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Ask HN: Terminated two weeks before vesting cliff – thoughts?
77 points by terminatedguy on March 18, 2016 | hide | past | favorite | 75 comments
Details hidden to provide anonymity to both parties.

I am being terminated from a startup 2 weeks before reaching my one year cliff. The other day I was asked to sign a release form noting the date of termination and that I would receive no stake in the startup.

To provide some background, I was visiting the company at their new out of state location for a few weeks. Historically, the company started in SF and moved. We also worked remotely for a better part of a year. I was asked about my future with the company, and I mentioned that I would like to transition out of the company. My flight back home was scheduled for next week, but it was pushed up to two days after the discussion when a new ticket was purchased for me.

The following weeks progressed with my permissions to various websites were being revoked, and my receipt of a release form.

The company was bootstrapped, less than 5 people, and everyone worked for more than half a year without salary.

I saw a similar situation here on another Ask HN thread. https://news.ycombinator.com/item?id=3962292

What are your thoughts and advice about the situation above?

Thank you for taking the time

Don't listen to the people here telling you to just "move on". You worked for half a year without salary; they don't get to screw you and get away with it. There is no "high road" that benefits exclusively them.

Get a lawyer now, do not sign anything, do not pass Go. Upvoted advice in the other thread applies. The card you hold is the threat of a lawsuit, which happens to be justified.

To be clear: you're still an idiot. They're jerks. Let this be a watershed moment for you.

>more than half a year without salary

Pretty sure a lawyer would be salivating to take this case.

Why? Someone agrees to no salary, what claim do they then have?

At the very least, there are hourly minimum wage laws that you cannot agree to forfeit.

Lest someone think this is incorrect, California anyway has "you must pay overtime exempt workers at least 2x minimum wage" (or they can sue). Start at the overtime page: http://www.dir.ca.gov/dlse/faq_overtime.htm and follow through on exemptions.

Source: have known founders who had to sign waivers agreeing not to sue.

Yeah what is a judge going to say? "You deserve nothing" or "I'm pro-rata-ing your stake in the company, reducing it by two week worth".

I hope you haven't signed anything...

It's not clear what "write up your own response" means here, but:

1. You're in lawyer territory now. Stop talking.

2. Lawyers, the good ones anyhow, run about $350/hr minimum in the Bay Area. Quite possibly more. This will likely cost you $5k - $10k to litigate. The more you talk (and the more you tie up your lawyers time, quite probably billed in 15 minute to one hour minimums per contact -- and email or phone calls are contacts -- the more that will be.

3. Let your lawyer talk for you.

4. We've already established that you're an idiot and you were working for assholes. That's no real insult, most employees in the tech world are idiots when it comes to dealing with employment stuff. I certainly am. There's far too little training on this anywhere, and the law changes both quickly and regionally.

5. Just shut the fuck up already.

6. The fact that most employers are assholes and the law is the shits (among many other faults) are why I'm as far the fuck as I can get from tech these days. Watching my garden grow is both more rewarding and remarkably less stressful. Some plants are assholes, but I can burn them with fire, legally.

This is a side note but if your lawyer charges $350/hr and bills you .25 or 1.0 hours for an email, they are a piece of shit and you should get a different lawyer.

At that rate you should absolutely not be charged in increments larger than .1 hour (6 min).

Our attorney (Associate) charges $145/hr and his boss (Partner) charges $285/hr and they both bill in increments of .1, and they typically won't bill every single email either.

Read your lawyer's billing terms and understand them clearly. My information may differ from others, and it's not a field in which I'm an expert, though I've paid for a certain level of education, and not through an academic institution.

There may well be forums for discussing particulars of these terms and there may be value in negotiating those as well.

The larger point is that lawer time is expensive.

For what it is worth, 6 minute emails were normal with my lawyer, but I often found it easier in the startup world of things just to give them a phone call to explain an issue rather than back and forth 6 minute emails

They may not even be able to pay OP even if he does prevail in court. Something to keep in mind.

Good point, but there are almost certainly state labour code violations at play.

Up voted for the last point :-)

Obviously, the only genuine advice this forum can give is

1. Don't sign anything. 2. Don't say anything else to them. 3. Quit discussing it publicly. 4. Go directly to a lawyer.

But honestly unless they're completely incompetent they probably hold all the cards. Yet another reason not to trust employee equity.

Don't underestimate how completely incompetent a five person startup can be.

Bootstrapped, no less.

This is the correct answer. Sorry, OP.

> The company was bootstrapped, less than 5 people, and everyone worked for more than half a year without salary.

This is almost certainly illegal, and may not even take a lawyer to address (though that's usually going to be most effective, if not always most cost effective): if you had a nominal salary [], most jurisdictions' labor law require it be paid with a minimum frequency, and this is often a violation that state agencies will pursue on behalf of employees (e.g., in California, wage claim can be filed with the Department of Industrial Relations, Division of Labor Standards Enforcement [1]. Likewise, to the extent there are federal wage-and-hour violations, these can be addressed by complaint to the federal Department of Labor [2].)

[] if you didn't, its probably a violation of minimum wage laws (potentially both state and federal), and since you were probably otherwise treated as FLSA exempt in other aspects of employment, and FLSA exemption includes a minimum salary, its probably a violation of other labor laws. These, again, may be things that can be addressed through complaint to government agencies without pursuing a lawsuit; particularly, the Federal Department of Labor [2].

[1] http://www.dir.ca.gov/dlse/howtofilewageclaim.htm

[2] http://www.dol.gov/wecanhelp/howtofilecomplaint.htm

Importantly, in some egregious cases, some DoLs apparently can go after the company officers directly. This fact should motivate the owners, and would get you actual cash instead of worthless equity.

This does burn all the bridges.

Ianal but tons of startups forego salary when times are tight (a month or two) and a bootstrapped startup isnt paying anyone until money starts flowing. What's illegal here?

Minimum wage laws. It's technically illegal, but it's a civil penalty, not criminal, and so the employee has to sue to claim damages. And if the company doesn't have money to pay salaries, they aren't going to have money to pay out damages to a lawsuit - a victorious plaintiff just goes to the top of the creditor list when it comes to fighting over the carcass.

[Edit: "Willful" violations may also be prosecuted criminally, although again, this usually requires that somebody report it. [2]]

It's a calculated risk for many founders. They're one disgruntled employee away from a company-ending lawsuit, but usually if they're not paying salaries then they're a paycheck or two away from a company-ending bankruptcy. And once money comes in, good founders will usually pay back all the back wages to avoid that lawsuit.

(This is also why founders should pay themselves minimum wage - I've had a (Massachusetts) lawyer tell me this, and YC's legal counsel also suggested it in their "How to start a startup" lecture [1]. Yes, this also means you have to pay taxes on the money you're paying yourself. This is one of the few good arguments against incorporating before there's money coming in.)

[1] https://www.youtube.com/watch?v=EHzvmyMJEK4#t=1980

[2] http://www.dol.gov/general/topic/youthlabor/enforcement

The employee may not have to sue themselves; both the federal and many state governments have agencies that take wage and hour complaints and pursue employers on behalf of employees. "Civil" does not imply "not pursued by the government".

I think if you weren't ready to leave, you shouldn't have said you were leaving. They would be derelict of duty if upon hearing you say it, they didn't immediately stop any capital flow in your direction.

It's shitty as hell, and I'd like to think I'd never do that, but it's rational, and people tend to choose rationality over morals.

It's going to seem less rational when the company is forced to give back the stock+penalties, or a year's salary at a reasonable engineering rate (they're either a founder or an employee, and either way the company is screwed).

What salary is someone owed when they agree to work for free?

In the USA, you can not agree to work for free. It's just not allowed. People do it, yes -- but it's illegal, and governments do prosecute companies, and it's one of the few violations that can "pierce the corporate veil" and go directly after owners.

Why is it "shitty as hell?" He was two weeks away from owning what is probably a significant piece of equity and basically said he's looking for another job. Just as you said the founders would be violating their fiduciary responsibility to the company by not shit-canning him.

I've worked in lots of tech companies and my experience is that you don't give notice in advance at all. That's because you get walked out the day you say you want to / will be leaving. That's a no-brainer from the tech company point of view. The longer you stay after announcing an intention to leave the more IP they stand to lose. You should have expected to be walked out immediately. Sorry. You may have a case because of the 6 mo without pay but that's not your equity option. Live and learn.

Not sure wtf kind of assholes you've been meeting at "lots of tech companies".

At Amazon I told my boss point blank: "I want to leave in 6 weeks, on the date my stocks vest." He said "OK, you're worth keeping as long as you want to stay, so that's totally fair."

I'm sorry you've had so many bad experiences. It's not that way everywhere. In my experience it's normal at Bay Area tech companies to have a happy hour and send people off warmly.

Absolutely! But his point still stands: don't give notice until the day you're ready to walk out. Don't give notice the week before yearly bonuses (and make sure you have the dates correct!), don't give notice right before a big vesting event, don't give notice until you transfer/clear out the gigs of photos and personal crap you accumulated on your work machine over the years, etc..

You can ask to amend the release to get 50/52 of your yearly reward of shares, or 96.15%, and then you'll agree to the rest of the release.

Generally, a company is not allowed to push out employees in order to avoid granting vesting options. This is a "breach of contract," in the sense that you're only supposed to be terminated with cause. "Pushing out," in many circumstances, includes making you miserable and making you want to leave.

Termination with cause is pretty tricky. If you received a "performance improvement plan," then you'll have a weaker case. If your performance was poor, then it was poor. They had to inform you at some point. Otherwise, it doesn't really mean anything if you say you plan to transition out of the company. That doesn't sound like cause, but it may in the state in which you are employed.

You'll notice on the release that you're going to be agreeing that you can't sue about anything that happened under your employment. That clause is there to specifically prevent people from suing about being pushed out.

Absolutely don't sign the release, do not say anything to them. They do not hold any cards, as others have said. Your lawyer will ask to perform discovery on their e-mail. If they have but one text message or e-mail that says, "We need to terminate this guy before he vests," or if any of the employees sign an affidavit indicating anything to the effect of pushing out, they will incur a significantly higher liability.

So what you're betting on is not whether or not they wanted to push you out, or what you said (being unhappy doesn't make you less entitled to your shares). It's whether or not you can prove that they pushed you out.

You're probably not used to being an aggressive person. Expect to pay a good lawyer a $2,500 retainer for the first time in your life. My suggestion is to talk to them first, see what they'll agree to, and then if you don't get 50/52 of a year's grant, talk to a lawyer. Note, if they so much as agree to even 0.01% of granting your shares, your life becomes immensely easier in court--then the argument because not IF you should get a grant, but HOW MUCH. So if you can get a piece of paper that says even 1 share on it, grab a copy and don't sign it. Talk to a lawyer with it. You'll have everything you need.

In practical terms, this company is on a path towards failure. You screwed up by voicing your intentions prematurely, no question.

It's possible that you could attempt to use the law to get them to settle for an amount that could cover part of your last six months. However, I am strongly of the opinion that your equity is worth nothing because companies that act like this never make it anywhere near profitability.

There's a huge difference between founder bootstrapping and exploiting people.

When you mentioned you wanted to transition out of the company it sounds to me like you resigned.

Why would they allow you to stay past the vesting period if they know you are intent on leaving? Generally the vesting period is to ensure you are going to stay, and you stated your intent to leave.

Disagree, twice.

First, when he mentioned that he wanted to transition out of the company, that was giving notice, not resigning on the spot. You know, the kind of thing that is considered reasonable, polite behavior when leaving a job.

Second, what's the point of the vesting? It's to give him an incentive to stay for the year. He was doing that. You want him to stay longer than the year? Give him a carrot that shows up at two years.

Yes good points. Technically he was giving notice however the reality of working "at will" means the employer can say thank you very much for the courtesy but please leave the building asap and don't let the door hit you on the way out. The company I work at does this if you are leaving for a competitor. They typically will pay you the two weeks you give notice for but your badge, logon and email no longer works.

Great point about making the vesting period 2 years... But again being "at will" means your courtesy was equivalent to a resignation. True there is a common decency the company could be expected to uphold but it sounds like that was too much for this company. The way I look at it though was at least they bought him a plane ticket home.

Pro Tip: don't give notice a few days from vesting.

Alternative advice: It's such a small team, and clearly money is tight, so hiring a lawyer is going to waste a lot of money and you will all be squabbling over scraps. Instead consider pointing them to this post,and sit down with them to work out an outcome you can all live with. Don't be afraid to get less than your 'fair share' in order to get a deal done,but they should also know there is the credible threat of a lawyer. They just want you out of there, you just want a trailing stake - but they will stay and keep working, so they deserve much more.

However if the founders have gone feral and are not willing or able to be rational, then consider writing a formal letter insisting on your rights to the vast bulk of the stock owing to you and sign nothing they give you. This way if the company ends up doing well then you have more evidence that you can hand to a much more expensive lawyer. I've been done over a bunch of times, and it's alost always better to just move on. You are playing a multi-round game and the most valuable commodities are your time and mental health, not money.

I am a firm believer in the military 'need-to-know' philosophy. Your managers had no 'need-to-know' your future plans, especially since those plans were seemingly not concrete. And more importantly, you should not have told them so close to a vesting date. C'est la vie.

Question though: do they owe you a half year salary, or did you waive this?

We all didn't take salaries

This would help out if you pursued a lawsuit. But remember: civil lawsuits have nothing to do with right/wrong, only who has the deepest pockets.

This plainly is not true. Ignore this comment OP.

Fine. Ignore it. But the OP seems very young based on his decisions, so maybe, just maybe it is worthwhile telling him that the world sometimes is not just. Just because he may have a 'case', doesn't mean anything. It all depends on how important this lawsuit would be to the company. They may be in a funding phase or trying to sell company, and don't want the hassle so they will settle, or they don't want to lose this lawsuit as all the other employees (who may be as naive) would then claim against the company. So you don't know anything about the company, and your statement that I am wrong, is wrong.

So you don't get your lottery ticket. My advice is to just move on.

Maybe in the future don't telegraph your intentions so clearly. You practically begged them to fire you.

You told them you wanted to leave before they fired you? Is that right?

Yes, I wanted to transition out with intention to stay longer than the time given

Gather everything you signed, they signed and go talk to an attorney (google employment contract attorney and call a few) for an hour or two. Don't sign anything or agree to anything via email. The attorney can help you draft a response. It's worth the money (300-500 bucks maybe) just for the education you will get.

Finally, never have a conversation like the one you did two weeks before vesting. Hard lessons are learned in startups and I'm sure this is one you won't easily forget. My email is in a profile if you want to chat about this more. I've been through similar stuff.

why would you tell them that? Did you have any personal guarantees to pay back or something?

Do NOT sign the release form. Get a lawyer experienced with Silicon Valley employment contracts. Now.

No one in the company has an employment contract.

That may be to your advantage. Talk to a lawyer.

Something very similar had happened to me at my previous company. Our team was not as small as yours, rather pretty big.

So the story goes something like this. I was given stocks after having worked there for around six months. Their rationale behind it was that you need to earn stocks at [company] and I totally get that.

After a total 17 months at the company I decided that I wanted to leave and had a conversation with my manager regarding the same, they were ready to let me go. But they did not let me decide my exit date. My first set of options were set to mature in another week and they asked me to leave.

When I get my full and final settlement, I was given cash for my stocks. I wanted to exercise my options and keep them, but instead they cashed them out for me.

Hey, at least you got cash for them. :)

> everyone worked for more than half a year without salary

WHY WOULD YOU DO THAT?!? Sorry, that's not fair... Why would you do that without a FIRM equity deal? Why would you get yourself into a situation that allows somebody to yank your share away having already worked?

If you happily work for somebody without anything in return, I'm afraid to say you deserve everything you get when they turn around at the eleventh hour and take the cheap way out.

There may be laws attached to this (IANAL) but really, you've earned a very valuable lesson here. Don't work unless you're contractually guaranteed something in return.

Get a lawyer to draft a response asking them kindly to let you have the options anyways for their own reputation's sake.

They will be pressured by the fact that you are not willing to signed anything, you have the upper hand here.

Other than that, you deserve nothing. You stated your intent to leave, therefore there is no reason for the company to give you equity even though you worked very hard for it. They prefer to keep the equity for employees who would continue to work in the company.

As a founder, I wouldn't act like that because it is not nice, but it is the more rational decision.

You stated your intent to leave, therefore there is no reason for the company to give you equity even though you worked very hard for it.

WTF? An intention to leave isn't the same thing as handing in your resignation. The guy worked for the equity he was promised and IF it turns out that they terminated him for no other reason to than to avoid giving him that equity, that's a clear violation of their agreement.

* They prefer to keep the equity for employees who would continue to work in the company.*

Sure and that's why vesting periods exist in the first place. But if they agreed to a one year vesting period, they have no right to punish this guy for not wanting to do more. You make an agreement, stick to it. FFS.

I know you're looking for advice, but I hope it all works out! :)

Working for free for 6 months? Where can I find workers like you? I'll take a pack of 5. Seriously.

That said, I am sorry you are going through this. I know what it is like to believe in something. It's human to have hope for the future, but don't do this again.

When you work for free, you are establishing that you don't value your time. If your time is worth nothing, well then they don't owe you anything and that is how they see it.

It hurt you to say that you were planning on transitioning out before hitting your cliff. That was a mistake.

You were based in SF and then relocated? Was the company acquired before the relocation?

They relocated to be closer to the target market, and we agreed I could work remotely with visits every few weeks

I haven't signed the release

Congratulations, you have experience. No, really, chalk this one up to experience and learn from it.

> I mentioned that I would like to transition out of the company

put simply, you shouldn't have done that.

And this is why you should never agree to a cliff. Your shares, if valuable to you, better start vesting from day one - especially if you have accepted lower compensation in exchange for more shares. Either that, or you want to negotiate some sort of a severance package BEFORE you join the company. Think about it: the company will try their best to have you accept the lowest dollar offer in exchange of equity in the distant future - what will you do to protect against the downside of losing your job in the less distant future?

I have never heard of, nor worked for, a company that offers vesting from day 1.

Another reason why it's kinda plain dumb to work as a non-founder employee at any startup except those on a clear exit path. Founders enjoy too many benefits and advantages. If the company succeeds, they become megarich while you cash in a nice bonus. If a founder underperforms, only rarely does a board take immediate action -- in sharp contrast to employees.

And like you said, employees vest slowly, while founder is usually vested on day 1.

I've been a founder twice, I had a vesting schedule for options and for founder's shares. Our investors insisted on it, for obvious reasons. We insisted on it because we wanted out founding team to play nice.

Thanks, I was going to say I thought this was the usual case, but I don't have direct experience. It's only fair to have founders vest too, so a co-founder who walks out after the first month doesn't walk away with a third of the company!

Vesting shares or options makes you an owner in the company. Especially for a start-up, you want to keep the number of owners as small as you can. There's a valid business reason not to hand out stock with every paycheck. You want to make sure people are in it for the long haul before you give them an ownership stake.

If you're worried about fairness, you could bridge the time pre-vest with a cash reward, or offer a pro-rated cash payment if you quit or are terminated before the 1 year mark.

You could always play hard ball in negotiations and insist you receive market salary plus a little extra for working in a risky company. Could work if you're that good. Then invest that money as an angel in other companies or buy stocks and get megarich doing that.

I understand if the company is paying a good base salary, then the equity is basically bonus to compensate for working the extra hours and working in a company that could go out of business.

There is a balance. If the company wants you to accept a lower base in exchange for higher equity - then you better ask yourself, "hey, does this mean that the remaining salary buys that equity? If so, then why don't I start earning it immediately?".

Just because someone doesn't offer you a fair deal, doesn't mean you can't demand a fair deal!

That's a good recipe to not ever get hired... even if you are a hot shot engineer.

If I am accepting a lower salary, then my equity better start vesting right away. I'm getting compensated in salary+equity aren't I? Engineers really should think about this - by accepting a lower salary, they are investing the remaining salary into the company. That and all the overtime they'll be working.

Yeah, definitely insist on a full salary. Structure the extra portion as a loan from the company that you only need to pay back if and when the options vest. That way if you're let go before the options vest, you worked a year with full salary and they aren't tempted to fire you before your options vest.

Well, what do you want out of the situation?

If you had the honest conversation that you weren't happy, it sounds like you got what you wanted.

If you did/do still want equity, take the advice of others: Take all of your paperwork to a lawyer and stop talking to anyone else.

Personally (having just resigned <4 weeks ago, 10 days before my vesting), I think this sounds like the right thing to do. No reason to prolong an unhappy situation just to end up with equity when you want out anyway.

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