
Ask HN: Startup stopped paying my salary - 0x5a177
My first job out of college was for an "internet media" startup right across the street from school.  Long story short, after a few years they started running out of cash. Salary started coming a few days late, then weeks, then a month. At the point when they owed me 2 months of salary, I quit and started looking for a new job full-time (which I found after a couple months, thank God).<p>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?<p>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.<p>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.<p>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.<p>Any advice would be welcome. Thanks!
======
tptacek
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.

~~~
lionhearted
> 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.

~~~
benatkin
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.

~~~
bobf
(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.

------
mattmanser
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.

------
trizk
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.

~~~
amirmc
_"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).

~~~
0x5a177
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.

------
acangiano
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.

~~~
0x5a177
Thanks, that confirms what's been stewing in my mind.

~~~
techiferous
"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. :)

~~~
0x5a177
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?

~~~
leif
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.

------
mgkimsal
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?

~~~
0x5a177
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.

~~~
mgkimsal
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. ;)

------
gojomo
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.

------
MediaSquirrel
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.

~~~
j_baker
"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.

~~~
0x5a177
You are correct, sir. Equity in this company would be worthless to me, just a
token of their appreciation.

------
prodigal_erik
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.

~~~
0x5a177
There is a 3-year statute of limitations in California on wage claims.

------
j_baker
"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.

~~~
benatkin
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.

~~~
0x5a177
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.

------
jacquesm
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).

------
staunch
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.

~~~
0x5a177
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.

~~~
nimblegorilla
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.

------
spitfire
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.

~~~
0x5a177
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.

------
bugsy
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.

------
maxawaytoolong
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.

------
mgkimsal
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_.

~~~
0x5a177
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?

~~~
mgkimsal
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.

~~~
0x5a177
Thanks very much for your advice and sharing your story, it is really helping
me think through this situation.

------
sethg
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.

------
mike463
Any way you can deduct the loss against taxes?

------
mkramlich
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.

