Ask HN: Terminated two weeks before vesting cliff – thoughts?
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
77 comments
[ 3.4 ms ] story [ 137 ms ] threadFinally, 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.
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.
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.
Maybe in the future don't telegraph your intentions so clearly. You practically begged them to fire you.
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.
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.
Pretty sure a lawyer would be salivating to take this case.
Source: have known founders who had to sign waivers agreeing not to sue.
I hope you haven't signed anything...
Question though: do they owe you a half year salary, or did you waive this?
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.
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.
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.
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.
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.
put simply, you shouldn't have done that.
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."
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.
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.
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.
And like you said, employees vest slowly, while founder is usually vested on day 1.
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.
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!
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
This does burn all the bridges.
[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
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.
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.
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.
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.
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.