Ask HN: Is being underpaid/working for free normal in SV?

I can't believe 30 people fell for this.

Even if the revenue goal is met and there's a contract in place I expect a guilt game to happen "If we pay out money/options now we're, I mean you're, hurting our company because we could use the money to invest in indexing more products." or being called greedy or not passionate enough.

Is it normal? I have seen it a bit.

Have I been asked to code for free, at a substantially reduced rate, for equity, and with really strange arrangements? Absolutely. At times I have been asked to do this on a more than weekly basis. Do I ever accept the terms? Absolutely not, never.

Have I started companies and asked people to do this? I have started businesses, I always pay a rate that is fair because I believe the relationships I have with people who sit in my office are important. I would rather my idea fail then see an employee 5 years down the line whispers under his breath "There is that #$%@@#$% who promised me the world and than didn't pay up."

There are substantial ethical, and, maybe more important to some, legal risks to have people work on your start up without being paid. Who owns their work output? If they are not paid, are they covered in the case of physical or emotional harm or accident? What tax liabilities are you under because of their generosity? What tax liabilities are they under for taking deferred payment or an investment in return for real goods or services? The list goes on and on.

Putting on my employee or consultant hat the answer is simple. How do I value my time? If I receive $100/hr from client A as agreed upon in writing, why would client B, an underfunded start up, deserve my time at a lesser rate? Many times I have said to a company who tries this tactic of saying "Can we pay you X amount in Y months?", "No, I take $X per hour, and if you cannot meet these terms, I understand. Please let me know before signing." They sign, they pay, and everyone ends up quite happy.

As I suggest to engineers who I meet, know what your value is and charge for that value. It is engineers who allow start ups to get away with these sorts of practices.

Great insight about liabilities.

There is zero legal way to operate like that in the United States. If you employ someone, you must put them on a normal payroll schedule, must pay them at least minimum wage, and must begin withholding taxes and the other usual payroll responsibilities. In California specifically, you must receive at least two paychecks per calendar month. Failing to do any of that is a violation of state and federal labor laws, and no contract/agreement/waiver can supersede this -- you can't do employee work for free (or for promises of future wages) even if you want to.

http://www.dir.ca.gov/dlse/faq_minimumwage.htm

http://www.dir.ca.gov/dlse/FAQ_Paydays.htm

Someone willing to make this kind of deal with his "employees" is someone willing to spin down the company as soon as revenues start to approach his trigger value, and keep all the profits.