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Payroll 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 even

Payroll 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 ago
I 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 ago
  I doubt you can go to jail for failing to pay money to another person or entity, except in very specific cases.
  - mastazi 3y ago
    OP 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 ago
    In 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 ago
They 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 ago
  I 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.
- DiggyJohnson 3y ago
  The tone of this comment is completely out of line. We probably disagree on many things, yet your comment makes sense to me. So does the comment you're replying to. It's not clear it's asinine: the cost of trying to recoup money from an entity that is completely out of money can very easily become not worth it.
  - elefanten 3y ago
    The comment I replied to said OP should take the loss if they think the failure is “in good faith”. This implies that OP should give up what they’re owed to take pity on the failed business’ owners. That would be giving the owners a pass on the risk that should be inherent in starting a business venture at the expense of OP’s already-delivered labor. I stand by my tone. That kind of risk shuffling is cancer to the whole realm of private ventures and contributes to general distrust of business as a means of organizing and motivating collective human action.
    - maerF0x0 3y ago
      One thing to consider is that Startups, Tech, the bay area, and life in general is a very small world. You'd be surprised how some good faith spread around becomes a nepotistic interview invite a few years later.
HWR_14 3y ago
Payroll piercing the corporate veil must be a state-specific law.
cogitoergofutuo 3y ago
> If you think the folding of the company is in good faith, you might just want to take the loss on this one. This is astonishingly bad advice! It is the fundamental opposite of what you should do in this situation! If you work for someone, you deserve to be paid for your work. Full stop. There are state agencies to assist with this exact situation that are funded by your tax dollars, avail yourself to them! What you think happened to the company is immaterial. I am genuinely baffled by the phrase “folding of the company in good faith” as I can’t imagine a good faith reason to tell people to work for free based on how your feelings align in relation to a business entity. The only people that would benefit from this becoming the norm would be con artist founders that are working to perfect an “Aww shucks, payroll is sooo hard for a smol bean like me!” excuse for getting folks to work for free. I would also not work for anyone that would even slightly agree with this advice.
- awaythrow98765 3y ago
  Actually, there is no "folding in good faith" in such like cases. A company is bankrupt if a point in time can be foreseen, where the company can no longer pay its debtors (employees here are debtors, sometimes even a higher-priority class of such). And while one can argue about the "foreseen" part, e.g. by saying "I did reasonably expect that incoming payment to arrive, which didn't". As soon as you were unable to pay a debt once, or like here even twice, you are actually too late in declaring your bankruptcy. Which, in most jurisdictions, is a crime. And it certainly is in bad faith. If the company isn't actually bankrupt, could pay but won't, then it is also an act of bad faith.

itsthecourier 3y ago

I 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 ago
I doubt you can go to jail for failing to pay money to another person or entity, except in very specific cases.
- mastazi 3y ago
  OP 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 ago
  In 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 ago

They 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 ago
I 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.
DiggyJohnson 3y ago
The tone of this comment is completely out of line. We probably disagree on many things, yet your comment makes sense to me. So does the comment you're replying to. It's not clear it's asinine: the cost of trying to recoup money from an entity that is completely out of money can very easily become not worth it.
- elefanten 3y ago
  The comment I replied to said OP should take the loss if they think the failure is “in good faith”. This implies that OP should give up what they’re owed to take pity on the failed business’ owners. That would be giving the owners a pass on the risk that should be inherent in starting a business venture at the expense of OP’s already-delivered labor. I stand by my tone. That kind of risk shuffling is cancer to the whole realm of private ventures and contributes to general distrust of business as a means of organizing and motivating collective human action.
  - maerF0x0 3y ago
    One thing to consider is that Startups, Tech, the bay area, and life in general is a very small world. You'd be surprised how some good faith spread around becomes a nepotistic interview invite a few years later.

HWR_14 3y ago

Payroll piercing the corporate veil must be a state-specific law.

cogitoergofutuo 3y ago

> If you think the folding of the company is in good faith, you might just want to take the loss on this one. This is astonishingly bad advice! It is the fundamental opposite of what you should do in this situation! If you work for someone, you deserve to be paid for your work. Full stop. There are state agencies to assist with this exact situation that are funded by your tax dollars, avail yourself to them! What you think happened to the company is immaterial. I am genuinely baffled by the phrase “folding of the company in good faith” as I can’t imagine a good faith reason to tell people to work for free based on how your feelings align in relation to a business entity. The only people that would benefit from this becoming the norm would be con artist founders that are working to perfect an “Aww shucks, payroll is sooo hard for a smol bean like me!” excuse for getting folks to work for free. I would also not work for anyone that would even slightly agree with this advice.

awaythrow98765 3y ago
Actually, there is no "folding in good faith" in such like cases. A company is bankrupt if a point in time can be foreseen, where the company can no longer pay its debtors (employees here are debtors, sometimes even a higher-priority class of such). And while one can argue about the "foreseen" part, e.g. by saying "I did reasonably expect that incoming payment to arrive, which didn't". As soon as you were unable to pay a debt once, or like here even twice, you are actually too late in declaring your bankruptcy. Which, in most jurisdictions, is a crime. And it certainly is in bad faith. If the company isn't actually bankrupt, could pay but won't, then it is also an act of bad faith.