5 ms·

Around 33 minutes in, "working for free is against the law". Is this just a case of requiring a peppercorn? If not, how do $1/year salaries work?

deleted 12y ago
[deleted]
toomuchtodo 12y ago
> Is this just a case of requiring a peppercorn? Yes. > If not, how do $1/year salaries work? It depends on each state's regulations.
TheBiv 12y ago
What is requiring a peppercorn? Google wasn't of much help
- nols 12y ago
  A peppercorn is a tiny payment to provide consideration between the two parties. In common law both sides of the contract need to benefit somehow, so you can't have one party work or sell something for free. A peppercorn is a dollar or a pound to satisfy the requirement that both sides benefit (however tiny). So you'll have people who want to work for free getting hired for a dollar, or people selling a house for a dollar to their cousin.
- cperciva 12y ago
  A peppercorn is the dried fruit of the black pepper; it's what you grind up to produce ground black pepper. Or in the legal sense, it's an item of token value.
gamblor956 12y ago
No, it's a matter of labor law. An employee that does not own a "substantial" amount of the company they work for must be paid at least minimum weekly salary, which varies from state to state. In NY, the minimum salary is $600/week. In California, the minimum weekly salary is 2x the state minimum wage ($9/hour) for 40 hours/week, or $720. "Substantial" in this context depends on the facts and circumstances. Generally, anything less than double-digit % ownership is not substantial enough, unless the company is worth well into the millions.
- dllthomas 12y ago
  With a few exceptions that probably aren't going to apply to a startup, like volunteering for a nonprofit.
- sparky_z 12y ago
  > In California, the minimum weekly salary is 2x the state minimum wage ($9/hour) for 40 hours/week, or $720. As somebody who knows basically nothing about any of this, I found this statement confusing. Don't minimum wage employees break this rule by definition? So what subset of "employees" does the rule apply to?
  - mikeyouse 12y ago
    The distinction is Salary vs. Hourly, or more specifically, Exempt vs. Non-Exempt (Software Engineers / Founders are definitely Exempt, which mandates that they're paid at least 2x the minimum wage in California). The difference between the two: http://career-advice.monster.com/salary-benefits/salary-information/whats-the-difference-between-exempt/article.aspx http://career-advice.monster.com/salary-benefits/salary-info... And California-specific regulations: http://www.calchamber.com/california-employment-law/Pages/exempt-nonexempt-employees.aspx http://www.calchamber.com/california-employment-law/Pages/ex...
- cperciva 12y ago
  OK, but wouldn't founders have "substantial" ownership? Yet the implication was that even founders had to be paid minimum wage.
  - joshu 12y ago
    for what it's worth, at my last startup I paid myself zero salary (as CEO/founder with significant ownership) and neither lawyers nor accountants squawked.
    - boulos 12y ago
      In California at least, that's because you can sue the company for underpaying you (at least 2x minimum wage as stated above) but others cannot bring that suit on your behalf. I don't believe California has any sort of "significant ownership" bar. So yes, the $1/yr salaries are against the rules, but just don't sue your own company.

deleted 12y ago

[deleted]

toomuchtodo 12y ago

> Is this just a case of requiring a peppercorn? Yes. > If not, how do $1/year salaries work? It depends on each state's regulations.

TheBiv 12y ago

What is requiring a peppercorn? Google wasn't of much help

nols 12y ago
A peppercorn is a tiny payment to provide consideration between the two parties. In common law both sides of the contract need to benefit somehow, so you can't have one party work or sell something for free. A peppercorn is a dollar or a pound to satisfy the requirement that both sides benefit (however tiny). So you'll have people who want to work for free getting hired for a dollar, or people selling a house for a dollar to their cousin.
cperciva 12y ago
A peppercorn is the dried fruit of the black pepper; it's what you grind up to produce ground black pepper. Or in the legal sense, it's an item of token value.

gamblor956 12y ago

No, it's a matter of labor law. An employee that does not own a "substantial" amount of the company they work for must be paid at least minimum weekly salary, which varies from state to state. In NY, the minimum salary is $600/week. In California, the minimum weekly salary is 2x the state minimum wage ($9/hour) for 40 hours/week, or $720. "Substantial" in this context depends on the facts and circumstances. Generally, anything less than double-digit % ownership is not substantial enough, unless the company is worth well into the millions.

dllthomas 12y ago
With a few exceptions that probably aren't going to apply to a startup, like volunteering for a nonprofit.
sparky_z 12y ago
> In California, the minimum weekly salary is 2x the state minimum wage ($9/hour) for 40 hours/week, or $720. As somebody who knows basically nothing about any of this, I found this statement confusing. Don't minimum wage employees break this rule by definition? So what subset of "employees" does the rule apply to?
- mikeyouse 12y ago
  The distinction is Salary vs. Hourly, or more specifically, Exempt vs. Non-Exempt (Software Engineers / Founders are definitely Exempt, which mandates that they're paid at least 2x the minimum wage in California). The difference between the two: http://career-advice.monster.com/salary-benefits/salary-information/whats-the-difference-between-exempt/article.aspx http://career-advice.monster.com/salary-benefits/salary-info... And California-specific regulations: http://www.calchamber.com/california-employment-law/Pages/exempt-nonexempt-employees.aspx http://www.calchamber.com/california-employment-law/Pages/ex...
cperciva 12y ago
OK, but wouldn't founders have "substantial" ownership? Yet the implication was that even founders had to be paid minimum wage.
- joshu 12y ago
  for what it's worth, at my last startup I paid myself zero salary (as CEO/founder with significant ownership) and neither lawyers nor accountants squawked.
  - boulos 12y ago
    In California at least, that's because you can sue the company for underpaying you (at least 2x minimum wage as stated above) but others cannot bring that suit on your behalf. I don't believe California has any sort of "significant ownership" bar. So yes, the $1/yr salaries are against the rules, but just don't sue your own company.