IANAL. Considering the employees are going to be challenging California's "at will" employment laws and the fact that the charges against the employees is performance based, how likely is #2 to have a fighting chance?
I think this is probably a bit extreme (I realize you may be employing hyperbole for effect but still) Zynga is a considered a "hot" IPO candidate and as such you will find folks who recognize that not everyone is a super star. Some talent might be more attracted to Zynga because they 'deal with the dead wood' in a proactive way. And pre-IPO options are better than post-IPO options.
It will certainly be interesting to see if it affects their ability to recruit and retain talent. I can only hope that some of the HR people escape and can share the results with others. Too often there isn't any really definitive data post event if it was a net positive or loss for the company. This is why I think there is a lot of hand waving in the HR space, hard to get real numbers.
Would you really classify this as "dealing with the dead wood?" If they were "dealing with the dead wood", I'd expect they would just fire them for being dead wood in the first place and get their unvested options back as a side-effect.
Trying to keep the dead wood employed, but scaring them into effectively renegotiating their contracts isn't the sort of "dealing with" that very many people are going to look upon favorably.
Yes some but I don't think much, IT employment is very much based on trends, in the 70-80's the hot place to work was Bell Labs or DEC, in the 90-00's it was Google. If you ruin your name you loose the A-Listers interest and everyone in tech fashions themselves A-Listers. So when this happens you have to rely on finding talent that has not proven itself yet or settling for the "it's just a job crowd". The biggest draw to pre-IPO is stock and the possibility of fortunes. To me and probably quite a few others, this is a shot across the bow that they will limit the participation in the fortunes part, which kills the primary reason people join pre-IPO start-ups. I would not underestimate the gravity of this action especially in this hot of a market.
Not if they decide to take yours back so they can get more money. pre-IPO options with Zynga are worth nothing.
Usually the employee only wins because the company messed up the paperwork.
It's about an employment contract which involved compensation while an employee was working, where the employer backed out of that later and terminated the employee to keep from paying what are effectively back wages.
I am against suing to get one's job back, esp. here. However, suing to keep the unvested stock they took when dismissing you is a bigger deal.
Here's the thing:
1) Employee is promised stock for efforts
2) Company doesn't want to pay as promised
3) Employee is fired
4) Stock not paid as promised.
I don't think the fact that this occurs in an at will state has any major impact on the analysis.
You can't leave and then expect to get unvested options = otherwise people would simply sign up for every startup, stay a month and move on - then come back years later when the company is a success and ask for their million dollars.
It's abused when companies deliberately fire people before the options vest - this is relatively rare, since any sane company knows that getting rid of all your talent is a rather short term option.
This is what Oracle did when they took over Sun - they fired almost all of the VPs before the deal so they would have no share. In their case it was more justified, these people hadn't contributed to Suns future (it didn't have one) and weren't the reason for the Oracle takeover - there was no reason why they should gain from Oracle being in charge when the music stopped.
With Sun and Oracle, at least the case could be made that the VP's would have been redundant during the reorganization process. But it's different from saying "Hey, give up the stock options or you are fired."
I think it's that point where you have arguable contract claims.
Coming from Australia where you can't fire anybody without good reason (even demoting people can be considered unfair dismissal) this just sounds insane.
http://en.m.wikipedia.org/wiki/At-will_employment
Pretty much the only significant reason you can't get terminated in the US is as a direct result of being in a protected class (so you can't fire someone for being black but you can fire a black person for any other reason including no reason at all)
Corporate personhood is a funny artifact of English Common Law, and its present state in the US is almost unique. Much of the world views corporations rather differently than our (I'm assuming you're American) legal system does.
When you start from the premise that a corporation is an artificial construct that exists at the whim of, for the purposes intended by, and for the general good of, society as expressed through laws, including a corporation in words like "everyone", and speaking of its "freedom", becomes nonsensical.
If an employee can give 2 weeks notice to say they are quiting at any time for any reason, why shouldn't an employer be allowed to do the same.
However, losing your job as an employee is devastating. It's financially difficult and job hunting (particularly in this economic climate) is difficult. I suppose that Australian employment laws are an attempt to make things more equal and force employers to really think before hiring/firing – it makes employees people again rather than just entries in a payroll system.
Ah, this is a very good point!
This stricter regulation does make starting businesses very difficult, and a definite advantage the US has over Europe.
I think the answer is combination of the two where there is some kind of threshold where new/small companies have more freedom to dismiss, but forces larger businesses to treat their employees fairly.
Requiring cause to fire someone is business-hostile at best. Business can not improve efficiency, pivot, or generally adapt to changing markets if they are not free to hire and fire at will.
The one major point most "liberals" (in the American sense) miss regarding employment security is that employers are far less likely to take risks on hiring - whether in quantity, salary, or experience - when they can not fire at-will. This leads to less employment overall, not more.
The arguments are similar to other well intentioned, but seriously deleterious policies, such as rent control and Calfornia's "Prop 13."
That said, ethics and treating people well are very important. I find Zynga's actions unethical and think there is a good chance they should be held civilly liable.
Generally, in countries which require reasons for dismissal, there is a distinction between a redundancy and a dismissal. A redundancy means that the position someone is working in is declared not to exist (and so no one will be hired to replace the redundant employee), while a dismissal means the position continues but the employment of the employee filling that position is ended by the company.
Changing the size of a workforce to "improve efficiency, pivot, or generally adapt to changing markets" is done through redundancies, not through dismissals, and redundancies can generally happen on whatever terms are agreed to in the employment agreement.
If an employee genuinely isn't working out in a no-fire-at-will country, the employee generally has to be treated fairly and given an opportunity to correct the problems, but they can still be dismissed if they are unable to rectify the problems.
The cost of a dismissal might be slightly higher in a non-fire-at-will company, due to the time period when the employee is given a chance to correct the problems, but not significantly, and businesses can still adapt to changing conditions through redundancies. Non-fire-at-will is therefore not a significant barrier to business.
However, it protects employees against abusive practices like those of Zynga in this instance - employees who do not have anything like the same bargaining power as the companies they are working for.