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Yes, you and your sibling threads are all correct, but it's not extortion. It's immoral and will certainly hurt them in the future, but it's not extortion. I a

Yes, you and your sibling threads are all correct, but it's not extortion. It's immoral and will certainly hurt them in the future, but it's not extortion. I am simply trying to explain why this is a moral issue and not a legal issue. This is the equivalent of saying: 'your gonna have to take a pay cut or were gonna have to let you go'. It is morally repugnant and goes against everything we believe in the startup community, but it is not illegal, nor should it be.

rhizome 15y ago
You don't know whether or not it's a legal issue.
- Androsynth 15y ago
  I am saying it shouldn't be a legal issue. It is the equivalent of saying 'you need to take a cut in pay or you will be laid off'.
  - _delirium 15y ago
    If we're talking about what should be illegal, I find it hard to argue that it shouldn't be. If you hire someone on the promise that they'll get a bonus at 5 years, and purposely fire them at 4 years, 11 months solely to avoid paying them the bonus, that should be illegal. In any reasonable interpretation of the contract, that isn't good-faith upholding of the contract--- you promised them something at certain milestones, and then purposely acted in a manner intended for the sole purpose of sabotaging the milestones, which is acting in bad faith. In most other kinds of contingent pay that's tortious: if you promise a building contractor contingency bonuses upon meeting certain deadlines, and then you purposely interfere to make them miss the deadlines so you can get the work cheaper (and admit doing so!), you're probably acting illegally. Heck, even basketball players have sued over instances where a team kept them out of a few games solely to cause them to miss performance targets.
    - ericd 15y ago
      I disagree, what you describe is shady, but also pretty unrealistic. Normally there's a vesting schedule with only a 1 year cliff, and then chunks vest yearly. That's essentially pro-rata.
      - rdl 15y ago
        The standard is to have a 1 year cliff (i.e. 25% of equity vest at 1 year), and then monthly vesting of the remainder (1/36 per month for the next 36 months). NOT yearly vesting after the first year. The exception is M&A earn out or vesting for key hires, which is often yearly, and sometimes even crazier; 1/2/3/4 where it's 10% the first year, 20% the second, 30% the third, and 40% the fourth.
        ericd 15y ago
        Oops, sorry, yeah, you're right - it is normally monthly. That latter vesting is pretty crazy - with each year, each point is usually getting nonlinearly more valuable as well.
      - kls 15y ago
        what you describe is shady Not only is it shady it is a legal term and that term is called bad faith, if you can prove the party acted in bad faith, which if what is being reported about, return it or get fired, then that one is pretty locked up, then they are in violation of the spirit of contract. Faith is one of the foundations of contract law. If you are found to have not honored the faith portion of the contract then more times than not, you will be on the loosing end of a contract dispute.
        ericd 15y ago
        I'm aware of bad faith. I think the fact that it continuously vests after a cliff, that it's clear in basically every options grant that you don't receive unvested options upon termination, and because employment contracts repeatedly emphasize that employment is completely at-will makes it pretty clear that you shouldn't count your unvested option chickens before they hatch, and hard to prove that you could reasonably expect to vest all options. The employees that have been there for multiple years will have already vested a big percentage of their stock regardless of what happens. I think Zynga is repulsive, and will hopefully get punished hard on many fronts for this, but I'm not convinced that what they're doing is strictly illegal. I'm convinced they'll get sued, though.
jellicle 15y ago
No matter how vehemently you keep asserting it, the promise Zynga made has value - or else Zynga wouldn't want to renege on it, duh - and making threats in order to get anyone to give you anything of value is extortion in the common law.
joezydeco 15y ago
Imagine your company gave you a $40,000 bonus. You get 4 checks for $10k each, dated 11-Nov-2012, 2013, 2014, and 2015. If the company is still in business on those dates you can cash the checks. If you leave or quit, you hand back the uncashed checks. Now the company says "give us back 2014 and 2015 or you're fired". What would you say?
- kamaal 15y ago
  Also more importantly they gave a $40,000 bonus as payable in the future because they wanted you to do $40,000 work now but didn't have money to pay you.
  - joezydeco 15y ago
    Yeah, I realized after the fact that the analogy was a little shaky there. It's not just a bonus but deferred compensation. But let's keep it simple for now. Androsynth had a problem trying to understand the idea that these options were granted in lieu of earned pay.
- mjs00 15y ago
  This analogy isn't correct with regard to future periods, vesting is concurrent with your participation (contribution and effort). The trigger for earning the bonus is not if the company is in business that year, but if you were a member of the company and contributed during that period to earn the bonus. The issue at hand is mid-stream renegotiation of the future un-earned bonuses.
rayiner 15y ago
Morality and legality are somewhat intertwined in business law. Every contract contains an implied duty of "good faith and fair dealing." Violations of that duty can result in contract damages. It's not at all clear-cut. See sections 5-6 of this article: http://www.bernabeipllc.com/pdfs/stockoptions.pdf http://www.bernabeipllc.com/pdfs/stockoptions.pdf
einhverfr 15y ago
I agree it is not extortion. Extortion typically requires the threat of unlawful force. If I way "Pay me $100 not to picket your company" and I start lawfully picketing that's not extortion. Otherwise workers strikes would all be illegal. The larger issue though here is that of a contract. The company has in essence said "we want you to stick around and so we are giving you an incentive of stock options which vest on such and such a schedule." Later they are saying "give up what we gave you or leave so we can take them back." It's this choice here which says clearly "we are going back on our contracts with you." A close example might be this "We are giving you a raise and will pay you retro pay next month when this goes through but you have to work fewer hours at your hourly wage" and then the next month saying "sorry, no retro pay for you." I think this would be a fun case. And now that class action cases have taken a few serious setbacks in the courts, it seems to me that Zynga really should be getting sued by lots and lots of employees in individual lawsuits..... One piranha may be good for dinner, but don't wade into a swarm of them.

rhizome 15y ago

You don't know whether or not it's a legal issue.

Androsynth 15y ago
I am saying it shouldn't be a legal issue. It is the equivalent of saying 'you need to take a cut in pay or you will be laid off'.
- _delirium 15y ago
  If we're talking about what should be illegal, I find it hard to argue that it shouldn't be. If you hire someone on the promise that they'll get a bonus at 5 years, and purposely fire them at 4 years, 11 months solely to avoid paying them the bonus, that should be illegal. In any reasonable interpretation of the contract, that isn't good-faith upholding of the contract--- you promised them something at certain milestones, and then purposely acted in a manner intended for the sole purpose of sabotaging the milestones, which is acting in bad faith. In most other kinds of contingent pay that's tortious: if you promise a building contractor contingency bonuses upon meeting certain deadlines, and then you purposely interfere to make them miss the deadlines so you can get the work cheaper (and admit doing so!), you're probably acting illegally. Heck, even basketball players have sued over instances where a team kept them out of a few games solely to cause them to miss performance targets.
  - ericd 15y ago
    I disagree, what you describe is shady, but also pretty unrealistic. Normally there's a vesting schedule with only a 1 year cliff, and then chunks vest yearly. That's essentially pro-rata.
    - rdl 15y ago
      The standard is to have a 1 year cliff (i.e. 25% of equity vest at 1 year), and then monthly vesting of the remainder (1/36 per month for the next 36 months). NOT yearly vesting after the first year. The exception is M&A earn out or vesting for key hires, which is often yearly, and sometimes even crazier; 1/2/3/4 where it's 10% the first year, 20% the second, 30% the third, and 40% the fourth.
      - ericd 15y ago
        Oops, sorry, yeah, you're right - it is normally monthly. That latter vesting is pretty crazy - with each year, each point is usually getting nonlinearly more valuable as well.
    - kls 15y ago
      what you describe is shady Not only is it shady it is a legal term and that term is called bad faith, if you can prove the party acted in bad faith, which if what is being reported about, return it or get fired, then that one is pretty locked up, then they are in violation of the spirit of contract. Faith is one of the foundations of contract law. If you are found to have not honored the faith portion of the contract then more times than not, you will be on the loosing end of a contract dispute.
      - ericd 15y ago
        I'm aware of bad faith. I think the fact that it continuously vests after a cliff, that it's clear in basically every options grant that you don't receive unvested options upon termination, and because employment contracts repeatedly emphasize that employment is completely at-will makes it pretty clear that you shouldn't count your unvested option chickens before they hatch, and hard to prove that you could reasonably expect to vest all options. The employees that have been there for multiple years will have already vested a big percentage of their stock regardless of what happens. I think Zynga is repulsive, and will hopefully get punished hard on many fronts for this, but I'm not convinced that what they're doing is strictly illegal. I'm convinced they'll get sued, though.

jellicle 15y ago

No matter how vehemently you keep asserting it, the promise Zynga made has value - or else Zynga wouldn't want to renege on it, duh - and making threats in order to get anyone to give you anything of value is extortion in the common law.

joezydeco 15y ago

Imagine your company gave you a $40,000 bonus. You get 4 checks for $10k each, dated 11-Nov-2012, 2013, 2014, and 2015. If the company is still in business on those dates you can cash the checks. If you leave or quit, you hand back the uncashed checks. Now the company says "give us back 2014 and 2015 or you're fired". What would you say?

kamaal 15y ago
Also more importantly they gave a $40,000 bonus as payable in the future because they wanted you to do $40,000 work now but didn't have money to pay you.
- joezydeco 15y ago
  Yeah, I realized after the fact that the analogy was a little shaky there. It's not just a bonus but deferred compensation. But let's keep it simple for now. Androsynth had a problem trying to understand the idea that these options were granted in lieu of earned pay.
mjs00 15y ago
This analogy isn't correct with regard to future periods, vesting is concurrent with your participation (contribution and effort). The trigger for earning the bonus is not if the company is in business that year, but if you were a member of the company and contributed during that period to earn the bonus. The issue at hand is mid-stream renegotiation of the future un-earned bonuses.

rayiner 15y ago

Morality and legality are somewhat intertwined in business law. Every contract contains an implied duty of "good faith and fair dealing." Violations of that duty can result in contract damages. It's not at all clear-cut. See sections 5-6 of this article: http://www.bernabeipllc.com/pdfs/stockoptions.pdf http://www.bernabeipllc.com/pdfs/stockoptions.pdf

einhverfr 15y ago

I agree it is not extortion. Extortion typically requires the threat of unlawful force. If I way "Pay me $100 not to picket your company" and I start lawfully picketing that's not extortion. Otherwise workers strikes would all be illegal. The larger issue though here is that of a contract. The company has in essence said "we want you to stick around and so we are giving you an incentive of stock options which vest on such and such a schedule." Later they are saying "give up what we gave you or leave so we can take them back." It's this choice here which says clearly "we are going back on our contracts with you." A close example might be this "We are giving you a raise and will pay you retro pay next month when this goes through but you have to work fewer hours at your hourly wage" and then the next month saying "sorry, no retro pay for you." I think this would be a fun case. And now that class action cases have taken a few serious setbacks in the courts, it seems to me that Zynga really should be getting sued by lots and lots of employees in individual lawsuits..... One piranha may be good for dinner, but don't wade into a swarm of them.