The problem is that all the refined nuances of this law turn on facts and circumstances, most of which depend on the word of the parties involved.
Lessons and risks to founders:
1. Absurd as it may seem (because it is natural that attachments may be formed by those working together), from the standpoint of protecting your stake in your venture, it should be a categorical rule for a founder never to have any form of sexual or romantic interaction with a co-worker in your venture and this applies especially if you are an officer or director of the company. Why? Because it is a certainty that you can be "set up" by the other party at any time after the company begins to prosper. Accusations can be made from any direction, real or fabricated. All they need is some fragment of verifiable support and you can be guaranteed that you will be on the hot seat for all allegations made, whether true or not.
2. Among the risks, say, if you are an officer, a VC-controlled board will almost certainly demand that you "resign" or, if you do not, will fire you. This may be because the board members do not want to fool with defending potentially indefensible facts or it may be that they simply want to consolidate investor control of the company by using the event as a reason to get rid of an otherwise dominant founder.
3. Which leads to a further risk: when your employment gets terminated in this way (or you are forced to resign), you will very typically forfeit all of your unvested stock and options, usually meaning that your founder stake will get cut to less than half of what you could have gotten upon earning it out. Of course, your value to the company may be such that a board will prefer to defend you and allow you to continue to vest but the point is that, through this set of events, you are vulnerable to the whims of whatever investors happen to control the board. This is a huge vulnerability and (from an economic standpoint) a risk never worth taking in exchange for a few moments of fun.
4. You will also be sued personally if a lawsuit ensues and that lawsuit will typically be ugly, both financially and emotionally. Of course, the company would get sued as well and this is the justification for your being terminated in the first place - your actions as an officer would be seen as irresponsible at best and you would have caused some serious harm to the company as a result of subjecting the company to the risks of a multi-million dollar lawsuit. Worse than that, the company may or may not choose to indemnify you for your personal costs in defending the lawsuit or in paying any resulting judgment. Even with an indemnity agreement in place, there is a strong incentive here for the company to claim that your conduct falls outside its parameters. You may win on this point in the end but, even if you do, who wants to have a huge liability threat looming over him for the duration of such a lawsuit.
5. Even if you manage to keep a half-decent financial stake, you can lose further once you are bounced from the company in this. For example, if the company later has a down round, resulting in a huge dilutive hit for all original shareholders, it may continue to incentivize its then current employees (including your co-founders) with a "refresh" on option grants so that they keep some form of parity with the new equity structure, but you will be left holding only a severely diluted equity piece in the end. Your apparently secure "vested" stake will be worth very little.
The above is based on real-world experiences that I have gone through with startups and the risks are very real. When this sort of thing happens, you will get no sympathy from those on whom you counted. In effect, you become tainted and those around you will either attack you or will keep distance in order to play safe. What is worse, common sense does not prevail in these situations. The company lawyers will work to ensure that all emphasis is placed on the worst legal risks imaginable, even if there is another side of the story. This may not be as true in Forture 1000 companies where the positions are more entrenched, but it is true in startups and is therefore murder for founders who get caught up in such a mess.
So, beware - when doing that international travel for conferences, when doing those late-night sessions with co-workers, etc., etc. - don't leave yourself in situations where you can be second-guessed. Remember too that the other party need not be some high-up person in the company and, indeed, usually is not. Keep it clean, then, for sure. But also keep the appearances clean.
If the above sounds too much like a lawyer's perspective, it's because it is. I realize that people place value on real-life affections that have nothing whatever to do with money and these may be enough to trump the legal risks. In my experience, though, in the startup context for founders, the mixture is too lethal in its consequences to make it worthwhile. That is a personal judgment for every founder to make. Do so with open eyes, however, for once you start down this road, you will be completely at the mercy of the person with whom you are flirting or whatever else you may be doing. Should it go bad, you will have little to fall back on.
I hope it's not discourteous to emphasize one of George's points as a tl;dr:
> "don't leave yourself in situations where you can be second-guessed"
THAT'S THE KEY TAKEAWAY -- HERE ARE TWO RULES OF THUMB:
(1) Never make comments of an even-remotely sexual nature, joking or otherwise, to anyone, at any time.
In particular, don't so much as hint that a co-worker should go out with you.
You also want to be extremely careful about complimenting anyone's appearance.
* If there ever is a lawsuit, you will be asked, under oath, whether you ever made such comments.
* Moreover, people who work with you are likely to be asked, also under oath, whether they ever heard you make such comments.
* If the answer is yes, you did make such comments, then the jurors will be that much more likely to believe your accuser. Plaintiffs' lawyers know this and will take advantage of it every time.
* If you deny ever having made such comments, but other people said you did, then your credibility will take a serious and possibly-fatal hit --- not a happy event in a he-said / she-said situation.
(2) To the greatest extent possible, avoid being alone with anyone, of either sex and of any age, who might conceivably bring a sexual-harassment charge against you --- you want always to have a neutral witness who could testify in your favor.
>(1) Never make comments of an even-remotely sexual nature, joking or otherwise, to anyone, at any time.
So much of humor and personality are bound up in sexuality that this is tantamount to saying, for many people, "Leave your personality at the door."
I also worry that this kind of principle, and especially your second principle, will lead to founders doing the easy thing and simply not hiring women.
Notice that I'm not arguing in favor of sexual harassment or not hiring women.
For an alternate cultural perspective, read Elaine Sciolino's La Seduction: How the French Play the Game of Life, which has a section on the workplace and love; in it she says this:
The game of the sexes also extends deep into the workplace. In the United States, the mildest playfulness during business hours and in a business setting is forbidden; in France, it is encouraged. In American corporations, men are told routinely that they cross the line when they compliment a female employee on the color of her dress or the style of her hair. In France, flirtation is part of the job.
(I wrote more about the book here: https://jseliger.wordpress.com/2011/08/09/la-seduction-how-t...).
It might be that we have a large-scale cultural problem that has bled into legal problems.
Plot twist: In this specific case, he's being accused by another man.
Those who encourage baseless sexual harassment claims (and baseless lawsuits of all sorts) couldn't care less about the hiring of women. Those who do care about the hiring of women ought to consider making this issue a priority.
These risks/warnings could apply to just about anything. A person could allege all manner of offensive, suggestive or coercive things, but none seem quite as effective as sexual harassment.
Am I wrong in the impression that allegations of sexual harassment specifically seem to be automatically taken quite seriously?
Over the course of my career, I've seen people accused of every kind of discrimination imaginable, intimidation, extortion, death threats and more, but nothing gets traction like sexual harassment.
What's the deal?
I'm hypothesizing that second wave feminism is an issue dear to the current generation of judges and prosecutors, since they were young then, which is why it gains far more traction in the American court of law. Even reality TV Judge Judy references second wave feminism in some of her judgments.
Wait. Don't ever be alone with anyone? Rough times.
So a straight guy can say to another straight guy "Hey man you have a nice ass?" without legal repercussions?
One more reason to try to work from home I guess.
Trying to judge risk in terms of gender or apparent orientation seems a bit silly to me.
edit: obviously, this is only what Keith claims on his part. I'm only saying, these are the assertions that he's adding to the record
1. Keith and the accuser were in a consensual relationship before the accuser came to work at Square.
2. Keith encouraged his accuser to join the company but asserts that he did not give his accuser any favors or preferential treatment, nor did his accuser ever report directly to him
3. Keith admits that continuing the relationship after his accuser started working at Square was poor judgment.
4. The accuser is claiming that some of the acts in the relationship were not consensual, and Keith unequivocally denies doing the "horrendous things I am told I may be accused of".
5. Keith insinuates that his accuser tried to blackmail him on the order of millions of dollars.
Edited to add: There's also the altogether not-minor point that even a consensual relationship preceding and concurrent with Square employment wouldn't mean sexual harassment was impossible. Imagine the accuser, say, breaking up with Keith and getting stalked or threatened by him as a result.
In the end, it'll be a matter of perspective...it's possible that the accuser is out to blackmail him. It's also possible that Rabois misjudged his role in the relationship, and that the accuser felt pressure to accomodate him because Rabois, indirectly or not, was his boss.
Unless Keith is colossally stupid, he didn't just make up a bunch of stuff when his lawyer told him it's time to be quiet. People have been known to be that stupid in that past , so like someone else said it's good we have a court system to deal with the serious allegations being made by each side.
Even in the criminal justice system, the goal of the criminal justice system has never been to find truth, only produce justice or deterrence.
The last part sounds a bit like a tautology, but essentially, most criminal justice systems were created with the knowledge they can't figure out what really happened in most cases (take murder, where at least one person who knows what happened is dead, and another stands accused), so the goal is usually not to find the truth. Justice is easy, truth is hard.
There are also plenty of cases where truth is irrelevant to the aim of deterrence. It doesn't matter if you catch everyone who is speeding, or even that everyone you ticket was speeding, your goal is usually to get a high enough rate of catching actual speeders to deter the conduct.
Edit: I am referring to the canonical definition of justice, not the bureaucratic one.
"3. Keith admits that continuing the relationship after his accuser started working at Square was poor judgment."
I would think that would make #2 poor judgment, too (encouraging someone to do something so that you have an excuse to break up? Poor judgment). Actually, I would think #2 already was poor judgment given #1.
We've seen a lot of article on HN about how difficult it is for women to break into the tech industry. If legal concerns make men leerier of referring girlfriends or spouses to their own companies, that will make it harder still for women to get in the door.
(Notice that this is an observation, not a policy argument.)
"With increasing frequency, we hung out, drank wine, and I helped prepare him for interviews with tech startups"
...so this case doesn't seem to involve women, not directly. Your observation still stands, though.
There will come times of interest conflict, and it will hurt either your business or your relations. If someone works with his girlfriend (or people hook up with someone from workplace) and get a painful breakup, it tends to poison the working environment for the whole team. If there are relatives on-board, then people will be angry with a feeling of nepotism no matter if it's there or not. It just doesn't work out.
So - don't encourage your GF/BF, spouse, mom or nephew to join your company, spread out. I know a couple of married couples that first hooked up in the workplace - but it all started to be nonproblematic only after one of them quit the company.
"In 1992, to challenge Stanford's rules on political incorrectness, Rabois stood outside the dorm room of an instructor and made remarks criticized by many as homophobic."
(Alternatively, it's not too uncommon for people to be homophobic either because they don't understand their sexuality, or because they understand it but want to hide it from other people.)
That is exactly what I thought after reading the articles on this, his response, and the Standford news article.
Having said this, the sexual harassment laws are a minefield with serious unintended consequences, and there is a cadre of lawyers ready to start what amount to shakedowns at the drop of a hat.
I once heard someone say (very cynically, and I hope not truthfully) that he preferred to hire "young white males of means" because he believed they would have no cause of action to sue. Apparently even such shamefully prejudiced behavior is no longer protection against this sort of outcome.
I'm not talking about fraud here, or things like that. I'm talking about when you get into a situation which can only cause the company harm and embarrassment, the generally appropriate thing to do is remove your link to the company.
If he was a random employee, sure, they don't pay you to do that, but executives, yeah, this is one of the reasons they are paid well.
I'm sure he also holds enough options/stock that he has a financial incentive to not cause the company financial trouble through his alleged personal indiscretions.
If he was sued personally, but Square was not, then yes, cutting this link probably would help.
This is consistent with the Square statement: "While we have not found evidence to support any claims, Keith exercised poor judgment that ultimately undermined his ability to remain an effective leader at Square."
In other words, both Square and Rabois suggest that what transpired was an error in judgement which would complicate things if he continued at Square, but not legally actionable. Since both Rabois and Square can continue independently, minimizing the complications with a resignation can make sense even if completely 'innocent' of legally-enforceable damages.
I'm guessing they offered him the choice of resign and possibly vest a few more options or not resign and be fired by square.
Your preferred explanation of this event is that a baseless accusation of sexual harassment was orchestrated by the big payment processors as a means of torpedoing Square's already breathless pace? And that, despite the baselessness of that claim, a major architect of Square decided to hop off the train? That despite a huge investment of time, energy and ego, the mere whisper of an accusation was sufficient to send him running?
If I may posit a more likely scenario: Square hires human beings. And human beings, thanks to a technology stack built atop a basal ganglia, like to fuck almost at the exclusion of all other things. And, due to imperfections of this stack, sometimes higher order objectives are subjugated by that enthusiasm for fucking.
And that as a result, maybe someone just didn't keep their willy in their pants, they knew it, and decided to step aside before their complicated mess got slopped on the company they helped build?
I dunno – I feel like I like the "humans are imperfect" explanation a bit better.
edit: Via a comment above by ry0ohki, this appears to be exactly what happened. http://keithrabois.tumblr.com/post/41463189288/a-note-from-k...
Yes, because a conspiracy is more likely than one of the guy's at the helm of a company notorious for its poor working environment actually turning out to, allegedly, being a douchebag.
Although I doubt this case was some conspiracy.
I would expect that tone of comment on other boards but not here.
Also, how are they going up against Visa? They don't issue their own cards, but rather, are competing against the likes of PayPal, Bank of America, and Authorize.net.
It's not uncommon for the accused to step down, or step away, while an issue is being investigated.
just look at the stats for the amount of rapes which don't go to court.
this is a dismissing tactic to imply that sexual harassment is some sort of pseudo law that isn't fair, with often the implication that it's a giant conspiracy to allow women and evil feminists to screw over men.
sexual harassment is a crime. it's a real crime. tech has a sexism problem.
Note this quote: "The conduct of the harasser must either be severe or it must be pervasive to be sexual harassment. A single incident is probably not sexual harassment unless it is severe. For example, a single incident of rape or attempted rape would probably be sexual harassment (it would also violate criminal laws)."
> Several months after our relationship began, I recommended that he interview at Square. He went through the interview process and was ultimately hired. I had no impact on his potential success at the company. At no point did he ever report directly to me, and I have seen his work product less than a handful of times.
"In [Intercourse], she argues that all heterosexual sex in our patriarchal society is coercive and degrading to women, and sexual penetration may by its very nature doom women to inferiority and submission, and "may be immune to reform.""
Though Dworkin denied it, many, including female, critics, viewed it as such:
"Such descriptions are often cited by Dworkin's critics, interpreting the book as claiming "all" heterosexual intercourse is rape, or more generally that the anatomical mechanics of sexual intercourse make it intrinsically harmful to women's equality. For instance, Cathy Young says that statements such as, "Intercourse is the pure, sterile, formal expression of men's contempt for women," are reasonably summarized as "All sex is rape.""
Feminism, like all groups, has many overriding ideas and then within that movement you'll have disagreements and there's be a tiny minority who take extreme uncommon views that the rest of the group don't share. "All sex is rape" is such a minority and extreme view. The majority of feminists don't think that at all (I might be wrong, so please, more evidence if you have it)/.
You can find gay men who don't support gay rights, I'm sure there were (at least one) black person in Deep South of USA who supported slavery. etc. etc.
I absolutely agree that probably the very vast majority of feminists don't think that at all, and my intent was not to claim so, though it may not have been clear.