Ask HN: I am working in a troubled startup and seeking some advice | Hacker News Reader

Ask HN: I am working in a troubled startup and seeking some advice

19 pointskulachilli14 comments

I've been working in this startup for over 1.5 years. My boss keeps the financials hidden from all the employees. Lately paycheques were always delayed. Also I had not been paid for my latest salary payment.

The boss and an investor came to apologize to each of the coworkers individually. However, I found I was the only one who didn't get paid for this time. I found out about this just the past Friday. I emailed my boss and politely asked him when is he going to pay me. He didn't reply me.

Tomorrow is also the last legal day he must pay me. I am struggling whether I should just quit tomorrow. What would you do if you are in my position?

Thanks a lot for your advice in advance.

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You are too focused on pay. Continuing for a limited amount of time without pay is not unheard of, but if I were in that situation, I'd want the founder to be completely open about what's going on. The fact that he isn't is obviously a red flag.

What else is going on? Do you have a viable product? Is it not selling? Or is the problem that he says that it's selling but there's no paycheck anyway? Does the product's market make sense to you? How does your product stack up against the competition? In other words: is there any point to sticking around, even ignoring the paycheck issue?

If you have doubts about the company's prospects, and they are being cagey about how things are going, I'd probably leave.

If you think the company has a bright future, then I'd dig deeper into the paycheck issue, maybe asking the founder why he's being so secretive. Have with him the conversation you're starting here. (Him thinking you are about to leave might not be such a bad idea. Hard to imagine that would be a surprise.)

> What else is going on? 1) The founder said he's raising money. 2) Cable was cut a few times. 3) Amazon server bills were not being paid since 5 months ago and they did suspend us a few times. 4) The company initially had around 15 people. Today, there's only 3.

Do you have a viable product? 1) We do not have a viable product yet. It's more like a prototype. The founder is very focused on building a lot of nice looking features. The product is not lean, in my perspective. We are more like building five products.

>Does the product's market make sense to you? Yes it does.

>How does your product stack up against the competition? Personally, I believe in the product, but we never really spent a lot of time testing the market.

>If you think the company has a bright future, then I'd dig deeper into the paycheck issue, maybe asking the founder why he's being so secretive. I will definitely try to have another conversation with him.

You are one of 3 employees, building 5 products, and the founder is not being completely transparent?

I'd first ask the founder to be frank and open about what's truly going on. If that succeeds, I'd then change the focus to less products. If you can't get both those things to happen, I'd suggest leaving.

So the market makes sense to you, but the product is not focused?

What about equity? You should know exactly how much you have, and this should be backed up by documents stating how many shares are outstanding, what options you have, vesting schedule, etc.

Asking employees to work without pay is unheard of. It's almost invariably an admission of failure.

The company and your boss has lost all credibility and trust with you.

They are hiding from you, and not disclosing to you your situation and their situation. This is absolutely unworkable and unacceptable.

I am assuming you are in the United States.

Arrive early at the office and clear out any valuables and documents and personal items that belong to you, as well as documents showing that you are owed wages.

Before going to work write down the facts of your situation, for future reference.

Inquire in person with your supervisor as to whether you will be paid that day, and if not, whether you are being dismissed. If you are not being dismissed, inquire as to how you will work if you are not paid according to the laws of your state.

Assuming you are not paid, and not dismissed, and no agreement has been made to issue you a promise to pay you signed by an officer of the corporation, work until the end of the work day, through the regulatory period the company is required to act to pay you.

Following the failure to pay you at the end of the statutory day, demand that they pay you verbally, and in writing for all wages that are due to you, including vacation time and other benefits due to you.

Indicate in your verbal statement and your letter that the company has failed in its obligations. Indicate that your letter is being copied and sent to the appropriate wages and labor regulatory authority as a demand for pay. Indicate you interpret the actions of the company as a layoff.

Most states have a labor and wages regulatory department.

Example:

California Department of Industrial relations. How to file a wage claim.

http://www.dir.ca.gov/dlse/howtofilewageclaim.htm

In New York, there are both civil and criminal penalties for failure to pay wages. In some jurisdictions, the officers of a company are double or triply liable for failure to pay wages.

Indicate at the end of the day that you interpret the failure to be paid as a layoff. File a claim against the company for failure to follow the law and pay wages.

Find a new job.

Thanks a lot for your detailed response. I really appreciate it.

I would definitely hope the situation is better. In fact, we had not even been given pay stubs for over half a year. My coworkers and I had asked individually and we never got them.

Ignore what geophile says above about being focused on pay. Not getting paid is a big deal and you should work it until it is resolved to your satisfaction. This is business, not charity. You work and are paid for that work. Period.

Go in tomorrow and ask for two things: 1. a summary of all your checks and withholdings since you started, and 2. your last check. If you fail to get either announce you are leaving on paid vacation (assuming you have some banked) and not returning until you receive your check. The no pay stub thing could be a red flag as well - I've heard of several companies who stopped paying taxes to stretch out the cash.

> Find a new job.

Start looking dude. It's time to make a choice for yourself.

Thanks for your input! The paid vacation is definitely a good plan.

> had not even been given pay stubs for over half a year

In most states, that's actually illegal. Employer is required by law to give you pay stubs.

Did they issue you a W-2 wages summary last year?

There is reason to doubt that they are even paying the payroll taxes to the state and federal tax authorities, that they should be withholding, if they are not issuing a proper pay stub.

Indicate you are also reporting the failure to disclose the withheld taxes to the state wage and labor department too. This is illegal, to not give you a pay stub.

This kind of behavior taking advantage of employees is the reason there are laws against it, and the reason there are unions.

File today for unemployment compensation.

Check the online corporations filings for the company with your state's secretary of state. See if the corporation is in good standing, and who the officers of record are of the corporation, and the official address of the entity.

Find a new job. The ship is sinking.

Every failing start-up dies the same, predictable death:

Money starts to run out and there is no cash flow. The first things that the company stops paying for are ... health insurance, taxes and unemployment insurance (you may not care, but this is important to you after you get laid off). Really crooked companies will also quietly steal your 401k contributions. Company perks also disappear.

Any external financial accounting agency is fired and not replaced.

Next, the company will stop paying vendors, and if they are a financial middle man to other companies, they will keep those monies as well.

Amazingly, a start-up can stay afloat for 1 year or longer by employing these tactics.

Next, the cash crunch hits harder. Paychecks are delayed, and a short time later, paychecks are issued on-time, but bounce when you try to deposit them. There are some tactics that you can use to make sure your paycheck clears before your coworkers' do, but I won't get into those details. As some money comes in the door, preferred/mission critical employees are paid while others are not. You might be asked to pay for things on your credit card that are actually company expenses, with the promise that you will be reimbursed.

All the while, your CEO will promise paychecks in a day or two, over and over again. You will go along with this because it's kind of a new and exciting thing to happen to you. It's also fun to meet your coworkers for happy hour and gossip about the situation.

Some people will start to quit and find new jobs. The CEO secretly breathes a sigh of relief because .. he/she won't have to be on the hook for unemployment insurance for that employee.

Eventually, the company collapses under financial pressure from creditors and investors. It's ugly and everyone gets laid off without receiving their last few paychecks. So, the next day, you go online and file for unemployment benefits. A few days later you get something in the mail saying that your unemployment benefits were denied.

After spending a couple of weeks proving that you were an employee by showing all of your pay stubs (which, by the way, it looks like you don't even have those!), you find out that since your company wasn't paying for unemployment insurance, the unemployment office is unable to pay you. You think this is crazy, because it's a government agency, but you are screwed. The local government starts going after your ex-company and its leadership, by threatening them with legal action and jail time. However, there is no money left in the company now, and you find out that the leadership weren't official employees of the company, only contractors. Maybe you'll get unemployment money in the future, but you'll likely find a new job before then.

You and your other laid-off coworkers hire a lawyer to try to recoup your last few paychecks. By this time, the company is totally dissolved. Not that there was any money left in the first place.

TL;DR: Your company is dying and you should leave now while you're only 1 paycheck behind.

>The first things that the company stops paying for are ... health insurance, taxes and unemployment insurance (you may not care, but this is important to you after you get laid off).

My health insurance actually stopped a few months ago. I discovered it while I was in the dentist.

> Paychecks are delayed, and a short time later, paychecks are issued on-time, but bounce when you try to deposit them.

This is exactly what happened.

> You might be asked to pay for things on your credit card that are actually company expenses

I first felt very weird when my boss was unable to provide a company credit card for me to test our own credit card processor. He asked me to use mine.

What you said in the last few paragraphs is definitely a wake up call for me. I am very surprised this is actually what's happening to me at the moment.

Thanks a lot for your insight!

I am very surprised this is actually what's happening to me at the moment.

Keep your chin up, because it's not the end of the world. No one is immune to riding out a failing start-up; I've seen really bright and highly qualified engineers, who have just relocated their families to a new city, fall victim to a failing start-up. You have very marketable skills and will be able to find a new job faster than most people in other industries. Your CEO will beg you not to leave, and will have other employees guilt-trip you, but you need to figure out how long you want to go unpaid before leaving and stick to that threshold.

The funny thing is that you may find yourself in this same situation with another company in the future. It's a common game that start-up CEOs play and the faster you catch on for next time, the more control you have over the continuity of your employment and income. I.e. don't be afraid to cash your last paycheck and quit the very next day, without 2 weeks notice.

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