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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?
- danielmarkbruce 3y agoHave you written a polite email to someone in HR and/or the founder asking for them as a step 1? It's very possible they are just disorganized.
- skinsfan687 3y agothere's no one left in HR but will reach out to the founder based on the feedback. thanks!
- lathiat 3y agoThis kind of thing is generally both country and state specific. It’s likely the relevant state regulator would have some info on this on their website.
- Animats 3y ago> This kind of thing is generally both country and state specific. Very. It ranges from "you're a creditor in the bankruptcy" to "CEO, you're under arrest".
- deleted 3y ago[deleted]
- JStanton617 3y agoPayroll is one of the very few (only?) things that "pierces the corporate veil" - that is, the principals / board members are personally liable even in the event of corporate bankruptcy. 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.
- itsthecourier 3y agoI don't think there is something like good faith and failing to pay payroll. As an entrepreneur I have failed before and never have I considered payroll money as something I can use for other purposes. 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.
- H8crilA 3y agoI doubt you can go to jail for failing to pay money to another person or entity, except in very specific cases.
- mastazi 3y agoOP could be in a country that has robust labour protection laws where that could be the case. If OP is in the US then you're probably right.
- flangola7 3y agoIn many jurisdictions failure to pay wages is criminal theft. If someone takes money out of my wallet without my consent, that's theft. The fact that it was stolen before it even made it into my wallet doesn't make it not stealing.
- elefanten 3y agoThey absolutely shouldn’t “take the loss on this one”, what kind of an asinine comment is that? 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.
- paulajohnson 3y agoI think the parent comment is about the likelihood of recovering enough money to make the exercise worthwhile, rather than the propriety of getting ripped off.
- laccount2 3y ago[dead]
- startlaunch 3y ago[flagged]
- arp242 3y agohttps://news.ycombinator.com/item?id=33945628 https://news.ycombinator.com/item?id=33945628
- aobdev 3y agoChatGPT is not a lawyer and this is not good advice. Generally threatening to sue will almost never serve your interests.
- startlaunch 3y agoI hate to tell ya, but most lawyers will be using GPT in the near future, if not already.
- JosephRedfern 3y agoYou can put whatever you like into ChatGPT and get _something_ out, but that doesn't mean it's accurate or good advice. 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.
- aobdev 3y agoGenerating a demand letter and being a lawyer are not the same. Thinking they are is exactly why the parent comment is bad advice.
- howard941 3y agoI'd hazard a guess that if the OP ran the ChatGPT dunning letter by a lawyer s/he'd point out a handful of issues with it. The ChatGPT letter might best be used to brief the situation with the OP's lawyer but not actually sent to the former employer.
- jf93ap29sh 3y agoThere's 2 things to consider: 1) Do you want to pursue legally -now- ? It will take time and money, if you are without a salary, balance the effort required versus prioritizing finding another job. You can always get a new job first, and only then explore if you can recoup the money 2) As lathiat said, the legal options are context dependent, factors are: where you live, where the company is registered and operating, etc.
- ghaff 3y agoThings got a bit sketchy for me a couple of times with bounced checks and unpaid checks (due to confusion because everything was falling apart). I was eventually paid but there were probably some bounced check charges in one case. Mostly if everything seems in good faith, I'd probably try to collect and, if you're ghosted, probably chalk it up to not getting blood from a rock and move on. My guess is you'd put a lot of energy in and get nothing.
- deleted 3y ago[deleted]
- itsthecourier 3y agoOnce I had a bastard trying to get away with my salary after quitting the company. Contact a lawyer, this is super easy to win.
- lisasays 3y agoDo I have any legal avenues to recoup these missed payments? 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.
- neilv 3y agoIf employer doesn't come through promptly, and money is tight, a local legal clinic might help.
- Laaas 3y ago> more formal-sounding letters 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.
- jstanley 3y agoWriting a first draft yourself and then asking ChatGPT "please rewrite this text to sound more like a lawyer wrote it" might work quite well.
- lisasays 3y ago"Pretending to be a lawyer" was Step 1. If that doesn't do the trick (and you don't want to wait indefinitely) - it generally pays to get a lawyer.
- jcranmer 3y agoDemand letters can have legal repercussions, for example, resetting the clock on how long they have to try to pay up before you can initiate legal action to recover money. (And the precise repercussions are highly dependent on whose law applies!)
- vegancap 3y agoGoing through something similar now, all my bills and direct debits bounced today because I wasn't paid and my reminder message was ignored. I guess it's always a risk. I have no legal recourse because I didn't have a contract (was told it was going to be sent over to me, but never was, which seems intentional now come to think of it...). 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.
- jcranmer 3y ago> I have no legal recourse because I didn't have a contract 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.
- vegancap 3y agoI can certainly prove I did a whole bunch of work for a fairly lengthy period, so could be something worth me exploring. Thanks for that! Was about to just write it off
- orra 3y agoHad they paid your previously, just failing to pay this time? In that case it will be quite easy to demonstrate what you're owed. But yes, the other user was absolutely right: just because a contract isn't written, doesn't mean it's not a contract.
- vegancap 3y agoIt's been late several times, and I've had to remind and pester. I started working with them full-time in December, they pay every two weeks, the mid-week payment has been late a few times. But I said 'this is now my full time wage, so I need to be paid before the 1st because of bills'. So there was never an issue with that one until this month. I sent a reminder the day before, which was ignored. Then, as warned, all my bills bounced. Three days into the month and nothing still. 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.
- yousifa 3y agoIf the startup has failed, it is highly unlikely that you would be able to get any $ from them. Even if you go after the founders personally, they likely don't have any cash and it will be a waste of time. If the company is still operating and has cash in the bank, 1000% you should go after them -- payroll is the first thing on the preference stack that gets paid when shutting down.
- pjdemers 3y agoI don't know other states, but in California, managers are personally liable for paying their employees. The penalties are steep. If the company doesn't pay you, anyone who knew that employees were working without the company's ability to pay them has committed a felony and either must pay back wages or will go to prison. You will get paid. I've had managers tell me the company was broke, and to go home right now, then quit themselves right there.
- dumbfounder 3y agoThe name implies you are in the DC area, is that right? The lack of clarity on this makes it tough for anyone to really give pointed advice. Is this for severance? Did they fail to pay you before they laid you off? Did you talk to anyone at the company? What did they say? How long has it been? Is it possible it's a mistake? Has this happened to others that were laid off? Of course you have legal avenues, but more info is needed to give proper advice.
- DyslexicAtheist 3y ago> The name implies you are in the DC area, ... skins fan might refer to this show https://www.imdb.com/title/tt0840196/ 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.
- skinsfan687 3y agoThanks for the response. Yes, I am located in Washington DC, but was working remotely for a company based in Kentucky. 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.
- dumbfounder 3y ago
- issa 3y agoIt's really hard to "accidentally" not make payroll. This shouldn't be something that sneaks up on you. If you feel the founder deserves the benefit of the doubt, I would suggest reaching out to them first before doing anything else. But if that doesn't work it's really just a question of what you want out of the situation. You will probably never see the money regardless (lawyer/court costs, squeezing blood from a stone, etc) but it might be worth it to you to make the (very valid) point anyway.
- DyslexicAtheist 3y agoi know an infinite number of people who got stiffed and have myself been on the receiving end plenty times. this isn't an accident it's the norm wit coked-up "fake it till you make it" start-up culture. 99% of the industry is toxic and it's not just entrepreneurs that fail but everyone who drank the cool aid ;)
- icedchai 3y agoIn over 20 years, I only ran into this with one startup. The founder ran out of money... twice. He was a nice guy so I gave him the benefit of the doubt this wouldn't happen again. Big mistake. It did... a few short months later. 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.
- anonlamb 3y ago[dead]
- icedchai 3y agoDo you have any of the investors emails? Email the founder, CC the investors, quoting your various state labor laws. Founders love it when employees go around them and talk to their investors directly. /s
- throw2awaymay 3y ago[dead]
- toast0 3y agoAny chance you were in an employee leasing/Professional Employer Organization arrangment? Trinet, Justwork, ADP TotalSource, etc. 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.