Ask HN: Fired at 51 weeks by prominent startup?
I was fired at 51 weeks by a somewhat prominent startup. For the first time, I went on unemployment while finding my next opportunity. The startup contested unemployment however they were overruled by the judge. I went on unemployment for the health insurance as I have a young child.
I fear associating my name with this incident however I also think I should warn my fellow engineers. The options were clawed back.
How would you handle being fired without cause at 51 weeks? Would you share it publicly?
89 comments
[ 3.0 ms ] story [ 74.3 ms ] threadI don't understand your use of 'clawed back.' Commonly stock options don't vest until the first year - were your options really clawed back or were they unvested at termination?
Why were you fired?
It's plausible you can make a statement anonymously, while your employer would know who it is, most hiring managers in the future wouldn't know it was you, or of the issue.
There's nothing wrong with going on unemployment when you're terminated. You directly or indirectly pay for that unemployment insurance.
I believe they're saying that they had less than a week til their options would vest, but the company pulled the rug out from under them.
Clawback in this context has a specific meaning - http://www.investopedia.com/terms/c/clawback.asp.
See also http://www.nytimes.com/2016/09/28/business/dealbook/wells-fa...
Clawback is taking back something given. Since quite likely the options were never vested or transferred, they weren't clawed back.
Once lawyer has extracted what s/he can from the company and settlement doesn't prevent you from further pursuing, send complaints to department of labor and state attorney general. While DOL and AG office most probably will not do anything, The complaints will go on file at both offices. If the company is pulling similar stunts with other employees and DOL/AG office sees series of similar complaints, they may go after the company.
Privately bad-mouth the company to your network (not intentionally), word gets around and will warn others. Make sure you never work for another company connected to founders and senior executives of this company. Unethical management and investors at the top attract unethical people and breed unethical culture, they will never change their behavior.
What skeletons or bones could there be?
Having been to a lawyer in really stressful circumstances, here's what you should do: Write down what happened, in chronological order. Be brutally honest about everything you did. Revise this a couple times. This way, you won't get emotional during the recounting and leave out crucial details. Differentiate claims and claims with proof. eg did your boss give you feedback? Written? ie was that a "good job" in the hallway or an excellent written annual review? Do you have a copy?
Then get a free consultation (they all do it) with a couple employment lawyers. Bring this paper, let them read it, and let them lay out your options. Bring any papers you've signed -- employment agreement, reviews, employee handbook, etc.
ps -- forward critical emails from your boss/cto to your personal account for safekeeping. Reviews, promotions, even negative feedback. Keep your own copy.
good luck.
If he ever wants to sue the company, the first thing a lawyer would tell him is to not make any public statements.
Anyway, success is very often the best form of revenge on asshats. Good luck.
They likely offered you an inducement (severance pay) in exchange for you agreeing to a contract that precludes disparagement or other action. If they did coerce or force you into signing, the contract is null and void and you should see an attorney.
Were you offered any severance above and beyond your due wages?
Yes this was the case.
I don't recall the source, but I remember overhearing advice about when to sue. The advice I heard was "Before you hire a lawyer, count to 1,000 twice."
> The people here are not paid to worry about your well being...
No, they are not.
Regardless of whether or not they are in this contract this is something that you should always insist on when signing up with a start-up.
Have your lawyer that you pay check your paperwork before signing to make sure it is fair, don't be pressured and don't take 'this is standard stuff' as a reason to sign it without review.
Yes, it will cost you some money but it may save you much more.
That said, you're not in a good place right now. Don't make any rash decisions in that state of mind. It's really not in your best interest to take this public.
At the end of the day, the company didn't do anything illegal. You most likely signed a standard 4 year/1 year cliff vesting schedule, and it did what it was designed to do. What they did was immoral and wrong, but not illegal. Sure, you can still sue (unlikely you'd win but they may settle to avoid a costly legal battle). And if you think a year of your options are going to be really valuable, it may be worth discussing with a lawyer if you're willing to foot the bill.
My best advice - focus on finding a new job right now. Land somewhere with a great track record for employee well-being so you don't run into this in the future. Get settled into that first. There's no benefit to making a big deal about this right this second. Bring yourself to a good place, then explore your options.
Of course not, the threat of taking it public is one of the clubs the nice employment lawyer is going to us to extract a settlement from them.
Which leads me to another way this is rude: when I'm looking at an employment record and I see someone was somewhere 6 months or less, I don't think much of it. Clearly something didn't work out, even if it wasn't mutual. When I see someone having been there one year, I assume there's one of two options: either the employee just wanted to cliff their shares and then move on or the company let them vest and then fired them. Either one of these does not reflect well on the employee. To let you stay 51 weeks and fire you without options is a double whammy -- I'm going to have the same negative reaction and you have no upside. :/
When you look for your next job, you may want to emphasize that you were at UnicornCo for less than a year to avoid this bias or at least offset it some. That will obviously require you to have a reasonable explanation for why there wasn't a good fit, but you were going to need that anyway.
Forgot to add: contesting your unemployment at a reasonably sized company is really unheard of. Even when someone is fired, unless they are fired for cause (like, they stole stuff, harassed someone, etc) you're going to give them unemployment. If I'm interviewing you, this detail will make me want to dig further into your story. Take that as you will.
You're operating from the 1950s veiwpoint which is really a cultural hold over from the great depression- that employees should be desperate to find a job and companies should be free to screen them out for any arbitrary reasons. Let me guess, you make them write code on a white board too.
If you have a one year cliff you are providing a huge financial incentive for your employees to leave after a year, by shifting the risk onto them.
Maybe that's why you don't have enough people already?
If I'm going to invest into onboarding an employee, training them, providing opportunities for growth, etc. I'm not sure why you find it so disagreeable that I would prefer that they stick around as long as possible. Both parties are free to discontinue the relationship when the fit is no longer there, and that's fine by me.
I'm indeed prejudiced against cowboy coders that want to jump from team to team, focus on picking up new tech for their resumes and do their best to avoid any maintenance work. Maybe that's just me, though...
Being at a company for a year doesn't tell you someone is like that. This is why I called it a prejudice.
Being at a company for a year can also indicate that the person is quality enough to be choosy about where they work and not to stick around when management proves themselves incompetent.
Most statups fail. Most startups management is very poor. The best software developers realize that they are making an investment by working for a startup. Thus staying around past the first year is a judgement call on the future of the company.
For some kinds of work, that's fine, but I think most companies of all kinds would prefer employees who will stay with them for at least a year.
It's totally valid for someone to want to hop companies and favor that lifestyle. But it's also valid for companies to favor people who don't want to hop.
With the 4 year vesting schedule, employees are incentivized to leave after a year to diversify their holdings.
If the resume shows three or more short stints, especially in a row, it's a red flag.
I might still phone screen the candidate if their experience looks relevant and the resume is otherwise impressive, but I'm going to ask about the short positions, and the answer matters a lot.
Or are you stuck in the 1950s era idea of loyalty and these employees are not "loyal"-- yet are you considering whether you're giving them a reason to be loyal?
Most are like that IME. This is compounded by the fact that these are the companies most frequently hiring.
You've probably seen comments along the lines of 90% of candidates failing fizzbuzz? Remember those candidates work somewhere.
I guess what I'm getting at is that the onus for company/team/culture fit is on both the interviewer and the interviewee. Bad luck aside, there's no excuse for running into irreparably lousy workplaces time and time again.
Don't believe it? It's not something I'm just parroting, it's something I've seen for myself, from people with more than a decade of experience.
> I guess what I'm getting at is that the onus for company/team/culture fit is on both the interviewer and the interviewee.
As an interviewee you don't have access to the single most important piece of information to make that assessment, the source code. When this changes then me and a lot of others will stop ending up at crappy companies.
There are a lot of reasons for quality developers to be dissatisfied with shops out there.
To take myself as an example, in my almost 4 year career, I am in my 5th developer job. I have changed jobs every 10 months or so, excepting one job lasting 3 months due to asinine expectations, and my current one that I am 15 months into and counting. The first two I left for better compensation & more responsibility.
I wasn't one for inaction at my jobs either - I was one who would be a driver of change and better practices. At two of the jobs I was promoted to lead developer, including my current one where I am a hybrid between tech lead & engineering manager.
I have interviewed many candidates over the past two years - I have found that candidates who are able to explain their positions well and are open to considering alternative possibilities tend to be passionate ones who care about what they do, which is a characteristic that is a positive if you want to improve the state of engineering at the company. Short durations often tend to mean that they care more than anyone else at the company, and management/executives are too difficult to fight as they have more power to countermand attempts to make things better if it doesn't align with misguided judgment.
I would recommend you rethink your evaluation skills, speaking as one who it sounds like you'd chase away from being interested because such biases would become obvious over the course of interviewing. I am a respected expert in my domain with significant open source work in it & major open source project stewardship. My company has been rewarded with my finding other high quality developers, as well as me being a strong advocate - all due to the simple choice of having good processes and listening to employees & trusting their professional opinion. It's not surprise that the company has risen into Fortune's top 50 small companies to work for.
Why would you stay at a company where you're being under-paid?
Sure, staying somewhere only 6 months can be a lack of fit. Staying somewhere a year, though, doesn't mean anything negative. Especially with startups. The startup could have pivoted. The employee could have felt that it was a good fit, then the startup pivoted and they gave the company an additional 6 months. The employee might have done great, but the statup founders chose to hire form outside rather than promote within (Showing a lack of loyalty to their own employees, and to the ones who took the greater risk by being there earlier.)
Also, you should never look down on an employee who chooses to leave after one year even if you know they are doing it because of the cliff.
The option structure of four years of vesting with a 1 year cliff is employee hostile (And startups should not be doing this because it incentivizes your employees to leave.) The first years and even months of a startup are most critical. Therefore, vesting should start nearly immediately, at most a 90 day cliff.
Secondly, the startup cargo culture is set up in a way that does not have a level playing field for founders and early employees. Founders often get RSUs which are 3X as valuable per share as startup options. An employee on a 4 year option plan should quit every company after that first year cliff.
In that way, after four years they have options in four companies... rather than all their eggs in one basket.
RSUs solve this problem by giving them real skin in the game rather than a lottery ticket that is subject to all kinds of founder shenanigans down the line.
Franky, all employees should be getting series-A preferred as it is silly that a Venture Capitalist an put in $10k of 10k shares and get preferences while an employee who gives up $70k in salary gets $70k options that he has to spend another $20k to exercise and even then only gets common.
Why is a VCs money more valuable, dollar for dollar than an employees? It's not because the VC is really going to help the company execute in any significant way-- yet the employee is.
And the delta between market price and salary you're paying employees is a real financial investment on the employees part (another reason you should not have vesting cliffs.)
Given that we have this cargo culture where things are not thought out from first principles and everyone emulates what other startups did we have not only job titles from the 1950s (eg: 21 year old "CEOs" of 4 person companies) but we have option plans that have not changed since the 1970s!)
The right thing for an employee to do in the market where companies are not giving them real skin in the game is to move every year, so that they diversify their lottery tickets.
It's the only smart move.
And that's just looking at options.
When you consider the only time most engineers ever get a raise is when they leave to go work elsewhere, from a salary perspective they should leave each year too.
Also, I think you are confused about startup options. I've never seen a founder get RSUs, there are strong tax reasons to prefer options -- primarily that you can lower your tax payments from regular income to long term capital gains. You can also convert some portion of them to non-qualified options which can be positive for the founder if they leave.
Regarding preferred vs common, again it is in the employee's interest from a tax perspective to receive common shares. The value of preferred to an investor is that it typically has some incentive structure for the founders to grow the value of the company. It also tends to set a minimum bar for an exit. If these hold true, the value of their shares is the same as common, but common was much cheaper. This is important for things like early exercise and whether or not your shares remain above water. The math in your example which implies preferred shares are somehow cheaper than common must have some unstated elements, perhaps the passage of time? Preferred shares are always more expensive, typically 3X or so, at any given time.
Finally the last point I'd like you to consider wraps up the remaining themes in your response. Founder "games" that dilute employees are typically unpleasant for the founder as well and are the result of having to take investment under less than favorable conditions. When this happens investors and company leadership want to incent people who are still present, not people who put a year in and left. Also your desire to start earning shares right away vs cliffing seems internally consistent with what seems like your desire to use your time the way an investor uses their money -- i.e. spread it around liberally to hedge your bets. That's fine for you to want, but if I'm a founder, I am all-in on this one thing, and I am looking for employees who are also all-in, or as close as I can get to that in the marketplace. Of course the market usually resolves somewhere in between -- I get employees who stay at least a year, preferably more like two or three and (if we are doing really well) sometimes longer. Meanwhile it takes more like 10 years on average to achieve a reasonable exit, so in the time I am slogging away, they can get meaningful exposure to 2-4 other companies. This is worse than what a VC gets in the same amount of time but the VC brings liquid capital to the picture, among other things. The current climate devalues money, but it's still necessary to remain in business in any meaningful way and the value of six months of a new engineer's time is usually far lower than what you are imagining. There are of course exceptions -- you can be a true mercenary and consult to startups in exchange for stock and an hourly rate, but you need very strong experience to make this appealing to the startup and of course your base will generally not be the same as an employee taking the equivalent role. My wife has done this, and it's workable but not awesome long term in my opinion. And then there is the extremely light weight version of this, which is to advise startups in exchange for equity. You have to bring commensurately more to the table for this to be appealing to the startup, and you likely won't see any cash out of it for a long time (in fact the times I have done this I will end up spending money on the company in the form of investing and at least early exercising my shares).
Long story short, feel free to bargain for whatever you want, just realize that achieving alignment on terms will require some give on both sides, and be sure not to over play your hand -- it is hard to hire engineers, but not impossible! And honestly one year cliffs are not the place to negotiate, because the company is unlikely to give on that. Go the consultant route if you really want to be a mercenary -- and if you find a rocket ship you can always sign on as an employee.
One last thing -- being an employee has paid for my house and my kid's education. The ...
IF you're a founder and you're working for options rather than RSUs, you got screwed.
Not sure why you're getting downvoted, though :(
What does this even mean?? (non-American here).
In this case, they really tried to throw tons of things at me (some I had contradicting evidence in non-work email however I had no idea they would make such wild claims). The judge forced them to narrow it down to the top 3-4. For these items, the judge heard one side and then the other. Then we had closing arguments.
Apparently, many people who are denied unemployment do not contest it. But in my experience, it was very straight forward. I did not need a lawyer. I stayed calm and presented my side.
The very next day I received a letter informing me that I had won and by the wording it was clear the judge sided completely with me. Of course, that was just for unemployment however it was a very satisfactory experience.
Were your options really "clawed back" (meaning recouping compensation that has already been given) or did they just not vest? Unless you mean founder equity or RSUs instead of options, I can't see how you would have had them after 51 weeks. Usually, people vest like 25% of their promised equity compensation after 1 year (the "cliff") and then a small percentage each additional month until they fully vest after 4 (or sometimes 5) years.
I say it might be a blessing in disguise because... I worked for a software company that designed kiosks for solar panels and I worked on the design of the software, how it looked, special requests, etc. Anyways, in the interview, they said they were hiring me to help catch them up.. they had about 150 clients they had to cold call to get information from them, assets, etc. -- these clients had already paid their money, but hadn't received kiosks or software. Anyways, to make a long story short, about a year later, I had knocked them down to about 30 clients left.
Meanwhile, our competition was also growing, and these companies were developing in HTML5, whereas we were still building in flash-based software, with an in-house developer working on it upgrading us, but the actual update never seemed to come. Anyways, it seemed that because that company refused to update their software, we lost out to our competition, or we were starting to lose.
I was called into an office, where human resources told me they had to let me go. So they gave me the choice: If I didn't file for unemployment, they would give me a 3-week severance pay. Fortunately for me, I was working a second job, so I actually couldn't file for unemployment, so that helped me out and was like getting paid for doing nothing for 3 weeks. Awesome how some things worked out, though in the first week was rough, I was certainly devastated.. nothing can prepare you for the moment you get laid off... and you go over so many scenarios in your head, "What did I do wrong? What could I have done better? What email did I forget to send? What assignment did I miss? Was it that one time I was 10 minutes late coming back from lunch? Was it that one day that I was running late to work because I overslept?" You go over everything because honestly, you just don't really know.
I had later found out they were struggling badly, financially, and I was the most expendable, so they let me go. I was lucky because I also kept in touch with my former co-workers, who all were not being paid on time, who were still showing up to work, not knowing if they were going to get paid or not, and some of them had to take the company to smalls claims court to get what they were owed. The company soon went under and I think they managed to stay in business by keeping three employees, simply for maintenance issues for existing clients.
So lucky to be let go first.. as everyone else would soon have to struggle, whereas I had a nice free ride for 3 weeks of making money by doing nothing, but accepting the fact that they laid me off. Did I write about this company? Sure did but there was and is still no reason to mention their name or be mad at them. Tough world of competition out there and they lost. Do I expect anything from it? Absolutely not. Life goes on and you find other companies.
Startups are either successful.. or they aren't. And I am sure no startup wants to fire or lay off their employees, but sometimes, the startup is just failing, and they feel horrible themselves, wanting to have been successful, but realizing the reality of the situation.
Life goes on.. the second job I was working at the time.. became my primary job, and I still hold the position over 4 years later, as a very satisfied employee who loves his job. Look to it as a learning process, an experience, and keep moving on til you find the job or come up with your own that will set you up for however long you need.
Remember that options are just the privilege to exchange real money that has value now for restricted private stock you can't easily sell and will very likely be worthless. Obviously you know more about the company having worked there - just be careful indignation and a sense of justice don't prevent you from making the optimal financial decision.
This is how people will perceive this.
https://zachholman.com/posts/fired/
But again, I don't disagree with you. There is a lot of grey around in being fired and people tend to believe authority over non-authority (for good or bad, that seems to be the case).
I tend not to put so much weight on options but it is an interesting issue.
But to get back to your post, was there anything in particular you were thinking of? I'm just not sure what to look for or if this is more the kind of thing it is hard to know about without being in employment law.
Get up... dust-yourself-off, and Move On!
The knee-jerk lawyer-up advice is asinine. The only guys who win that game are attorneys. Are you prepared to spend $5-10K+ in 'modest' legal fees so you can to go to war with a former employer? Do you really trust the courts will right the wrong you perceive?
It totally sucks being fired! The biggest bruise is to your ego and immediate cash-flow. Best to put that time/money/energy into connecting with a new, potentially more rewarding job.
I suspect this is on the minds of many replying with the advice to go to a lawyer.
I somehow like the idea of 'Let Go', though easier said than done, this will make you realize many things in life and prepare you for the Future than continue to lurk in the Past.
(Or is it the Buddha in me talking!!)