Don't let my belief here imply that you shouldn't do anything; all three of your options are valid. However, in each of them, before you (a) get emotional, (b) burn any potential bridges (even treacherous, slippery ones), or (c) contemplate investing serious time or any money in this process, keep in mind that your outlook on this probably isn't good.

Indeed, that's my read too, but he shouldn't just shrug his shoulders and give up.

An option: Call them up, tell them you're short on cash and really need the money, and offer to take 1/4th of the salary you're owed if they can pay you shortly and it'd be a huge favor to you and you'd appreciate it.

This removes the small chance of getting the full amount, but it gives the very-important closure and gets the pay off the top idea on your mind - http://www.paulgraham.com/top.html

The cost to thinking about bullshit like this isn't considered enough. Offer to take two weeks pay and sign away the rest. Then be very, very grateful about it, thank them and say it's a big favor to you and you're rooting for them. You lose the small chance of getting full pay, but you get something and can move on with your life and devote your mental energy to other things.

Edit: The other nice thing about this route is that after going through that process, you're no longer a creditor to them and can call them up more freely without them tensing up and feeling the pressure. Depending on how valuable the contact/reference is for you, that could be better than going more hostile. If you did want to go hostile, small claims court might be a better bet than the wage board, depending on what the cap is in California. Small claims doesn't require a lawyer and is pretty straightforward to navigate on your own.

I'd support the legal system allowing him to sign an agreement accepting a lower amount and making that final, but I wonder if it works like the minimum wage, where workers can't sign away their right to be paid at least the minimum wage.

Having said that, I was in a similar situation and basically just gave up ever seeing the money for the same reasons others have already given.

What you described about kicking off the bankruptcy process is pretty much how I pictured it. They have implicitly made me an interest-free lender.

One of the hard lessons of life here for me is that I am really hesitant to trust any people in business now. I now understand why unions exist.

I was under the impression that employees owed wages are paid before other creditors, which means OP would have a better chance of getting something.

Update: according to 11 USC Section 507, wages fall in 3rd place. I am not a lawyer so I may be reading this all wrong, but it goes "administrative expenses", "unsecured claims", then wages up to $4000 (about half of what I'm owed) and earned within 90 days of the bankruptcy filing. It's been about a year since I quit the company, and the wage claim through the labor board has a 3-year statute of limitations. I wonder what would happen if I filed a wage claim on a bankrupt company...

(http://www.lawdog.com/bkrcy/bkmd3.htm#726.)

Call them up and tell them straight out that they have a week to get the money otherwise you go after them in court, which will throw the company into banckruptcy.

It's actually possible that no one is getting paid and equity and commitment are driving the ones that are left.

Getting paid isn't just workers, but is also the other businesses.

If you did start them on the chain of bankruptcy, you're doing a favour to all the people they'll screw down the line.

And if they're lying about money woes, you get something.

Better to kill the company before they cause some serious damage to a real person. I understand your reluctance, you probably put some of your heart and soul into it, but in the end it's just a company. You tried, they tried, but it just didn't work out.

Then again, having said all that, if I could detach my emotions from it I'd be a bit more selfish and take the advice elsewhere in the thread to negotiate a partial payment. It's probably your best chance of getting some money. But then again I wouldn't be able to detach my emotions, I'd go after the whole amount on principle and I certainly wouldn't have waited this long.

And the little twist, them buying you iPhones and sending you everywhere? That's people pretending to run a business. That's people being the big men, who think that's what a business should be when it's not. They pissed your paycheck away on frivolities. That was their choice.

The founders are not jerks. They spent what they had on you and treated you well. Now they have nothing but your loyalty and goodwill. They probably want to pay you (maybe even before they pay themselves!) but they can't. Yes they are trying to keep plastic smiles so every one doesn't jump ship and you can live to fight another day. Perhaps, at this point they should be more honest, but I imagine they are afraid to see the dream vaporized.

Obviously, if you worked there for some time you at least kind of believe in what you are doing. Now is an opportunity to gain more control/equity and maybe even help steer the company to profitability. On the other hand if you are sure it is going nowhere, even if everyone tightened their belts and rolled up their sleeves then it is time to let go and write it off.

Yes you are entitled to the money. But you are probably not going to get it. You are only going to destroy relationships. Be up front with the founders. Either leverage your position to change your circumstances or walk away in good faith.

I disagree with that. This person is an employee not a founder. Therefore the risk they assume should be different. At worst, it should be that of losing their job at short notice. The flexibility you also refer to should not extend to working for long periods with no idea when you'll get paid.

Although we can only hear one side of the story here, I feel the founders were negligent in their duties to their employees. They should have made the company's situation clearer to the staff and gone over the options.

Like others in the thread, I doubt the OP will get all the money he is rightfully owed. However, simply walking away in 'good faith' seems weak (esp when that faith has already been abused).

You are right, I did assume risk in joining the startup. That was not apparent to me at the time because it was not really communicated, but now I know. Looking back, I see a lot of "I should have known" moments. The lesson is that one should not look to the leaders of the company to look out for their interest.

The founder is unlikely to be aware of his poor judgement. I know this, because I've made the same mistake. Tempering vision wih pragmatism is hard, especially if you achieve early success.

If your founder doesn't admit fault and put in a solid plan to turn the business around, leave.

I think the assumptions you are making about the Founders are not well grounded. How do you know they are not jerks? Here's how I see it. Employee wages are fixed costs and easy to predict. If you know ahead of time (extremely likely) that you can't make wages, you MUST immediately notify your employees and put them on unpaid leave. You can't just implicitly ask them to work for uncertain future compensation based on not-booked revenue. It's incompetent and unethical. There's no excuse for that. As the poster has said, he was a straight salaried employee, not a founder in any way expected to have variable income. That would be different, but that's not the case. Go get more funding if needed, but don't exploit your employee's loyalty.

I'm glad that the poster quit because that's the right thing to do, and the sooner the better. If this ever happens to me again, I'm gone when the first check doesn't show up.

In the end, my employer went into bankruptcy, which is probably the best in this situation. I got a lawyer and made sure my back wages priority claim was registered. Yes, it's true that employee back wages are high priority and get paid earlier than many other outstanding debts, BUT, this doesn't just happen automatically. I only got paid (a fraction of what I was owed) BECAUSE I got myself active in the legal process. All the other employees who just moved on and didn't get involved didn't get anything. You need to stand up for what you are owed and work in the legal system to get (a fraction of) it.

FYI this didn't entirely destroy the relationship in the long run. I still talk with one of the founding partners on good enough terms. There's nothing wrong with asking to get paid what you were promised. That's not burning a bridge. In the big picture, honestly this is a bridge that you probably need to burn and that's OK in this case, but you're relationship surviving depends more on how they handle it. If you walk away quietly like a chump, how does that make you appear to them for your future relationship?

When you start to see the people as the problem, instead of the people in the problem, it can hinder your social problem solving. And this is as much a social problem as it is a financial one.

There is a chance that this can be resolved with (1) you getting your money back and (2) you still being on friendly terms, but probably not if you label them "assholes" in your head. :)

Yeah, I know what you mean. Totally agree with you.

1. Character - how do I carry myself with justice, mercy, and compassion, yet not get pushed around and maintain self-respect? 2. Social - how do I maintain relationships? 3. Financial - how do I get my money?

Go to them confidently, tell them "You didn't pay me. I know your company's having problems, but that doesn't get you out of your debt to me, we both know this. How can we make this right without destroying our friendship and the company?"

If they don't give you anything to work with (you should accept either money or a solid explanation of why they can't pay you now, and a concrete, explainable timeline showing exactly when they'll be able to), then either they're clearly disrespecting you and their social contract, or they actually are completely bankrupt and have no hope of getting out of it, and in either case, it's perfectly within reason to start them down the bankruptcy path.

When I'm in a situation like this, it also helps to think of myself as an "ambassador of reality". Basically, reality is sending a message to the business people. It's feedback saying "your assumptions about the market were wrong" or "you didn't plan thoroughly enough" or whatever the situation is. Reality just happens to be sending this message through you to them. If you don't ask for your money back, you're not giving them the proper financial feedback that they need to learn to be better businesspeople. For their next venture, you will have helped them learn that if you don't pay people they won't just go away and forget about it. You don't have to be aggressive or threaten legal action, you just have to be persistent and not go away. :)

If you need some inspiration, go watch the film Gandhi. He was always civil and friendly, but very stubborn. :)

Then ask them to pay you a set amount every week to pay down the amount. No matter what their financial situation is, they certainly can pay you something every week. Insist on getting paid something, even if it's just $1! Collect the check in person every week. Email them a receipt with an updated balance due. It's a very visible reminder to them that they owe you money and it's a way that you will at least get some money back!

Answer, you can try to sue, but there's probably very little chance you'll get your money any time soon. Whether you want to pursue this or not depends on a few things. Do you feel they mislead you? Do you think they really have money and are just lying to you?

The flipside of my experiences was about 4 years after that scenario above, I did some contracting with a company - remotely (unfortunately) and they didn't pay. I found out from discussions that the PM on my project quit soon after I started, another developer on the project quit as well. He'd told me he'd quit because he was tired of the contractors bitching to him they weren't getting paid - apparently this was a habit company X had. I had other contractors seek me out and tell me they'd been shafted on payments too - one for $700, and another for $3500. Mine was to the tune of close to $9000. (never again!). So... I drove up to his state and filed a lawsuit. It's been > 2 years, and it's still in the system. Will probably take another year, and at that point, I'd still have to collect. At this point, it's a matter of principal - the company's whole MO was to farm out work to contractors in various states, then not send payment. That's a whole other level of evil, imo.

But maybe I'm biased and I really was as scammy as the guy who didn't pay me? I don't think so. I was honest with people - there's no money coming in - take another job if you can get one. That's not what happened to me a few years later, though perhaps some might see it as divine retribution?

Our CEO would come into our office and say, "I just had a meeting with a potential investor and he's committed $25k!" He always had our hopes up, but our CFO would paint a different picture. Even our president told me he was starting to pick up work on the side.

Later, I went back to working for others for a while. I smelled a bad burn rate at this company, but only after I'd sold my house and moved states. :/ We were supposed to be impressed with announcements of $x projects and $y investments, but it wasn't that hard to see that 20+ people at a company, being paid full time, would eat up those $x and $y in just a couple months, but the $x was for a 9 month project.

I ended up being extremely cynical and distrustful of others (as I'm sure a few people ended up distrusting me earlier) and it's taken years to get back a modicum of faith/optimism again. Working for myself seemed about the only way I could have a degree of control and not be left in the dark on finances. Yeah, my boss is a jerk, but I'm sleeping with his wife. ;)

People who have no vesting in the company other than a pay check, receive nothing from the gamble and in many cases don't even know they have money in the race. So the person that decides to do this is gambling the employees money and giving them no up side. They are exposing them to the risk and keeping all of the reward if it pays off.

Worse yet the fear of unemployment puts them at a deep psychological disadvantage so any gravy coating or straw of hope becomes bloated in their mind. It is a human trait that helps shield us from traumatic events.

In the end, at the first sign on trouble it is up to the vested parties to trim the company to the capital available. Unfortunately, as happens far to often, the rats on the mast leave the ship first. In other words those at the top start bailing while the gravy coating is being dished to the bottom. When you see the COO, CFO, VP's leaving the company it is time to go. It means the money has run out and there are no real talks from investment sources.

The worst offenders by far are those principals that leave and give a pep talk, to the guys in the field, going out the door to secure their package of the last remaining scraps.

Never work for future funds from a company with money troubles, investors do not invest in companies that get themselves into money troubles and do nothing to correct the imbalance.

9 times out of 10 these companies are run by megalomaniacs who want to play big business on investor funds.

If you do secure a contract for hard asserts in the event of default. In other words you walk out with servers, hardware or transferable software licenses. Ensure that the execution of the contract becomes valid 6 mo before any bankruptcy filing. To keep it clear of claw-backs.

So be sure to communicate that you still expect to be paid, and keep documentation on the amount owed -- ideally also a confirmation from them of the amounts. Making an official complaint to state employment authorities should be a consideration -- but one you neither rush to nor wait too long to pursue. Ask an employment lawyer about your rights and any deadlines for asserting them that may apply.

So my overall suggestion would be: (2), with increasingly aggressive nagging that gets them on the record with excuses/acknowledgments, and makes them realize you'll eventually go (1), so they might as well pay you as soon as they can.

I'd also be open to a settlement for less, but not be first to mention the possibility. If their fortunes improve, and you then assert your legal rights before they expire, you might get the original amount plus penalties/interest. So you have leverage unless it's a blood-from-a-stone situation.

First off, you have a right to know the state of the company's finances. If they say they don't have the money, tell them to prove it and show you their bank account balance.

Second, you can be aggressive without getting personal, as long as everyone stays honest. If they're lying to you, then they're douchebags and it is personal.

Third, another way you could do this is to setup a formal loan and repayment plan with set interest rates, payment schedule and penalties. You could probably do this yourself.

Setting up a formal, high interest-bearing loan seems like a great way to incentivize them to pay your money back. If they don't want to play ball, then take them to court.

However, I definitely agree that the solution is NOT to bend over and take it in the ass.

Who would want equity in a failing company? If I were the OP and they offered me equity, I'd be insulted.

That said, it doesn't sound like you have a long employment history, so a cordial relationship and good references from them might be worth more than the money they're unlikely ever to be able to pay, no matter how you go after them. Consider hanging tight at least until you risk losing the right to claim your due (I have no idea if there's anything like a statute of limitations on wage claims or suits).

Good luck. I've been through "oops, we're about out of money, guys", but I was fortunate they were honest and ethical about it.

Did you deserve the job of CTO? If so, then you also deserved the paycheck. If not, then be happy with the fact that you got a cushy job that will look good on your resume and leave it at that.

Seriously, this is business. It's good to be happy about the time you worked there, but don't let it cloud your judgement. I'm not saying you should go after them. I'm just saying not to hold back because you feel you owe them something that you don't.

I wouldn't count on it going anywhere unless you become very blunt. They might be afraid to file for bankruptcy, you might get paid a bit if you threaten to sue, rinse, repeat as long as they pay up bits and pieces.

Until they go bust (which sounds like it is weeks or at most months away).

1) You're owed the money legally. No question about it. You can probably even get it. California takes a very hard line on unpaid wages.

2) In the grand scheme of the situation do you feel good about fighting them over the unpaid wages?

#1 is easy. You file a claim. You have a decent chance of getting your money.

#2 is harder and it's impossible to know from the outside. I think it's perfectly reasonable to let people off the hook in some rare circumstances. Only you can make the call if this is one of those times. It doesn't make you weak or a fool to treat people better than they strictly deserve.

It sounds though, like you've already made up your mind that you want to go after the unpaid wages. So give them a final warning (written, certified mail, return receipt) and then file a claim.

I think it would be a weak move to avoid it completely, but maybe not weak to at least confront them and then show mercy.

But I think you're absolutely right, nobody here can really decide for me.

I've lost out on a month's earnings before and it really sucks, but if you had a good relationship with them and learned a lot then maybe it isn't so bad.

Definitely keep up the pressure and hopefully you'll get some of the money you are owed.

While I was still getting paid, I didn't want to quit until I had secured a new job. When they were 1 month late with pay, that pretty much drew the line for me so I gave them 1 month notice at that point.

And yes, now I'm regularly updating my resume and keeping my eyes and ears open for other opportunities.

I strongly advise you emotionally disconnect from them. It sounds like you like them and don't want to cause troubles for them, and they like it that way. You may find they are not the nice sweet people you thought they were as soon as you require them to pay you the money that they owe you. They are not doing you a favor paying your wages, that is money you earned. They are not your friends, they are thieves who stole your hard earned money from you. Don't allow the fact that they did this while smiling and patting you on the back to distract you from your goal - to get paid what you are rightfully and legally owed.

You should take them to court. Part of being a CEO/founder is taking care of your people. If you don't do that, you're really just using them.

What do you mean when you say you have diversified?

I know what you mean about $9k feeling like a lottery win. As I said, I ended up suing, but it's likely going to be years before you get a trial, and assuming you get a judgement, you still have to collect.

One bit of advice might be to file in small claims court for whatever California's limit in small claims. In the state I filed in, it was $5k, but I wanted to go after the full $9k (technically, $8800 IIRC). It will probably get handled faster than a traditional court/arbitration process.

Get your documentation (emails, whatever) bundled together, file your claim, then move on in life (if you choose a legal route). If they're still operating (on a shoestring I guess?) there's still a chance you'll get a judgement, but it'll likely be years before you actually see a dime. So, don't think you'll be getting $9k any time soon.

I've planned my life around never collecting, but have put a process in place which might let me collect. But I have to operate financially like it's gone. Once you get to that point, and you're living without it, it might become easier to make the decision to not sue. In my case the company had a habit of operating this way, and I'm suing on the principal of it. In your case, if you were friendly with the guys, and you believe them to still be decent people, adding a lawsuit to their misery might not be the karmic thing to do.

Good luck either way.

I know what you mean about $9k feeling like a lottery win. As I said, I ended up suing, but it's likely going to be years before you get a trial, and assuming you get a judgement, you still have to collect.

In some states, corporate officers can be personally liable for the unpaid wages of an employee. From my casual Googling, I’m not sure if California is such a state, but you should know how much leverage you have, even if you ultimately decide you don’t want to apply it.

Also note that if the company goes through bankruptcy, unpaid wages are fairly high up in the chain of priority for creditors.