Ian Carleton Schaefer, Member of the Firm in the Labor and Employment practice and co-lead of the Technology, Media, and Telecommunications ("TMT") strategic industry group, in the firm’s New York office, and Nancy L. Gunzenhauser, Associate in the Labor and Employment practice, in the firm’s New York office, authored an article in TechCrunch, titled “Employment Issues Your Startup Should Not Ignore.”
Following is an excerpt:
Too often, startups attract talent by offering equity in the quickly growing business, either in lieu of or in addition to an employee’s wages.
Unfortunately, providing stock and/or options in a company does not always adequately compensate employees under federal and state minimum-wage laws. Wage and hour lawsuits — which are up 438 percent since the year 2000, according to the Federal Judicial Center — are among the most popular and most expensive to litigate and defend.
If you’re paying your people in stock in lieu of wages, you’re breaking the law. Period.
Further, failure to pay overtime for employees who are not exempt from overtime (i.e. those who are ineligible for overtime by making at least $455/week and whose job duties fall into one of several exemptions, including executive, administrative, computer professionals) has become another minefield for startups.
