
Ask HN: Forced repayment of wages. Just common startup stuff? - w8GHxRLeeJRp9Xc
Not interested in making this personal, so going to just state facts instead of sharing an interesting story.<p>For 3 months, I worked for free on coding a project for a social scientist academic. I got asked to work &quot;full-time&quot; by the academic. No papers were signed other than an NDA (the company&#x27;s changed product and names twice since then). I would get a below minimum wage monthly personal check from the academic and told I would not need to pay any taxes on it.<p>One year later, the company gets VC funding from a tech investor who had been giving the academic money to start a company.<p>Fast forward 8 months, even though I was not a cofounder, I am told &quot;we&quot; (academic and I) need to pay back the loan and I need to sign an agreement that I will repay that loan from the company to me (in even more than the amount I had been paid in the previous year). I would have to pay interest on it each year for the next 4 years and then the full amount. Academic tells me that I will get paid the interest amount by the company in the form of a bonus. Also, the loan would be canceled, but they weren&#x27;t allowed to put that in writing. I ask a senior manager what this is all about, and they say it&#x27;s just common startup stuff.<p>I left the company (not because of this, but related). Unfortunately, they are still expecting me to pay, and also say they have no way to pay me anymore since I am not on payroll.<p>I obviously don&#x27;t want to pay back wages I was paid. I also just want to be done with this situation asap and would appreciate any advice that moved me closer to not having anything to do with this company. I also don&#x27;t want to spend money on a lawyer just to not have to pay back my wages.<p>Please let me know what you think I should do.
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mchannon
Everyone's telling you to involve a lawyer. You've stated you don't want to
involve a lawyer, so assuming that you're putting your foot down, here's what
I'd do (other than involving a lawyer):

Put together a letter that succinctly lists the following points:

• You have not agreed to any loan

• You are aware that you have been illegally underpaid, and your former
employer is liable for back pay, benefits, and taxes

• You have intellectual property rights to the code you produced and reserve
the right to exercise those rights

• You would like to consider the matter closed but if they want to persist in
harassing you, you will use all legal means at your disposal to get them to
stop

Mail copies to all individuals involved, and do it so that everybody sees
everybody involved. cc'ing a private attorney is free, though as a courtesy,
you might want to consult with one prior (many will initially consult for
free) and ask if they'd mind.

Assuming you're US based, you can also file a complaint with your state's wage
and franchise tax board or equivalent. The complaint is free, will get the
desired results in the long term, but if you never had taxes paid on that
income, the state may "borrow" some of it from your bank account or tax refund
until things get worked out. Sucks but it sounds like a relatively small
amount of money.

You can also take them to small claims court to get some back pay. This
needn't involve an attorney, and while I realize your goal isn't squeezing
more money out of these people, it might shut them up or get them in so much
more trouble that a lawyer would be more likely to take your case on
contingency (you pay nothing directly).

Stick with option A for now, since it's cheap and probably effective.

~~~
tudelo
> • You have intellectual property rights to the code you produced and reserve
> the right to exercise those rights

Is that true?

~~~
b_t_s
Depends on whether it's work for hire.....but if there's no contract and
they're trying to claw back his paychecks then they're the ones trying to
prove that it's _not_ work for hire, which would also prove that he owns the
code.

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b_t_s
Call the VC and tell him you're the guy who owns the IP to his startup and
that you see 3 paths forward. Offer to sign the IP over to him for market
rate.($100 an hour times approximate number of hours you worked there). Or he
can just call his goons off and leave the IP question fuzzy. Or he can keep
harassing you and you can report his company for paying below minimum wage,
tax evasion, and fraud, and you can assert your IP rights on the code you
wrote. His call. Better yet, get a lawyer to make the call. Mr VC will
probably just buzz off, but you may be pleasantly surprised to get a (well
deserved) check for 50 grand if the startup is not a lost cause.

~~~
karmajunkie
I don't know if I'd be that aggressive about it, but parent is correct that
you likely own the IP. An NDA is not a consulting agreement, and it would be
very unusual for an NDA to assign copyright or declare work product to be a
work-for-hire. This gives you a lot of leverage. They want you to give
something back because they think you have nothing to take back from them.
What you have is way more valuable than the back wages (which are very likely
in violation of federal employment law as you've described your situation.)

Seriously, talk to a lawyer. Best money you'll ever spend.

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psyklic
I recall when I worked on projects for free and was more timid. Just for
perspective:

First, even though you worked for free, recognize that your work very possibly
had great value to this company. Even if you feel you were a beginner or that
your code was not well written, very possibly your work was much more valuable
than you thought at the time.

Second, based on your description, remember that this is very likely not your
fault. So, you shouldn't feel like you're imposing or being unreasonable by
insisting on fixing things in a correct fashion that is amicable to everyone.

Third, keep in mind that the academic's company is likely much more eager than
you to resolve this issue. As just one example, it sounds like you may still
own the copyright to your code. If so, they may want to purchase the copyright
from you.

Finally, do not be concerned about talking with an employment lawyer. A lawyer
will very likely give you a free consultation. I am sure the business is
looking at this from a legal perspective, so it would help you to see it from
that perspective too. The lawyer may even accept your case on contingency,
where they are only paid if you are. So, I strongly suggest talking with a
lawyer soon before talking with the company further.

~~~
w8GHxRLeeJRp9Xc
Thank you. You're spot on.

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greenyoda
Since you didn't say where you're located, I'll assume you're in the U.S. If
not, laws are different.

> _No papers were signed other than an NDA. ... I would get a below minimum
> wage monthly personal check from the academic and told I would not need to
> pay any taxes on it._

Being paid less than minimum wage? Illegal, unless you're legally an intern
(and the work is not of benefit to the employer). Not having taxes withheld?
Probably very illegal. Even if you don't owe any income tax, you're going to
owe the IRS Social Security and other payroll taxes (plus interest and
penalties).

> _Fast forward 8 months, even though I was not a cofounder, I am told "we"
> (academic and I) need to pay back the loan and I need to sign an agreement
> that I will repay that loan from the company to me._

If you didn't sign any contracts, there is no "we" here. You're probably
regarded as a regular employee under federal and state employment law, and any
kind of demand for retroactive repayment of wages that you have already earned
is illegal. _Do not sign anything!_ You should definitely talk to a lawyer who
practices employment law before agreeing to anything, or even talking to the
academic again.

~~~
paulcole
> Being paid less than minimum wage? Illegal, unless you're legally an intern
> (and the work is not of benefit to the employer).

Are you sure about this?

"If you are an independent contractor as opposed to an employee, then you are
not covered by minimum wage laws."

Source: [http://nolo.com/legal-encyclopedia/right-
minimum-w…](http://nolo.com/legal-encyclopedia/right-minimum-w…)

~~~
greenyoda
Since he was working full-time for this company on their core business area
and not working for anyone else, it sounds like the IRS might want to classify
him as an employee and not a contractor. Also, there was no contract defining
his relationship either as a contractor or a business partner.

See: [https://www.irs.gov/newsroom/understanding-employee-vs-
contr...](https://www.irs.gov/newsroom/understanding-employee-vs-contractor-
designation)

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hguhghuff
This raises too many questions to give a meaningful answer here on HN.

But if you want a quick opinion.... sue them for underpaying you and report it
to the tax department and demand full pay for the work you did and also point
out to them that you own the intellectual property rights of all the work you
did and threaten to sue them if they don’t pay you for it.

Just throw it to a lawyer.

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wglb
So by not engaging an attorney, you are soliciting legal advice from non-
attorneys. Consider the possibility that the others will engage an attorney to
represent their interests. You need a strong advocate to ensure that you are
not run over by them.

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w8GHxRLeeJRp9Xc
First, thanks for all the great advice. Very relieved to know that I'll be on
the hook for at most some taxes on a really low salary.

To clear up uncertainty:

\- This is in California.

\- Pretty sure I signed over IP in the term sheet when the VC deal became
official.

\- In the month before VC investment, someone else did write code with me: a
lot of infra work and the push notification code.

\- It was a $several MM round but the company hasn't made much progress since
then, so don't know how much value the company still has.

\- To add to the fraud, the academic also rigged a study at a top university
that the product bases its efficacy on.

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itronitron
Do not sign anything, do not pay anything.

I recommend writing up a detailed account of your interactions with the
academic and just stashing it away somewhere so that you have a record of
known facts for future reference.

~~~
treehouseman
This. Document everything. Don't add new things to the discussion by
continuing to talk. Say everything has to be reviewed by your lawyer. Don't
answer the phone. Get everything in writing.

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tlb
Certainly not common startup stuff -- it all sounds very strange and sketchy.
You should talk to a lawyer at a firm that knows startups. In the Bay Area,
Wilson Sonsini or Orrick are good.

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sloaken
I gree with a prior poster that if this is US then they are in trouble with
the government. I suspect this 'Loan' is a way to keep them out of jail. Loans
to have to have interest charge. To remedy the situation, agree to sign the
loan when you get an offer for employment that includes a signing bonus, that
FAR exceeds the loan amount.

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treehouseman
Do not sign anything. Tell them that you are having this reviewed by your
lawyer (even if that is not true). Drag it out as long as possible until they
just give up. You are not liable for any of this shit. If you feel like you
want to claim ownership of your IP then call a lawyer and decide on what to
threaten-than-sue them with.

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mabynogy
Looks like a scam. Big red flag for me.

I'd do nothing except leave that company.

~~~
treehouseman
I agree. The academic is in too deep and looking to spread the liability
around. Best to just say you are talking to your lawyer and never respond
again (lest the academic try to find new "academic" ways to blame others).

Also: academics are generally not business people, nor are they generally
lawyers. Something to consider.

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s73v3r_
By not engaging a lawyer and suing these people, you are enabling them, and
allowing them to do it to someone else.

