4 ms·

Ask HN: Forced repayment of wages. Just common startup stuff?

Not interested in making this personal, so going to just state facts instead of sharing an interesting story. For 3 months, I worked for free on coding a project for a social scientist academic. I got asked to work "full-time" by the academic. No papers were signed other than an NDA (the company's changed product and names twice since then). I would get a below minimum wage monthly personal check from the academic and told I would not need to pay any taxes on it. One year later, the company gets VC funding from a tech investor who had been giving the academic money to start a company. Fast forward 8 months, even though I was not a cofounder, I am told "we" (academic and I) need to pay back the loan and I need to sign an agreement that I will repay that loan from the company to me (in even more than the amount I had been paid in the previous year). I would have to pay interest on it each year for the next 4 years and then the full amount. Academic tells me that I will get paid the interest amount by the company in the form of a bonus. Also, the loan would be canceled, but they weren't allowed to put that in writing. I ask a senior manager what this is all about, and they say it's just common startup stuff. I left the company (not because of this, but related). Unfortunately, they are still expecting me to pay, and also say they have no way to pay me anymore since I am not on payroll. I obviously don't want to pay back wages I was paid. I also just want to be done with this situation asap and would appreciate any advice that moved me closer to not having anything to do with this company. I also don't want to spend money on a lawyer just to not have to pay back my wages. Please let me know what you think I should do.

tlb 8y ago
Certainly not common startup stuff -- it all sounds very strange and sketchy. You should talk to a lawyer at a firm that knows startups. In the Bay Area, Wilson Sonsini or Orrick are good.
itronitron 8y ago
Do not sign anything, do not pay anything. I recommend writing up a detailed account of your interactions with the academic and just stashing it away somewhere so that you have a record of known facts for future reference.
- treehouseman 8y ago
  This. Document everything. Don't add new things to the discussion by continuing to talk. Say everything has to be reviewed by your lawyer. Don't answer the phone. Get everything in writing.
greenyoda 8y ago
Since you didn't say where you're located, I'll assume you're in the U.S. If not, laws are different. > No papers were signed other than an NDA. ... I would get a below minimum wage monthly personal check from the academic and told I would not need to pay any taxes on it. Being paid less than minimum wage? Illegal, unless you're legally an intern (and the work is not of benefit to the employer). Not having taxes withheld? Probably very illegal. Even if you don't owe any income tax, you're going to owe the IRS Social Security and other payroll taxes (plus interest and penalties). > Fast forward 8 months, even though I was not a cofounder, I am told "we" (academic and I) need to pay back the loan and I need to sign an agreement that I will repay that loan from the company to me. If you didn't sign any contracts, there is no "we" here. You're probably regarded as a regular employee under federal and state employment law, and any kind of demand for retroactive repayment of wages that you have already earned is illegal. Do not sign anything! You should definitely talk to a lawyer who practices employment law before agreeing to anything, or even talking to the academic again.
- paulcole 8y ago
  > Being paid less than minimum wage? Illegal, unless you're legally an intern (and the work is not of benefit to the employer). Are you sure about this? "If you are an independent contractor as opposed to an employee, then you are not covered by minimum wage laws." Source: http://nolo.com/legal-encyclopedia/right-minimum-w… http://nolo.com/legal-encyclopedia/right-minimum-w…
  - greenyoda 8y ago
    Since he was working full-time for this company on their core business area and not working for anyone else, it sounds like the IRS might want to classify him as an employee and not a contractor. Also, there was no contract defining his relationship either as a contractor or a business partner. See: https://www.irs.gov/newsroom/understanding-employee-vs-contractor-designation https://www.irs.gov/newsroom/understanding-employee-vs-contr...
hguhghuff 8y ago
This raises too many questions to give a meaningful answer here on HN. But if you want a quick opinion.... sue them for underpaying you and report it to the tax department and demand full pay for the work you did and also point out to them that you own the intellectual property rights of all the work you did and threaten to sue them if they don’t pay you for it. Just throw it to a lawyer.
psyklic 8y ago
I recall when I worked on projects for free and was more timid. Just for perspective: First, even though you worked for free, recognize that your work very possibly had great value to this company. Even if you feel you were a beginner or that your code was not well written, very possibly your work was much more valuable than you thought at the time. Second, based on your description, remember that this is very likely not your fault. So, you shouldn't feel like you're imposing or being unreasonable by insisting on fixing things in a correct fashion that is amicable to everyone. Third, keep in mind that the academic's company is likely much more eager than you to resolve this issue. As just one example, it sounds like you may still own the copyright to your code. If so, they may want to purchase the copyright from you. Finally, do not be concerned about talking with an employment lawyer. A lawyer will very likely give you a free consultation. I am sure the business is looking at this from a legal perspective, so it would help you to see it from that perspective too. The lawyer may even accept your case on contingency, where they are only paid if you are. So, I strongly suggest talking with a lawyer soon before talking with the company further.
- w8GHxRLeeJRp9Xc 8y ago
  Thank you. You're spot on.
mabynogy 8y ago
Looks like a scam. Big red flag for me. I'd do nothing except leave that company.
- treehouseman 8y ago
  I agree. The academic is in too deep and looking to spread the liability around. Best to just say you are talking to your lawyer and never respond again (lest the academic try to find new "academic" ways to blame others). Also: academics are generally not business people, nor are they generally lawyers. Something to consider.
mchannon 8y ago
Everyone's telling you to involve a lawyer. You've stated you don't want to involve a lawyer, so assuming that you're putting your foot down, here's what I'd do (other than involving a lawyer): Put together a letter that succinctly lists the following points: • You have not agreed to any loan • You are aware that you have been illegally underpaid, and your former employer is liable for back pay, benefits, and taxes • You have intellectual property rights to the code you produced and reserve the right to exercise those rights • You would like to consider the matter closed but if they want to persist in harassing you, you will use all legal means at your disposal to get them to stop Mail copies to all individuals involved, and do it so that everybody sees everybody involved. cc'ing a private attorney is free, though as a courtesy, you might want to consult with one prior (many will initially consult for free) and ask if they'd mind. Assuming you're US based, you can also file a complaint with your state's wage and franchise tax board or equivalent. The complaint is free, will get the desired results in the long term, but if you never had taxes paid on that income, the state may "borrow" some of it from your bank account or tax refund until things get worked out. Sucks but it sounds like a relatively small amount of money. You can also take them to small claims court to get some back pay. This needn't involve an attorney, and while I realize your goal isn't squeezing more money out of these people, it might shut them up or get them in so much more trouble that a lawyer would be more likely to take your case on contingency (you pay nothing directly). Stick with option A for now, since it's cheap and probably effective.
- tudelo 8y ago
  > • You have intellectual property rights to the code you produced and reserve the right to exercise those rights Is that true?
  - b_t_s 8y ago
    Depends on whether it's work for hire.....but if there's no contract and they're trying to claw back his paychecks then they're the ones trying to prove that it's _not_ work for hire, which would also prove that he owns the code.
treehouseman 8y ago
Do not sign anything. Tell them that you are having this reviewed by your lawyer (even if that is not true). Drag it out as long as possible until they just give up. You are not liable for any of this shit. If you feel like you want to claim ownership of your IP then call a lawyer and decide on what to threaten-than-sue them with.
b_t_s 8y ago
Call the VC and tell him you're the guy who owns the IP to his startup and that you see 3 paths forward. Offer to sign the IP over to him for market rate.($100 an hour times approximate number of hours you worked there). Or he can just call his goons off and leave the IP question fuzzy. Or he can keep harassing you and you can report his company for paying below minimum wage, tax evasion, and fraud, and you can assert your IP rights on the code you wrote. His call. Better yet, get a lawyer to make the call. Mr VC will probably just buzz off, but you may be pleasantly surprised to get a (well deserved) check for 50 grand if the startup is not a lost cause.
- karmajunkie 8y ago
  I don't know if I'd be that aggressive about it, but parent is correct that you likely own the IP. An NDA is not a consulting agreement, and it would be very unusual for an NDA to assign copyright or declare work product to be a work-for-hire. This gives you a lot of leverage. They want you to give something back because they think you have nothing to take back from them. What you have is way more valuable than the back wages (which are very likely in violation of federal employment law as you've described your situation.) Seriously, talk to a lawyer. Best money you'll ever spend.
sloaken 8y ago
I gree with a prior poster that if this is US then they are in trouble with the government. I suspect this 'Loan' is a way to keep them out of jail. Loans to have to have interest charge. To remedy the situation, agree to sign the loan when you get an offer for employment that includes a signing bonus, that FAR exceeds the loan amount.
w8GHxRLeeJRp9Xc 8y ago
First, thanks for all the great advice. Very relieved to know that I'll be on the hook for at most some taxes on a really low salary. To clear up uncertainty: - This is in California. - Pretty sure I signed over IP in the term sheet when the VC deal became official. - In the month before VC investment, someone else did write code with me: a lot of infra work and the push notification code. - It was a $several MM round but the company hasn't made much progress since then, so don't know how much value the company still has. - To add to the fraud, the academic also rigged a study at a top university that the product bases its efficacy on.
wglb 8y ago
So by not engaging an attorney, you are soliciting legal advice from non-attorneys. Consider the possibility that the others will engage an attorney to represent their interests. You need a strong advocate to ensure that you are not run over by them.
s73v3r_ 8y ago
By not engaging a lawyer and suing these people, you are enabling them, and allowing them to do it to someone else.

tlb 8y ago

Certainly not common startup stuff -- it all sounds very strange and sketchy. You should talk to a lawyer at a firm that knows startups. In the Bay Area, Wilson Sonsini or Orrick are good.

itronitron 8y ago

Do not sign anything, do not pay anything. I recommend writing up a detailed account of your interactions with the academic and just stashing it away somewhere so that you have a record of known facts for future reference.

treehouseman 8y ago
This. Document everything. Don't add new things to the discussion by continuing to talk. Say everything has to be reviewed by your lawyer. Don't answer the phone. Get everything in writing.

greenyoda 8y ago

Since you didn't say where you're located, I'll assume you're in the U.S. If not, laws are different. > No papers were signed other than an NDA. ... I would get a below minimum wage monthly personal check from the academic and told I would not need to pay any taxes on it. Being paid less than minimum wage? Illegal, unless you're legally an intern (and the work is not of benefit to the employer). Not having taxes withheld? Probably very illegal. Even if you don't owe any income tax, you're going to owe the IRS Social Security and other payroll taxes (plus interest and penalties). > Fast forward 8 months, even though I was not a cofounder, I am told "we" (academic and I) need to pay back the loan and I need to sign an agreement that I will repay that loan from the company to me. If you didn't sign any contracts, there is no "we" here. You're probably regarded as a regular employee under federal and state employment law, and any kind of demand for retroactive repayment of wages that you have already earned is illegal. Do not sign anything! You should definitely talk to a lawyer who practices employment law before agreeing to anything, or even talking to the academic again.

paulcole 8y ago
> Being paid less than minimum wage? Illegal, unless you're legally an intern (and the work is not of benefit to the employer). Are you sure about this? "If you are an independent contractor as opposed to an employee, then you are not covered by minimum wage laws." Source: http://nolo.com/legal-encyclopedia/right-minimum-w… http://nolo.com/legal-encyclopedia/right-minimum-w…
- greenyoda 8y ago
  Since he was working full-time for this company on their core business area and not working for anyone else, it sounds like the IRS might want to classify him as an employee and not a contractor. Also, there was no contract defining his relationship either as a contractor or a business partner. See: https://www.irs.gov/newsroom/understanding-employee-vs-contractor-designation https://www.irs.gov/newsroom/understanding-employee-vs-contr...

hguhghuff 8y ago

This raises too many questions to give a meaningful answer here on HN. But if you want a quick opinion.... sue them for underpaying you and report it to the tax department and demand full pay for the work you did and also point out to them that you own the intellectual property rights of all the work you did and threaten to sue them if they don’t pay you for it. Just throw it to a lawyer.

psyklic 8y ago

I recall when I worked on projects for free and was more timid. Just for perspective: First, even though you worked for free, recognize that your work very possibly had great value to this company. Even if you feel you were a beginner or that your code was not well written, very possibly your work was much more valuable than you thought at the time. Second, based on your description, remember that this is very likely not your fault. So, you shouldn't feel like you're imposing or being unreasonable by insisting on fixing things in a correct fashion that is amicable to everyone. Third, keep in mind that the academic's company is likely much more eager than you to resolve this issue. As just one example, it sounds like you may still own the copyright to your code. If so, they may want to purchase the copyright from you. Finally, do not be concerned about talking with an employment lawyer. A lawyer will very likely give you a free consultation. I am sure the business is looking at this from a legal perspective, so it would help you to see it from that perspective too. The lawyer may even accept your case on contingency, where they are only paid if you are. So, I strongly suggest talking with a lawyer soon before talking with the company further.

w8GHxRLeeJRp9Xc 8y ago
Thank you. You're spot on.

mabynogy 8y ago

Looks like a scam. Big red flag for me. I'd do nothing except leave that company.

treehouseman 8y ago
I agree. The academic is in too deep and looking to spread the liability around. Best to just say you are talking to your lawyer and never respond again (lest the academic try to find new "academic" ways to blame others). Also: academics are generally not business people, nor are they generally lawyers. Something to consider.

mchannon 8y ago

Everyone's telling you to involve a lawyer. You've stated you don't want to involve a lawyer, so assuming that you're putting your foot down, here's what I'd do (other than involving a lawyer): Put together a letter that succinctly lists the following points: • You have not agreed to any loan • You are aware that you have been illegally underpaid, and your former employer is liable for back pay, benefits, and taxes • You have intellectual property rights to the code you produced and reserve the right to exercise those rights • You would like to consider the matter closed but if they want to persist in harassing you, you will use all legal means at your disposal to get them to stop Mail copies to all individuals involved, and do it so that everybody sees everybody involved. cc'ing a private attorney is free, though as a courtesy, you might want to consult with one prior (many will initially consult for free) and ask if they'd mind. Assuming you're US based, you can also file a complaint with your state's wage and franchise tax board or equivalent. The complaint is free, will get the desired results in the long term, but if you never had taxes paid on that income, the state may "borrow" some of it from your bank account or tax refund until things get worked out. Sucks but it sounds like a relatively small amount of money. You can also take them to small claims court to get some back pay. This needn't involve an attorney, and while I realize your goal isn't squeezing more money out of these people, it might shut them up or get them in so much more trouble that a lawyer would be more likely to take your case on contingency (you pay nothing directly). Stick with option A for now, since it's cheap and probably effective.

tudelo 8y ago
> • You have intellectual property rights to the code you produced and reserve the right to exercise those rights Is that true?
- b_t_s 8y ago
  Depends on whether it's work for hire.....but if there's no contract and they're trying to claw back his paychecks then they're the ones trying to prove that it's _not_ work for hire, which would also prove that he owns the code.

treehouseman 8y ago

Do not sign anything. Tell them that you are having this reviewed by your lawyer (even if that is not true). Drag it out as long as possible until they just give up. You are not liable for any of this shit. If you feel like you want to claim ownership of your IP then call a lawyer and decide on what to threaten-than-sue them with.

b_t_s 8y ago

Call the VC and tell him you're the guy who owns the IP to his startup and that you see 3 paths forward. Offer to sign the IP over to him for market rate.($100 an hour times approximate number of hours you worked there). Or he can just call his goons off and leave the IP question fuzzy. Or he can keep harassing you and you can report his company for paying below minimum wage, tax evasion, and fraud, and you can assert your IP rights on the code you wrote. His call. Better yet, get a lawyer to make the call. Mr VC will probably just buzz off, but you may be pleasantly surprised to get a (well deserved) check for 50 grand if the startup is not a lost cause.

karmajunkie 8y ago
I don't know if I'd be that aggressive about it, but parent is correct that you likely own the IP. An NDA is not a consulting agreement, and it would be very unusual for an NDA to assign copyright or declare work product to be a work-for-hire. This gives you a lot of leverage. They want you to give something back because they think you have nothing to take back from them. What you have is way more valuable than the back wages (which are very likely in violation of federal employment law as you've described your situation.) Seriously, talk to a lawyer. Best money you'll ever spend.

sloaken 8y ago

I gree with a prior poster that if this is US then they are in trouble with the government. I suspect this 'Loan' is a way to keep them out of jail. Loans to have to have interest charge. To remedy the situation, agree to sign the loan when you get an offer for employment that includes a signing bonus, that FAR exceeds the loan amount.

w8GHxRLeeJRp9Xc 8y ago

First, thanks for all the great advice. Very relieved to know that I'll be on the hook for at most some taxes on a really low salary. To clear up uncertainty: - This is in California. - Pretty sure I signed over IP in the term sheet when the VC deal became official. - In the month before VC investment, someone else did write code with me: a lot of infra work and the push notification code. - It was a $several MM round but the company hasn't made much progress since then, so don't know how much value the company still has. - To add to the fraud, the academic also rigged a study at a top university that the product bases its efficacy on.

wglb 8y ago

So by not engaging an attorney, you are soliciting legal advice from non-attorneys. Consider the possibility that the others will engage an attorney to represent their interests. You need a strong advocate to ensure that you are not run over by them.

s73v3r_ 8y ago

By not engaging a lawyer and suing these people, you are enabling them, and allowing them to do it to someone else.