Ask HN: Paychecks from a failed startup?
Hey - I was recently laid off from an early stage start up (Pre-Series A) and haven't received my last two paychecks. Do I have any legal avenues to recoup these missed payments?
I've opened a case with the state DOL office but I'm worried the company will fold / file for bankruptcy. Does anyone have a similar experience? Any luck getting missed paychecks? Should I attempt to sue the founder?
75 comments
[ 3.3 ms ] story [ 111 ms ] threadVery. It ranges from "you're a creditor in the bankruptcy" to "CEO, you're under arrest".
You could engage a labor lawyer, but if this was pre-series A and the founder was self-funding, there might not be any personal assets there either.
If you think the folding of the company is in good faith, you might just want to take the loss on this one.
Go for it, sue and put in jail whoever owes you payroll money. Jail is a very good motivator to pay what's owed.
Do not take this loss. You should if you are a founder and decided not to take salary, but as an employee this is unacceptable. That money is yours.
OP performed labor at an agreed-upon rate. The hypothetical broke and failed founder should “take the loss”, even if it requires taking on further financial burdens.
Externalized risk is one of the most rampant and harmful moral hazards of this age.
It's not clear it's asinine: the cost of trying to recoup money from an entity that is completely out of money can very easily become not worth it.
That would be giving the owners a pass on the risk that should be inherent in starting a business venture at the expense of OP’s already-delivered labor.
I stand by my tone. That kind of risk shuffling is cancer to the whole realm of private ventures and contributes to general distrust of business as a means of organizing and motivating collective human action.
However the extent to which they should take this case is pretty wide.
At least the guy should ask for his wages.
Maybe he should insist on them if he needs it.
Should they sue the founders and get an lien on their houses? I don’t know.
The first two shouldn’t remove good faith or good feeling. The third means bridges burned.
But I also concede that, in some cases, the cost of recouping might not be worth it.
Anyone else the company owes money going out of their way to make sure those ahead of them in line get theirs first, especially the workers? LOL no, of course not. So why should a worker?
https://news.ycombinator.com/newsguidelines.html
This is astonishingly bad advice! It is the fundamental opposite of what you should do in this situation!
If you work for someone, you deserve to be paid for your work. Full stop. There are state agencies to assist with this exact situation that are funded by your tax dollars, avail yourself to them!
What you think happened to the company is immaterial. I am genuinely baffled by the phrase “folding of the company in good faith” as I can’t imagine a good faith reason to tell people to work for free based on how your feelings align in relation to a business entity.
The only people that would benefit from this becoming the norm would be con artist founders that are working to perfect an “Aww shucks, payroll is sooo hard for a smol bean like me!” excuse for getting folks to work for free.
I would also not work for anyone that would even slightly agree with this advice.
A company is bankrupt if a point in time can be foreseen, where the company can no longer pay its debtors (employees here are debtors, sometimes even a higher-priority class of such). And while one can argue about the "foreseen" part, e.g. by saying "I did reasonably expect that incoming payment to arrive, which didn't". As soon as you were unable to pay a debt once, or like here even twice, you are actually too late in declaring your bankruptcy. Which, in most jurisdictions, is a crime. And it certainly is in bad faith. If the company isn't actually bankrupt, could pay but won't, then it is also an act of bad faith.
Even if what you're saying is true, the skill would be in knowing whether the response is good and proper or not, which requires subject matter expertise. You'd be a fool to blindly trust output from ChatGPT right now for anything important.
“Dear sir,
I represent Mr. Client. It seems you may have neglected to pay my client his last two weeks salary, which is probably an oversight. But if it’s intentional, it might be illegal.
Could you and I sit down to discuss? If you don’t have time for a conversation, perhaps you might save a few minutes by mailing him a check at his address in the amount of One Salary.
Best regards, A Pile of Meat”
2) As lathiat said, the legal options are context dependent, factors are: where you live, where the company is registered and operating, etc.
Absolutely. You can write the first 1-2 "demand letters" yourself (look up the term for easily findable guidance on how to do this). In particular you can remind them as to which legal codes apply in your state and what they say about default payment terms.
Be sure to put in a firm deadline ("within 15/30 days") - no need to include additional threats of what you'll do after that point. Just be clear about the deadline.
And in the meantime find yourself a lawyer to start firing off more formal-sounding letters (likely costing 250-400 a pop) + to provide guidance on what to do after that. You'l have to dip into your pocket a bit, but that's the cost of doing business.
Do you really need a lawyer for this? Pretending to be a lawyer and seeming that way to the other party is more than enough usually.
If that doesn't do the trick (and you don't want to wait indefinitely) - it generally pays to get a lawyer.
Don't do a lawyer's job unless you're a lawyer, because the guy on the other side will definitely get the best lawyer he can afford to retain as much of his money as he can
it also has the potential to make you look like you can't afford a professional. An unhinged (reducto ad absurdum) version of this would be a person who insists they defend themselves in court.
I get this is well intentioned and the claim might be small (few months salary). But it's not professional looking at it from the perspective of a judge or lawyer.
I'd agree that going to two is too much. The second notice should be on a lawyer or regulator's letterhead.
This is good advice in general, for formal communication.
Do: State what you want to happen, when, how, and why, plainly and up-front; briefly state any directly relevant and necessary information.
Do not: Hedge; express uncertainty (if they think you're wrong, that's up to them to figure out—cut the "maybe's" and the "I think"s, et c.); apologize ("sorry to bother you, but..."); threaten; whine; rant.
Request, state, and do. Do not threaten. Threatening is what you get other people to do—lawyers, elected representatives, union reps, state regulatory bodies, et c. If you threaten, you just come off like a weak blowhard. [EDIT] Take note that when those others threaten it's inherent. A lawyer doesn't have to say "or we'll sue your ass". If you are personally threatening, you don't need to threaten. It's implied. If your ordinary correspondence doesn't carry an implied threat, it's because you're not personally threatening, and you need someone who is to do it instead. That's why explicit threats from Joe Blow tend to come off as weak—the actually-threatening are threatening when they simply make requests and state their case, and if they rise to actually making a threat, it's damn scary, because it's credible. If your request isn't threatening, your threats aren't either. By avoiding weak language and not falling into the amateurish trap of leading with threats, you raise your threat level, because you come off as someone competent enough to know all this.
Concise, direct, clear language comes off as more-powerful and "higher" than wishy-washy language and threats, and it's easier to understand, besides.
I'll also write a formal email to the Founder to understand his intent.
Why would you give them this much time? In the US if you’re fired/laid off you generally are legally due your last check within a day or so.
Usually it's 72 hours, or even the same day if fired.
I'd agree with the parent poster: demand 72 hours for the check, or else give me a guaranteed date within a week. If they can't give you the check or dates, or if they miss the date, immediately escalate to state / legal / etc. resources.
So the demand should be for immediate ("-ish") payment, as above.
If you have a contract, you might have some legal recourse you could pursue if it does turn out they're out of runway. But, if they're not making any effort to explain the situation to you, i.e., keeping you in the dark, then just get out of there. This is your livelihood at the end of the day, how you pay your bills. Don't accept it. Do what you can legally (depending on your contract) to recover what you can and move on asap.
IANAL, but you may still have a contract even if you don't have a signed, written contract. Your ability to demonstrate the terms of the contract, and mutual assent to those terms, will be negatively impacted, but legal avenues may still exist.
But yes, the other user was absolutely right: just because a contract isn't written, doesn't mean it's not a contract.
I suspect they're not happy with something (this happened once before I was full-time, I knocked the money off for a single task that they weren't happy with, which was something I know I'm not good at, but tried anyway). But like... you can't play those games with someone's full time salary. It's insane to think that's okay.
Get a lawyer and good luck!
skins fan might refer to this show https://www.imdb.com/title/tt0840196/ which is a British drama series
having worked with Brit, Irish, US, Oz & Kiwi entrepreneurs and also with companies in Europe I got stiffed on my invoices many times - it was a hard lesson.
If the founders first language is English you're a lot more likely to get stiffed on your work. I've learned to factor this risk into my quotes over the years.
On the other hand, the number of times I got stiffed by companies on the continent is close to nil. "Close" because the one time it did happen the CEO was a Brit. Not paying bills when you're in trouble isn't just an American thing. It is a problem with many companies when they're run by native English speakers (US, UK, CA, Australia, NZ).
But you can easily spot the bad apples with some experience: They will never agree on a 30% upfront of your fees. Not because they don't trust you with your work but because they expect to get stiffed the same way they stiff people.
The employer failed to make payroll for two straight pay cycles before deciding to layoff the entire engineering department. Impacted employees include my boss, my peer engineers and other W2s at the former company.
The CEO mentioned numerous times they would make payroll but continuously missed timelines before ultimately laying us off via Slack. We haven't received any formal termination/severance documents.
The company was eventually "acquired" for pennies-on-the-dollar in a fire sale. Early investors got nothing. Of course, like many failed "acquisitions", this is seen as a success on his LinkedIn page.
If so, that organization may be responsible to meet payroll even if your worksite employer doesn't provide them the funds. Worth checking into that, too.