawdog.com/bkrcy/bkmd3.htm#726.)
Update: according to 11 USC Section 507, wages fall in 3rd place. I am not a lawyer so I may be reading this all wrong, but it goes "administrative expenses", "unsecured claims", then wages up to $4000 (about half of what I'm owed) and earned within 90 days of the bankruptcy filing. It's been about a year since I quit the company, and the wage claim through the labor board has a 3-year statute of limitations. I wonder what would happen if I filed a wage claim on a bankrupt company...
(http://www.lawdog.com/bkrcy/bkmd3.htm#726.)
It's worth noting that if you do resort to pushing the company into bankruptcy, at best you'll get nothing, and at worst you'll make things even more difficult for the founders than they already are.
That is my fear in pushing too hard. I actually do want the company to succeed, but I just don't have the wherewithal to give the company this free loan.
Except, you're very likely not going to get the money, so I hope the "don't have the wherewithal to give the company this free loan" is an exaggeration. You should cut your losses. This is a sunk cost for you. Use your creativity to work on furthering your ambitions and career from here. Live for the future, not the past.
Make it their fear - they are still in business, so somebody is getting paid.
Call them up and tell them straight out that they have a week to get the money otherwise you go after them in court, which will throw the company into banckruptcy.
Call them up and tell them straight out that they have a week to get the money otherwise you go after them in court, which will throw the company into banckruptcy.
"they are still in business, so somebody is getting paid."
It's actually possible that no one is getting paid and equity and commitment are driving the ones that are left.
It's actually possible that no one is getting paid and equity and commitment are driving the ones that are left.
I doubt - that, they would have to pay for rent, utilities, internet, etc.
Getting paid isn't just workers, but is also the other businesses.
Getting paid isn't just workers, but is also the other businesses.
Screw them over? Look at it another way. They shafted you, and others. They're in the habit of it now. They're going to keep on shafting until one day they shaft someone who really can't afford it. They could cause someone some real life tragedy, all in the cause of keeping a non-viable business going.
If you did start them on the chain of bankruptcy, you're doing a favour to all the people they'll screw down the line.
And if they're lying about money woes, you get something.
Better to kill the company before they cause some serious damage to a real person. I understand your reluctance, you probably put some of your heart and soul into it, but in the end it's just a company. You tried, they tried, but it just didn't work out.
Then again, having said all that, if I could detach my emotions from it I'd be a bit more selfish and take the advice elsewhere in the thread to negotiate a partial payment. It's probably your best chance of getting some money. But then again I wouldn't be able to detach my emotions, I'd go after the whole amount on principle and I certainly wouldn't have waited this long.
And the little twist, them buying you iPhones and sending you everywhere? That's people pretending to run a business. That's people being the big men, who think that's what a business should be when it's not. They pissed your paycheck away on frivolities. That was their choice.
If you did start them on the chain of bankruptcy, you're doing a favour to all the people they'll screw down the line.
And if they're lying about money woes, you get something.
Better to kill the company before they cause some serious damage to a real person. I understand your reluctance, you probably put some of your heart and soul into it, but in the end it's just a company. You tried, they tried, but it just didn't work out.
Then again, having said all that, if I could detach my emotions from it I'd be a bit more selfish and take the advice elsewhere in the thread to negotiate a partial payment. It's probably your best chance of getting some money. But then again I wouldn't be able to detach my emotions, I'd go after the whole amount on principle and I certainly wouldn't have waited this long.
And the little twist, them buying you iPhones and sending you everywhere? That's people pretending to run a business. That's people being the big men, who think that's what a business should be when it's not. They pissed your paycheck away on frivolities. That was their choice.
I am going to have to go against the grain on this one. Yes you are owed money that is rightfully yours. But you wanted to be part of a startup with all the associated glory and rewards. That means you also assumed some risk and realized you might have to be flexible based on the circumstances handed to the startup. Remember, Amazon almost went under.
The founders are not jerks. They spent what they had on you and treated you well. Now they have nothing but your loyalty and goodwill. They probably want to pay you (maybe even before they pay themselves!) but they can't. Yes they are trying to keep plastic smiles so every one doesn't jump ship and you can live to fight another day. Perhaps, at this point they should be more honest, but I imagine they are afraid to see the dream vaporized.
Obviously, if you worked there for some time you at least kind of believe in what you are doing. Now is an opportunity to gain more control/equity and maybe even help steer the company to profitability. On the other hand if you are sure it is going nowhere, even if everyone tightened their belts and rolled up their sleeves then it is time to let go and write it off.
Yes you are entitled to the money. But you are probably not going to get it. You are only going to destroy relationships. Be up front with the founders. Either leverage your position to change your circumstances or walk away in good faith.
The founders are not jerks. They spent what they had on you and treated you well. Now they have nothing but your loyalty and goodwill. They probably want to pay you (maybe even before they pay themselves!) but they can't. Yes they are trying to keep plastic smiles so every one doesn't jump ship and you can live to fight another day. Perhaps, at this point they should be more honest, but I imagine they are afraid to see the dream vaporized.
Obviously, if you worked there for some time you at least kind of believe in what you are doing. Now is an opportunity to gain more control/equity and maybe even help steer the company to profitability. On the other hand if you are sure it is going nowhere, even if everyone tightened their belts and rolled up their sleeves then it is time to let go and write it off.
Yes you are entitled to the money. But you are probably not going to get it. You are only going to destroy relationships. Be up front with the founders. Either leverage your position to change your circumstances or walk away in good faith.
"But you wanted to be part of a startup with all the associated glory and rewards. That means you also assumed some risk..."
I disagree with that. This person is an employee not a founder. Therefore the risk they assume should be different. At worst, it should be that of losing their job at short notice. The flexibility you also refer to should not extend to working for long periods with no idea when you'll get paid.
Although we can only hear one side of the story here, I feel the founders were negligent in their duties to their employees. They should have made the company's situation clearer to the staff and gone over the options.
Like others in the thread, I doubt the OP will get all the money he is rightfully owed. However, simply walking away in 'good faith' seems weak (esp when that faith has already been abused).
I disagree with that. This person is an employee not a founder. Therefore the risk they assume should be different. At worst, it should be that of losing their job at short notice. The flexibility you also refer to should not extend to working for long periods with no idea when you'll get paid.
Although we can only hear one side of the story here, I feel the founders were negligent in their duties to their employees. They should have made the company's situation clearer to the staff and gone over the options.
Like others in the thread, I doubt the OP will get all the money he is rightfully owed. However, simply walking away in 'good faith' seems weak (esp when that faith has already been abused).
You could say that I assumed the general risk of dealing with people, but amirmc is correct that I did not assume any formal business risk. I.e., I did not receive stock options or any other compensation that is normally given to risk-bearing stakeholders.
Thanks for your comment trizk. I think you capture what I mostly feel in my gut. I really do feel like the CEO really believes in the company to a fault. His gift and curse seems to be that of a hyper-visionary; what he sees in the company doesn't jive with my reality of the company. He has expressed remorse for the situation, but at this point he's lost my trust; I now read his remorse as mere bluffing. Not that I believe he was out to maliciously defraud, I just see this as the outcome of poor judgment and incompetence.
You are right, I did assume risk in joining the startup. That was not apparent to me at the time because it was not really communicated, but now I know. Looking back, I see a lot of "I should have known" moments. The lesson is that one should not look to the leaders of the company to look out for their interest.
You are right, I did assume risk in joining the startup. That was not apparent to me at the time because it was not really communicated, but now I know. Looking back, I see a lot of "I should have known" moments. The lesson is that one should not look to the leaders of the company to look out for their interest.
It's likely the founder is a visionary without a pragmatic streak. Conferences and iPhones is what you give your developers when you're too optimistic about future business.
The founder is unlikely to be aware of his poor judgement. I know this, because I've made the same mistake. Tempering vision wih pragmatism is hard, especially if you achieve early success.
If your founder doesn't admit fault and put in a solid plan to turn the business around, leave.
The founder is unlikely to be aware of his poor judgement. I know this, because I've made the same mistake. Tempering vision wih pragmatism is hard, especially if you achieve early success.
If your founder doesn't admit fault and put in a solid plan to turn the business around, leave.
I went through the poster's exact situation in 2002 after my first company slowly died following 9/11.
I think the assumptions you are making about the Founders are not well grounded. How do you know they are not jerks? Here's how I see it. Employee wages are fixed costs and easy to predict. If you know ahead of time (extremely likely) that you can't make wages, you MUST immediately notify your employees and put them on unpaid leave. You can't just implicitly ask them to work for uncertain future compensation based on not-booked revenue. It's incompetent and unethical. There's no excuse for that. As the poster has said, he was a straight salaried employee, not a founder in any way expected to have variable income. That would be different, but that's not the case. Go get more funding if needed, but don't exploit your employee's loyalty.
I'm glad that the poster quit because that's the right thing to do, and the sooner the better. If this ever happens to me again, I'm gone when the first check doesn't show up.
In the end, my employer went into bankruptcy, which is probably the best in this situation. I got a lawyer and made sure my back wages priority claim was registered. Yes, it's true that employee back wages are high priority and get paid earlier than many other outstanding debts, BUT, this doesn't just happen automatically. I only got paid (a fraction of what I was owed) BECAUSE I got myself active in the legal process. All the other employees who just moved on and didn't get involved didn't get anything. You need to stand up for what you are owed and work in the legal system to get (a fraction of) it.
FYI this didn't entirely destroy the relationship in the long run. I still talk with one of the founding partners on good enough terms. There's nothing wrong with asking to get paid what you were promised. That's not burning a bridge. In the big picture, honestly this is a bridge that you probably need to burn and that's OK in this case, but you're relationship surviving depends more on how they handle it. If you walk away quietly like a chump, how does that make you appear to them for your future relationship?
I think the assumptions you are making about the Founders are not well grounded. How do you know they are not jerks? Here's how I see it. Employee wages are fixed costs and easy to predict. If you know ahead of time (extremely likely) that you can't make wages, you MUST immediately notify your employees and put them on unpaid leave. You can't just implicitly ask them to work for uncertain future compensation based on not-booked revenue. It's incompetent and unethical. There's no excuse for that. As the poster has said, he was a straight salaried employee, not a founder in any way expected to have variable income. That would be different, but that's not the case. Go get more funding if needed, but don't exploit your employee's loyalty.
I'm glad that the poster quit because that's the right thing to do, and the sooner the better. If this ever happens to me again, I'm gone when the first check doesn't show up.
In the end, my employer went into bankruptcy, which is probably the best in this situation. I got a lawyer and made sure my back wages priority claim was registered. Yes, it's true that employee back wages are high priority and get paid earlier than many other outstanding debts, BUT, this doesn't just happen automatically. I only got paid (a fraction of what I was owed) BECAUSE I got myself active in the legal process. All the other employees who just moved on and didn't get involved didn't get anything. You need to stand up for what you are owed and work in the legal system to get (a fraction of) it.
FYI this didn't entirely destroy the relationship in the long run. I still talk with one of the founding partners on good enough terms. There's nothing wrong with asking to get paid what you were promised. That's not burning a bridge. In the big picture, honestly this is a bridge that you probably need to burn and that's OK in this case, but you're relationship surviving depends more on how they handle it. If you walk away quietly like a chump, how does that make you appear to them for your future relationship?
Go for 2, then 1. Have a polite, but firm discussion with the CEO. Tell him that you can't wait anymore for what it's rightfully yours. Give them 30 days to get your money or you'll be forced to go through the state. If they don't pay up, file a claim (you gave them ample time and a fair warning). And remember, they are the assholes, not you for wanting your money.
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Thanks, that confirms what's been stewing in my mind.
"And remember, they are the assholes..."
When you start to see the people as the problem, instead of the people in the problem, it can hinder your social problem solving. And this is as much a social problem as it is a financial one.
There is a chance that this can be resolved with (1) you getting your money back and (2) you still being on friendly terms, but probably not if you label them "assholes" in your head. :)
When you start to see the people as the problem, instead of the people in the problem, it can hinder your social problem solving. And this is as much a social problem as it is a financial one.
There is a chance that this can be resolved with (1) you getting your money back and (2) you still being on friendly terms, but probably not if you label them "assholes" in your head. :)
Generally speaking I don't advocate labeling people. My remark was included because many people in the OP's situation would feel terrible about asking money to a company that is struggling. However, it's important to remember that they are the ones at fault so a request is absolutely legitimate and he shouldn't feel bad about it.
"so a request is absolutely legitimate and he shouldn't feel bad about it."
Yeah, I know what you mean. Totally agree with you.
Yeah, I know what you mean. Totally agree with you.
I think you hit the nail there in that I'm really curious on how to solve the social problem in more of a win-win way as you described. I would probably break down and rank the problem like this:
1. Character - how do I carry myself with justice, mercy, and compassion, yet not get pushed around and maintain self-respect? 2. Social - how do I maintain relationships? 3. Financial - how do I get my money?
1. Character - how do I carry myself with justice, mercy, and compassion, yet not get pushed around and maintain self-respect? 2. Social - how do I maintain relationships? 3. Financial - how do I get my money?
Most people know what's fair, somewhere deep down. You know it, and they know it.
Go to them confidently, tell them "You didn't pay me. I know your company's having problems, but that doesn't get you out of your debt to me, we both know this. How can we make this right without destroying our friendship and the company?"
If they don't give you anything to work with (you should accept either money or a solid explanation of why they can't pay you now, and a concrete, explainable timeline showing exactly when they'll be able to), then either they're clearly disrespecting you and their social contract, or they actually are completely bankrupt and have no hope of getting out of it, and in either case, it's perfectly within reason to start them down the bankruptcy path.
Go to them confidently, tell them "You didn't pay me. I know your company's having problems, but that doesn't get you out of your debt to me, we both know this. How can we make this right without destroying our friendship and the company?"
If they don't give you anything to work with (you should accept either money or a solid explanation of why they can't pay you now, and a concrete, explainable timeline showing exactly when they'll be able to), then either they're clearly disrespecting you and their social contract, or they actually are completely bankrupt and have no hope of getting out of it, and in either case, it's perfectly within reason to start them down the bankruptcy path.
It's tough. What helps me is to step back and look at the problem objectively. Think about the situation is if it were happening to strangers and you were a disinterested observer. How should the problem be resolved?
When I'm in a situation like this, it also helps to think of myself as an "ambassador of reality". Basically, reality is sending a message to the business people. It's feedback saying "your assumptions about the market were wrong" or "you didn't plan thoroughly enough" or whatever the situation is. Reality just happens to be sending this message through you to them. If you don't ask for your money back, you're not giving them the proper financial feedback that they need to learn to be better businesspeople. For their next venture, you will have helped them learn that if you don't pay people they won't just go away and forget about it. You don't have to be aggressive or threaten legal action, you just have to be persistent and not go away. :)
If you need some inspiration, go watch the film Gandhi. He was always civil and friendly, but very stubborn. :)
When I'm in a situation like this, it also helps to think of myself as an "ambassador of reality". Basically, reality is sending a message to the business people. It's feedback saying "your assumptions about the market were wrong" or "you didn't plan thoroughly enough" or whatever the situation is. Reality just happens to be sending this message through you to them. If you don't ask for your money back, you're not giving them the proper financial feedback that they need to learn to be better businesspeople. For their next venture, you will have helped them learn that if you don't pay people they won't just go away and forget about it. You don't have to be aggressive or threaten legal action, you just have to be persistent and not go away. :)
If you need some inspiration, go watch the film Gandhi. He was always civil and friendly, but very stubborn. :)
Okay, here's an interesting idea. First of all, make sure both of you agree that they owe you money and you agree on the amount. Get it in writing.
Then ask them to pay you a set amount every week to pay down the amount. No matter what their financial situation is, they certainly can pay you something every week. Insist on getting paid something, even if it's just $1! Collect the check in person every week. Email them a receipt with an updated balance due. It's a very visible reminder to them that they owe you money and it's a way that you will at least get some money back!
Then ask them to pay you a set amount every week to pay down the amount. No matter what their financial situation is, they certainly can pay you something every week. Insist on getting paid something, even if it's just $1! Collect the check in person every week. Email them a receipt with an updated balance due. It's a very visible reminder to them that they owe you money and it's a way that you will at least get some money back!
I was in their shoes once, and it was a horrible experience. I had paychecks bouncing at the end, some tempers flaring, and overall was about as miserable as could be. I'd suggested that people start looking for other jobs - there was no turnaround in sight. This was just a group of 5 of us - not some huge office, so we were closer (physically, if nothing else) than some other larger orgs that have gone through this. To their credit, they stayed as long as possible, later than was probably prudent. That may have been partially due to the fact that few others in the area were hiring at the time.
Answer, you can try to sue, but there's probably very little chance you'll get your money any time soon. Whether you want to pursue this or not depends on a few things. Do you feel they mislead you? Do you think they really have money and are just lying to you?
The flipside of my experiences was about 4 years after that scenario above, I did some contracting with a company - remotely (unfortunately) and they didn't pay. I found out from discussions that the PM on my project quit soon after I started, another developer on the project quit as well. He'd told me he'd quit because he was tired of the contractors bitching to him they weren't getting paid - apparently this was a habit company X had. I had other contractors seek me out and tell me they'd been shafted on payments too - one for $700, and another for $3500. Mine was to the tune of close to $9000. (never again!). So... I drove up to his state and filed a lawsuit. It's been > 2 years, and it's still in the system. Will probably take another year, and at that point, I'd still have to collect. At this point, it's a matter of principal - the company's whole MO was to farm out work to contractors in various states, then not send payment. That's a whole other level of evil, imo.
But maybe I'm biased and I really was as scammy as the guy who didn't pay me? I don't think so. I was honest with people - there's no money coming in - take another job if you can get one. That's not what happened to me a few years later, though perhaps some might see it as divine retribution?
Answer, you can try to sue, but there's probably very little chance you'll get your money any time soon. Whether you want to pursue this or not depends on a few things. Do you feel they mislead you? Do you think they really have money and are just lying to you?
The flipside of my experiences was about 4 years after that scenario above, I did some contracting with a company - remotely (unfortunately) and they didn't pay. I found out from discussions that the PM on my project quit soon after I started, another developer on the project quit as well. He'd told me he'd quit because he was tired of the contractors bitching to him they weren't getting paid - apparently this was a habit company X had. I had other contractors seek me out and tell me they'd been shafted on payments too - one for $700, and another for $3500. Mine was to the tune of close to $9000. (never again!). So... I drove up to his state and filed a lawsuit. It's been > 2 years, and it's still in the system. Will probably take another year, and at that point, I'd still have to collect. At this point, it's a matter of principal - the company's whole MO was to farm out work to contractors in various states, then not send payment. That's a whole other level of evil, imo.
But maybe I'm biased and I really was as scammy as the guy who didn't pay me? I don't think so. I was honest with people - there's no money coming in - take another job if you can get one. That's not what happened to me a few years later, though perhaps some might see it as divine retribution?
I think you can at least take some credit for telling your employees to look for other jobs.
Our CEO would come into our office and say, "I just had a meeting with a potential investor and he's committed $25k!" He always had our hopes up, but our CFO would paint a different picture. Even our president told me he was starting to pick up work on the side.
Our CEO would come into our office and say, "I just had a meeting with a potential investor and he's committed $25k!" He always had our hopes up, but our CFO would paint a different picture. Even our president told me he was starting to pick up work on the side.
We'd had a not bad year - our first six figure project was earlier that year. However, the sales cycle was proving to be much longer than we'd anticipated (selling to higher ed) and then we had a couple of projects cancel (mid-late 2003). Everything became too much.
Later, I went back to working for others for a while. I smelled a bad burn rate at this company, but only after I'd sold my house and moved states. :/ We were supposed to be impressed with announcements of $x projects and $y investments, but it wasn't that hard to see that 20+ people at a company, being paid full time, would eat up those $x and $y in just a couple months, but the $x was for a 9 month project.
I ended up being extremely cynical and distrustful of others (as I'm sure a few people ended up distrusting me earlier) and it's taken years to get back a modicum of faith/optimism again. Working for myself seemed about the only way I could have a degree of control and not be left in the dark on finances. Yeah, my boss is a jerk, but I'm sleeping with his wife. ;)
Later, I went back to working for others for a while. I smelled a bad burn rate at this company, but only after I'd sold my house and moved states. :/ We were supposed to be impressed with announcements of $x projects and $y investments, but it wasn't that hard to see that 20+ people at a company, being paid full time, would eat up those $x and $y in just a couple months, but the $x was for a 9 month project.
I ended up being extremely cynical and distrustful of others (as I'm sure a few people ended up distrusting me earlier) and it's taken years to get back a modicum of faith/optimism again. Working for myself seemed about the only way I could have a degree of control and not be left in the dark on finances. Yeah, my boss is a jerk, but I'm sleeping with his wife. ;)
I have seen this problem all to often and unfortunately the onus is on you to cut people. Entrepreneur and gamblers have a lot in common, one of them is the feeling of the big hit around the corner. The problem with Entrepreneur is many times they have others that depend on their direction.
People who have no vesting in the company other than a pay check, receive nothing from the gamble and in many cases don't even know they have money in the race. So the person that decides to do this is gambling the employees money and giving them no up side. They are exposing them to the risk and keeping all of the reward if it pays off.
Worse yet the fear of unemployment puts them at a deep psychological disadvantage so any gravy coating or straw of hope becomes bloated in their mind. It is a human trait that helps shield us from traumatic events.
In the end, at the first sign on trouble it is up to the vested parties to trim the company to the capital available. Unfortunately, as happens far to often, the rats on the mast leave the ship first. In other words those at the top start bailing while the gravy coating is being dished to the bottom. When you see the COO, CFO, VP's leaving the company it is time to go. It means the money has run out and there are no real talks from investment sources.
The worst offenders by far are those principals that leave and give a pep talk, to the guys in the field, going out the door to secure their package of the last remaining scraps.
Never work for future funds from a company with money troubles, investors do not invest in companies that get themselves into money troubles and do nothing to correct the imbalance.
9 times out of 10 these companies are run by megalomaniacs who want to play big business on investor funds.
If you do secure a contract for hard asserts in the event of default. In other words you walk out with servers, hardware or transferable software licenses. Ensure that the execution of the contract becomes valid 6 mo before any bankruptcy filing. To keep it clear of claw-backs.
People who have no vesting in the company other than a pay check, receive nothing from the gamble and in many cases don't even know they have money in the race. So the person that decides to do this is gambling the employees money and giving them no up side. They are exposing them to the risk and keeping all of the reward if it pays off.
Worse yet the fear of unemployment puts them at a deep psychological disadvantage so any gravy coating or straw of hope becomes bloated in their mind. It is a human trait that helps shield us from traumatic events.
In the end, at the first sign on trouble it is up to the vested parties to trim the company to the capital available. Unfortunately, as happens far to often, the rats on the mast leave the ship first. In other words those at the top start bailing while the gravy coating is being dished to the bottom. When you see the COO, CFO, VP's leaving the company it is time to go. It means the money has run out and there are no real talks from investment sources.
The worst offenders by far are those principals that leave and give a pep talk, to the guys in the field, going out the door to secure their package of the last remaining scraps.
Never work for future funds from a company with money troubles, investors do not invest in companies that get themselves into money troubles and do nothing to correct the imbalance.
9 times out of 10 these companies are run by megalomaniacs who want to play big business on investor funds.
If you do secure a contract for hard asserts in the event of default. In other words you walk out with servers, hardware or transferable software licenses. Ensure that the execution of the contract becomes valid 6 mo before any bankruptcy filing. To keep it clear of claw-backs.
I've been approached a few times by a company whose business model looked suspiciously like what you described. In fact, eerily similar. I don't want to name them here publicly because I'm not 100% sure that's what they were doing. But I felt strongly enough about it I walked away from them and ignore all email from them since.
fwiw, i wasn't approached - i'd simply answered an ad on craigslist.
Skip the law suit, call the fbi. The guy committed fraud, used a interstate commerce system (the internet) to do it, and he should be rotting in jail.
Tptacek is right that your prospects may be slim if the company is truly on the verge of bankruptcy. But if it's treading water, or up-trending, or captures a new opportunity or investment in the near future, your odds go way up.
So be sure to communicate that you still expect to be paid, and keep documentation on the amount owed -- ideally also a confirmation from them of the amounts. Making an official complaint to state employment authorities should be a consideration -- but one you neither rush to nor wait too long to pursue. Ask an employment lawyer about your rights and any deadlines for asserting them that may apply.
So my overall suggestion would be: (2), with increasingly aggressive nagging that gets them on the record with excuses/acknowledgments, and makes them realize you'll eventually go (1), so they might as well pay you as soon as they can.
I'd also be open to a settlement for less, but not be first to mention the possibility. If their fortunes improve, and you then assert your legal rights before they expire, you might get the original amount plus penalties/interest. So you have leverage unless it's a blood-from-a-stone situation.
So be sure to communicate that you still expect to be paid, and keep documentation on the amount owed -- ideally also a confirmation from them of the amounts. Making an official complaint to state employment authorities should be a consideration -- but one you neither rush to nor wait too long to pursue. Ask an employment lawyer about your rights and any deadlines for asserting them that may apply.
So my overall suggestion would be: (2), with increasingly aggressive nagging that gets them on the record with excuses/acknowledgments, and makes them realize you'll eventually go (1), so they might as well pay you as soon as they can.
I'd also be open to a settlement for less, but not be first to mention the possibility. If their fortunes improve, and you then assert your legal rights before they expire, you might get the original amount plus penalties/interest. So you have leverage unless it's a blood-from-a-stone situation.
Well, they owe you SOMETHING, either cash or if they don't have it, equity. Demand what is yours.
First off, you have a right to know the state of the company's finances. If they say they don't have the money, tell them to prove it and show you their bank account balance.
Second, you can be aggressive without getting personal, as long as everyone stays honest. If they're lying to you, then they're douchebags and it is personal.
Third, another way you could do this is to setup a formal loan and repayment plan with set interest rates, payment schedule and penalties. You could probably do this yourself.
Setting up a formal, high interest-bearing loan seems like a great way to incentivize them to pay your money back. If they don't want to play ball, then take them to court.
However, I definitely agree that the solution is NOT to bend over and take it in the ass.
First off, you have a right to know the state of the company's finances. If they say they don't have the money, tell them to prove it and show you their bank account balance.
Second, you can be aggressive without getting personal, as long as everyone stays honest. If they're lying to you, then they're douchebags and it is personal.
Third, another way you could do this is to setup a formal loan and repayment plan with set interest rates, payment schedule and penalties. You could probably do this yourself.
Setting up a formal, high interest-bearing loan seems like a great way to incentivize them to pay your money back. If they don't want to play ball, then take them to court.
However, I definitely agree that the solution is NOT to bend over and take it in the ass.
"Well, they owe you SOMETHING, either cash or if they don't have it, equity."
Who would want equity in a failing company? If I were the OP and they offered me equity, I'd be insulted.
Who would want equity in a failing company? If I were the OP and they offered me equity, I'd be insulted.
You are correct, sir. Equity in this company would be worthless to me, just a token of their appreciation.
These guys are scum for letting you work blindly without 1) having any idea how or when they would pay what they committed to and 2) warning you they're circling the drain. They deserve to get nailed for it.
That said, it doesn't sound like you have a long employment history, so a cordial relationship and good references from them might be worth more than the money they're unlikely ever to be able to pay, no matter how you go after them. Consider hanging tight at least until you risk losing the right to claim your due (I have no idea if there's anything like a statute of limitations on wage claims or suits).
Good luck. I've been through "oops, we're about out of money, guys", but I was fortunate they were honest and ethical about it.
That said, it doesn't sound like you have a long employment history, so a cordial relationship and good references from them might be worth more than the money they're unlikely ever to be able to pay, no matter how you go after them. Consider hanging tight at least until you risk losing the right to claim your due (I have no idea if there's anything like a statute of limitations on wage claims or suits).
Good luck. I've been through "oops, we're about out of money, guys", but I was fortunate they were honest and ethical about it.
There is a 3-year statute of limitations in California on wage claims.
"It was my first job as a developer, and when my boss left I got promoted to "CTO" and got to hire my own small team. This is one of the main reasons I haven't really "gone after them". I don't really want to screw them over, I just want my money."
Did you deserve the job of CTO? If so, then you also deserved the paycheck. If not, then be happy with the fact that you got a cushy job that will look good on your resume and leave it at that.
Seriously, this is business. It's good to be happy about the time you worked there, but don't let it cloud your judgement. I'm not saying you should go after them. I'm just saying not to hold back because you feel you owe them something that you don't.
Did you deserve the job of CTO? If so, then you also deserved the paycheck. If not, then be happy with the fact that you got a cushy job that will look good on your resume and leave it at that.
Seriously, this is business. It's good to be happy about the time you worked there, but don't let it cloud your judgement. I'm not saying you should go after them. I'm just saying not to hold back because you feel you owe them something that you don't.
Another thing about being CTO: are any other employees that have been shafted mad at him? In most companies that have the title, CTO is a leadership position.
Yes, the other employees that have beef are taking it up with the CEO. I wasn't a real "CTO" as you one might think. But as far as that small company was concerned, I was responsible technology direction, although I didn't have my own budget for hiring.
They're about to go under if I'm any judge of this.
I wouldn't count on it going anywhere unless you become very blunt. They might be afraid to file for bankruptcy, you might get paid a bit if you threaten to sue, rinse, repeat as long as they pay up bits and pieces.
Until they go bust (which sounds like it is weeks or at most months away).
I wouldn't count on it going anywhere unless you become very blunt. They might be afraid to file for bankruptcy, you might get paid a bit if you threaten to sue, rinse, repeat as long as they pay up bits and pieces.
Until they go bust (which sounds like it is weeks or at most months away).
Two issues from my point of view:
1) You're owed the money legally. No question about it. You can probably even get it. California takes a very hard line on unpaid wages.
2) In the grand scheme of the situation do you feel good about fighting them over the unpaid wages?
#1 is easy. You file a claim. You have a decent chance of getting your money.
#2 is harder and it's impossible to know from the outside. I think it's perfectly reasonable to let people off the hook in some rare circumstances. Only you can make the call if this is one of those times. It doesn't make you weak or a fool to treat people better than they strictly deserve.
It sounds though, like you've already made up your mind that you want to go after the unpaid wages. So give them a final warning (written, certified mail, return receipt) and then file a claim.
1) You're owed the money legally. No question about it. You can probably even get it. California takes a very hard line on unpaid wages.
2) In the grand scheme of the situation do you feel good about fighting them over the unpaid wages?
#1 is easy. You file a claim. You have a decent chance of getting your money.
#2 is harder and it's impossible to know from the outside. I think it's perfectly reasonable to let people off the hook in some rare circumstances. Only you can make the call if this is one of those times. It doesn't make you weak or a fool to treat people better than they strictly deserve.
It sounds though, like you've already made up your mind that you want to go after the unpaid wages. So give them a final warning (written, certified mail, return receipt) and then file a claim.
I don't feel good about fighting them over the money. This may sound weird, but I do want the company to succeed. However, I might feel worse if they flat out got away with it. There are several of us employees who are owed back salary and it was very unprofessional and un-courteous for them to keep us on the hook the way they did.
I think it would be a weak move to avoid it completely, but maybe not weak to at least confront them and then show mercy.
But I think you're absolutely right, nobody here can really decide for me.
I think it would be a weak move to avoid it completely, but maybe not weak to at least confront them and then show mercy.
But I think you're absolutely right, nobody here can really decide for me.
Do you think you were paid a "fair" salary to begin with? If you worked somewhere for 40 months and didn't get paid for 2 of those months then it's like you were paid 5% less than the agreed salary (I realize this isn't totally accurate in that the last 2 months you were probably paid more than the first 2 months). If they took you out for nice lunches and sent you to conferences then maybe they also overpaid you by 5% compared to other jobs?
I've lost out on a month's earnings before and it really sucks, but if you had a good relationship with them and learned a lot then maybe it isn't so bad.
Definitely keep up the pressure and hopefully you'll get some of the money you are owed.
I've lost out on a month's earnings before and it really sucks, but if you had a good relationship with them and learned a lot then maybe it isn't so bad.
Definitely keep up the pressure and hopefully you'll get some of the money you are owed.
Forget about it, move on. In the future, when salary starts coming in late is the time to start looking for a job. Better yet, always keep your network open.
I actually did start looking for a job right a little bit before the salary starting coming late. From the time I sent my first official "hey guys I'm looking for a job" email until the time I signed the contract for my next job was about 6 months. The operations of the company started smelling weird to me the longer I was there, plus I felt like I needed to be in a different type of position, so did start looking before things started falling apart.
While I was still getting paid, I didn't want to quit until I had secured a new job. When they were 1 month late with pay, that pretty much drew the line for me so I gave them 1 month notice at that point.
And yes, now I'm regularly updating my resume and keeping my eyes and ears open for other opportunities.
While I was still getting paid, I didn't want to quit until I had secured a new job. When they were 1 month late with pay, that pretty much drew the line for me so I gave them 1 month notice at that point.
And yes, now I'm regularly updating my resume and keeping my eyes and ears open for other opportunities.
I would advise you follow the wage claim route with the state since you were an employee. If you were a contractor you'd have to sue in small claims court, you'd undoubtedly win a judgement, and then it would be up to you to enforce the judgement by getting a lien on the company's property or such. With the wage claim you'll still probably not get anything, but it might prevent him from running more scams in the future unless he settles up.
I strongly advise you emotionally disconnect from them. It sounds like you like them and don't want to cause troubles for them, and they like it that way. You may find they are not the nice sweet people you thought they were as soon as you require them to pay you the money that they owe you. They are not doing you a favor paying your wages, that is money you earned. They are not your friends, they are thieves who stole your hard earned money from you. Don't allow the fact that they did this while smiling and patting you on the back to distract you from your goal - to get paid what you are rightfully and legally owed.
I strongly advise you emotionally disconnect from them. It sounds like you like them and don't want to cause troubles for them, and they like it that way. You may find they are not the nice sweet people you thought they were as soon as you require them to pay you the money that they owe you. They are not doing you a favor paying your wages, that is money you earned. They are not your friends, they are thieves who stole your hard earned money from you. Don't allow the fact that they did this while smiling and patting you on the back to distract you from your goal - to get paid what you are rightfully and legally owed.
I worked for a company that did exactly the same thing.
I didn't take them to court. They jerked around my friends who kept working there for years. They wouldn't pay them for months, fire them, rehire them with promises of giving them their backpay... all sorts of financial abuse. My friends were on the "creative" side of things, so they didn't have as many other options for employment, which is why they took the abuse. About a year after I quit I met someone who had worked with the CEO a long time ago, and said pre-startup the CEO was notorious for not paying bills, stiffing employees, was in estate lawsuits with his own sister, ex-wife and so on.
You should take them to court. Part of being a CEO/founder is taking care of your people. If you don't do that, you're really just using them.
You should take them to court. Part of being a CEO/founder is taking care of your people. If you don't do that, you're really just using them.
Ballpark, what's a 'decent chunk of change?'. In my other comment, I mentioned I got stiffed for about $9k. Perhaps your situation is more? or less? I realize everyone's perception of 'decent change' is different, but I can tell you that at that point, for me, $9k was huge. I'd passed on other work for that contract, and then not getting paid was a pretty big hit. However, I managed to scrape through it (barely), have diversified, and am multiple times better off than just 2 years ago. I suspect now that you have a new job, you did get through it, or are starting to. Should you forget about it? That's up to you. Can you forget about it? I'd suggest if you're through the worst of things, you indeed can.
The amount owed me is roughly the same as yours. I have positive cash flow in my personal finances so I'm above water, but if someone gave me that much right now it would almost feel like winning the lottery.
What do you mean when you say you have diversified?
What do you mean when you say you have diversified?
I'm doing multiple things - I didn't want to have all my eggs in one basket, revenue-wise. I'm getting to the point where I may want to refocus on just one avenue again, but the issue of having all income dependent on just one source, then getting shafted, was painful. Diversification was a reaction to that.
I know what you mean about $9k feeling like a lottery win. As I said, I ended up suing, but it's likely going to be years before you get a trial, and assuming you get a judgement, you still have to collect.
One bit of advice might be to file in small claims court for whatever California's limit in small claims. In the state I filed in, it was $5k, but I wanted to go after the full $9k (technically, $8800 IIRC). It will probably get handled faster than a traditional court/arbitration process.
Get your documentation (emails, whatever) bundled together, file your claim, then move on in life (if you choose a legal route). If they're still operating (on a shoestring I guess?) there's still a chance you'll get a judgement, but it'll likely be years before you actually see a dime. So, don't think you'll be getting $9k any time soon.
I've planned my life around never collecting, but have put a process in place which might let me collect. But I have to operate financially like it's gone. Once you get to that point, and you're living without it, it might become easier to make the decision to not sue. In my case the company had a habit of operating this way, and I'm suing on the principal of it. In your case, if you were friendly with the guys, and you believe them to still be decent people, adding a lawsuit to their misery might not be the karmic thing to do.
Good luck either way.
I know what you mean about $9k feeling like a lottery win. As I said, I ended up suing, but it's likely going to be years before you get a trial, and assuming you get a judgement, you still have to collect.
One bit of advice might be to file in small claims court for whatever California's limit in small claims. In the state I filed in, it was $5k, but I wanted to go after the full $9k (technically, $8800 IIRC). It will probably get handled faster than a traditional court/arbitration process.
Get your documentation (emails, whatever) bundled together, file your claim, then move on in life (if you choose a legal route). If they're still operating (on a shoestring I guess?) there's still a chance you'll get a judgement, but it'll likely be years before you actually see a dime. So, don't think you'll be getting $9k any time soon.
I've planned my life around never collecting, but have put a process in place which might let me collect. But I have to operate financially like it's gone. Once you get to that point, and you're living without it, it might become easier to make the decision to not sue. In my case the company had a habit of operating this way, and I'm suing on the principal of it. In your case, if you were friendly with the guys, and you believe them to still be decent people, adding a lawsuit to their misery might not be the karmic thing to do.
Good luck either way.
Thanks very much for your advice and sharing your story, it is really helping me think through this situation.
I'm doing multiple things - I didn't want to have all my eggs in one basket, revenue-wise. I'm getting to the point where I may want to refocus on just one avenue again, but the issue of having all income dependent on just one source, then getting shafted, was painful. Diversification was a reaction to that.
I know what you mean about $9k feeling like a lottery win. As I said, I ended up suing, but it's likely going to be years before you get a trial, and assuming you get a judgement, you still have to collect.
I know what you mean about $9k feeling like a lottery win. As I said, I ended up suing, but it's likely going to be years before you get a trial, and assuming you get a judgement, you still have to collect.
Talk to a lawyer.
In some states, corporate officers can be personally liable for the unpaid wages of an employee. From my casual Googling, I’m not sure if California is such a state, but you should know how much leverage you have, even if you ultimately decide you don’t want to apply it.
Also note that if the company goes through bankruptcy, unpaid wages are fairly high up in the chain of priority for creditors.
In some states, corporate officers can be personally liable for the unpaid wages of an employee. From my casual Googling, I’m not sure if California is such a state, but you should know how much leverage you have, even if you ultimately decide you don’t want to apply it.
Also note that if the company goes through bankruptcy, unpaid wages are fairly high up in the chain of priority for creditors.
Sounds like they burned cash wastefully, too fast, too early, and then they ran out of it for salaries. Foolish. But people make mistakes, hey, live and learn.
Any way you can deduct the loss against taxes?
Whenever I talk to the founder, he typically says they have "potential investors" and the money should be coming in a few months. I'm not as stupid as I was, and I'm sure that no money is coming in. Who wants to invest in a startup that hasn't been profitable for 5+ years and has back salary obligations to multiple employees?
I can survive without the money, but it's still a pretty good chunk for me so it's worth it to me to put in effort to retrieve it. Problem is, I don't really know how to approach it. I see my options as being: 1. Go to the law; 2. Approach them aggressively; 3. Forget about it.
I've been thinking about filing a wage claim with the state (California), but I would rather settle directly with the company rather than go through the state. I can't really forget about it because it's a decent chunk of change.
There is a little twist, and that is that my experience with the founders and officers was very good up until the point they stopped paying me. They took us out to nice lunches and bought us the first iPhones on launch day (even bought me a new one when I dropped mine). They sent me all-expenses paid to WWDC, Google I/O, OSCON, and SIGGRAPH. I essentially got my career started at that company. It was my first job as a developer, and when my boss left I got promoted to "CTO" and got to hire my own small team. This is one of the main reasons I haven't really "gone after them". I don't really want to screw them over, I just want my money.
Any advice would be welcome. Thanks!