It *can* be a bad idea to terminate even a poorly performing employee shortly after an "HR issue" depending on the "HR issue." For example, if the HR issue was an employeefiling a worker's comp claim, alleging harassment/discrimination
Disclaimer: This post does not constitute legal advice and does not establish an attorney-client relationship.
It really depends on the facts and circumstances of the termination. If the Company is genuinely interested in getting the release signed for fear of some existing liability, then negotiate. I find a useful technique is to ask the employee to tell me what they are basing their request for additional separation pay on? Often, they will tell you "length of service" or "loyalty and hard work" or some such other factor. But, sometimes, they will actually tell you what they perceive to be their legal entitlement, which can inform your decision regarding how much to negotiate. In almost all circumstances where the employee just wants more, I find that if you toss them another week or two, they can save face and feel like they are savvy negotiators. If they are sticking hard on an unreasonable number and you don't feel there is any real liability out there, make the one small move and then tell them IN WRITING that they have until [deadline] to sign and return it. If not received back by that time, the offer of separation pay will be withdrawn and they will get no separation pay. Then wait out the deadline. Keep in mind that the deadline may have to be at least 21 calendar days (and maybe as much as 45 calendar days) for workers 40 years of age and older pursuant to the Older Worker's Benefit Protection Act.
Disclaimer: This post does not constitute legal advice and does not establish an attorney-client relationship.
There is a difference between "authorized" shares and "issued" shares.
Authorized shares is set forth in the charter and is the maximum number that can be issued until changed by shareholder vote. 10M is a common number.
Issued shares are the number that are issued at any time. I typically issue about 3-6M of the shares to the founding team depending on the number of founders. The rest are reserved for option pool and other potential issuances.
The actual numbers don't matter much in practice since the percentages don't change, but using larger numbers allows you to make more granular equity grants, allows you to make grants with larger numbers of shares, and keeps the option price low.
The Genetic Information Nondiscrimination Act of 2008 prohibits the improper use of genetic information in employment (and health insurance). The Act prohibits employers from, among other things, using individuals' genetic information when making hiring, firing, job placement, or promotion decisions. Accordingly, it's wrong because it violates federal law.
Disclaimer: This post does not constitute legal advice and does not establish an attorney-client relationship.
Companies develop their vacation policies by balancing the business needs of the company with the personal needs of the majority of employees. You seem to have an idiosyncratic need/desire to take more vacation than will likely be offered, and voluntarily using more time than your employer alots for vacation is likely not a good idea. After several years, if you've been a star employee, you will likely be able to do so occasionally without any negative repercussions, but as a general rule, employers don't thrill at the thought of their employees taking more time off than permitted by the vacation policy.
Disclaimer: This post does not constitute legal advice and does not establish an attorney-client relationship.
While most lawyers won't make their fees "contingent" on closing (meaning they are not due and payable if the deal doesn't close, like an investment banker), it is in fact very common practice to have the fees paid at closing, which is when you most likely have the cash to pay them.
Any commentary on the actual cost is pretty much a guess, because the cost varies wildly depending on the circumstances. These are not "cookie cutter" transactions where it's easy to estimate the cost. If you are actually planning a sale, get a fee estimate from your current counsel and possibly some other ones, that will give you a good idea of what it should cost.
Ask your attorney to give you their standard VC due diligence list (it should look similar to what Michael posted). Set up an online document repository on a system like Box.net with all responsive documents that are organized according to the list. When you start due diligence, you can just give the VC's attorneys access to the data room. Make their job easier — it will greatly speed up the process. This is how we advise all our companies.
The answer really depends on the circumstances. When a startup is seeking a traditional round of funding from a VC with a lead investor, typically the lead investor generates a term sheet for the startup to review, negotiate and sign.
On the flip side, when a startup is doing a rolling closing with multiple small angel investors (often convertible debt), the company typically generates a term sheet and shows it to the early angels to get some consensus around the terms before legal counsel drafts the documents. It is not common (in my experience) that angels generate term sheets in this type of situation. While this type of funding is not new, it has been recently popularized by AngelList, Y Combinator and others.
Certainly before you get a term sheet. You want to be sure your house is in order before you get the term sheet so you can close the funding as soon as possible after you get the term sheet. You don't want to be spending this important time interviewing and vetting your future legal counsel.
It is painfully obvious to investors when the startup doesn't have their legal house in order. While this is not usually fatal and they will allow time for setup and cleanup, it's a discussion you'd rather not have with an investor. For example, we set up all of our startups from the beginning on an online document repository so when legal due diligence starts, we just flip the switch for access.
Also, you will need help from your counsel to negotiate the term sheet. You want to have that person standing by so you can send them the term sheet as soon as you receive it.
Most law firms that actually work with startups will work with you before you are funded with some sort of flexible billing arrangement. We all understand that new companies can't always afford good legal counsel.
People often refer to "seed" capital as an early stage raising of equity capital — i.e., selling stock. By comparison a convertible note is the sale of debt that may be (but is not necessarily) converted into stock at a later date. These are both describing the sale of different types of securities.
However, I think "seed" capital is better thought of as a stage of raising capital as opposed to the type of security you might sell. In this way, it usually refers to raising a smallish amount of money (usually $1M or less) in order to get a company up and running and prove out certain parts of the business model. So, "seed" in this manner would better be compared to Series A funding, which normally comes after the seed funding.
I don't think there is any hard data on this question given the subjective nature of the inquiry, but as a defense lawyer who has practiced in this area for well over a decade, I will say that very few sexual harassment claims are completely unfounded. That is to say, I think the percentage is in the low single digits where the facts are completely manufactured by the complainant.
However, I do think that a larger percentage of sexual harassment claims arise from misunderstanding, as opposed to evil intent, than most people would predict. In fact, in defending clients in these types of claims, I have yet to have a client confide to me that they knew what they were doing and elected to proceed anyway. Most people engaged in conduct that later becomes the basis for a complaint of sexual harassment are simply clueless to the fact their actions are creating an issue for fellow employees in the workplace. For that reason, I encourage people to speak up when they experience conduct or commentary in the workplace that they find offensive to them based on a protected characteristic (sex, race, sexual orientation, etc.). Often, the person engaged in the questionable workplace conduct simply needs some patient enlightenment to realize that they are treading on dangerous territory.
Lastly, I think there is a high percentage of sexual harassment claims that are based on unpleasant, even boorish, conduct, but stand little to no chance of ever arising to the level of "severe and pervasive" as is required to succeed on a sexual harassment claim in court.
Disclaimer: This post does not constitute legal advice and does not establish an attorney-client relationship.
The best advice for firing a subordinate for poor performanceis to do it in person with a companywitness (to avoid he said/she said-type evidence).The real work is in the preparation leading up to it.
When terminating a subordinate or poor work performance, in a perfect world, the manager has engaged in a performance management process that documents the company's efforts to identify the performance problem and assist the worker in reaching or re-reaching the expected performance standard. The typical process usually includes: (1) coaching and counseling – verbally identifying the performance problem and advising the employee on how to improve; (2) written warning – identifying the nature of the performance problem in a written warning that is presented to the employee, along with a written statementof the performance expectation the employee should strive to meet; and (3) a formal performance improvement plan (PIP) which includes a detailed outline of the performance problems, sets the performance standards, identifies the actions the manager will take to assist the under-performing employee, andadvises theworker that if the performance standard is not reached within a proscribed (reaonable) period of time, then discipline"up to and includingtermination" may be taken. It is important to actually tell the employee that their job is at risk so that if a termination occurs, they will not be surprised. It is also importantfor the manager tocheck in and assess the employee on a weekly or bi-weekly basis during the PIP period so that they know if they are on track or not, and have appropriate expectations as the PIP period draws to a close.
Once thecontemporaneous documentation demonstrating that the employer had a legitimate business reason for the termination is in place, and a termination decision has been made, advise the terminated employee of the decision to terminate them in private in a dignified way and (depending on the law of your state) present them with their final paycheck, includingaccrued unused vacation. The rule in California is that you have to pay the final paycheck,including unused vacation, at the time of termination. Ifyou delay thepayment of an accurate final paycheck, then the employer ispenalized one days' wages for every day the employee must wait for the paycheck, up to30 days (which is the equivalent of up to six weeks of pay). If the final paycheck is paid promptly,but it is"short" due to the employer's miscalculation, then the samepenalties applie until the balance is paid (up to 30 days).
P.S. While some people prefer not to give a reason for the termination, if the performance management process has been followed correctly, there is no question what the problem was (as it was already identified in detail inthe written warning and the PIP), and NOT telling the departing employee can often lead them to speculate and wonder if their termination was for a legally impermissible reason. Nobody needs that kind of speculation.
Disclaimer: This post does not constitute legal advice and does not establish an attorney-client relationship.
The best practice for terminating an employee is to do it in person with a companywitness (to avoid he said/she said-type evidence). However, my guess is that the question actually is asking much more, so I'll take a stab at it.
When considering terminating an employee, you need to identify whether the reason for the termination is poor performance or misconduct (and by misconduct, I mean that the worker has violated company policy warranting termination). If the reason for the termination is poor work performance, in a perfect world, the manager has engaged in a performance management process that documents the company's efforts to identify the performance problem and assist the worker in reaching or re-reaching the expected performance standard. The typical process usually includes: (1) coaching and counseling – verbally identifying the performance problem and advising the employee on how to improve; (2) written warning – identifying the nature of the performance problem in a written warning that is presented to the employee, along with a written statementof the performance expectation the employee should strive to meet; and (3) a formal performance improvement plan (PIP) which includes a detailed outline of the performance problems, sets the performance standards, identifies the actions the manager will take to assist the under-performing employee, andadvises theworker that if the performance standard is not reached within a proscribed (reaonable) period of time, then discipline"up to and includingtermination" may be taken. It is important to actually tell the employee that their job is at risk so that if a termination occurs, they will not be surprised. It is also importantfor the manager tocheck in and assess the employee on a weekly or bi-weekly basis during the PIP period so that they know if they are on track or not, and have appropriate expectations as the PIP period draws to a close.
Misconduct terminations are similar in that you want to ensure that you have as consistent a process in place as possible, but there is an additionalwrinkle. If an employee is accused of misconduct or violationof company policy,an investigation should take place to give the employee a sort of "due process" right to face theaccusation and beallowed to defend him or herself. For example, if an employee is accused ofviolatinga company policy that prohibits posting about confidential company activities on a social networking site, then the company should investigate by taking the statement of whomever informed on the employee (or capturing a screenshot of the posting if possible), then confront the employee with the information obtained and ask them for an explanation. If the explanation is notplausible, or is otherwise unsatisfactory,the disciplinary process set forth above should be engaged and documentation demonstratingthe company's efforts to bring theworker's conduct back in line with company policy should be generated and retained.
Once thecontemporaneous documentation demonstrating that the employer had a legitimate business reason for the termination is in place, and a termination decision has been made, advise the terminated employee in private in a dignified way and (depending on the law of your state) present them with their final paycheck, includingaccrued unused vacation. The rule in California is that you have to pay the final paycheck,including unused vacation, at the time of termination. Ifyou delay thepayment of an accurate final paycheck, then the employer ispenalized one days' wages for every day the employee must wait for the paycheck, up to30 days (which is the equivalent of up to six weeks of pay). If the final paycheck is paid promptly,but it is"short" due to the employer's miscalculation, then the samepenalties applie until the balance is paid (up to 30 days).
If you have a written agreement requiring you to repay relocation expenses incurred by the company on your behalf if you leave your employment before your first anniversary, then you almost certainly have an existing obligation to pay the money back (unless there was a caveat to your agreement that exempted repayment if the dysfunctionality of the organization is unbearable). Nevertheless, given the untenable working situation, you may be able to negotiate the repayment away completely in exchange for releasing the company from any claims, or at least make the argument that you should only have to repay a pro-rata portion of the amount owed (if you stayed for half of the period, perhaps you should only owe half of the relocation expenses back).
Disclaimer: This post does not constitute legal advice and does not establish an attorney-client relationship.
The key to managing older employees (and by that, I assume you mean employees protected by the Age Discrimination in Employment Act and its state law equivalents) is to followyour company's performance management practices in a manner consistent with younger employees. Moreover, you cannot allow workers to make age-ist comments without taking appropriate disciplinary action. Setting aside the legal pitfalls, when engaging in the performance management process,try to speak to the generational values that are reflected in your conversations with the older worker and remind them that they are role models making an important contribution to the organization's overall goals and accomplishments.
Disclaimer: This post does not constitute legal advice and does not establish an attorney-client relationship.
Betty Kayton and Anne Dorman are both great. Very hard to get their time.
Matt is a lawyer representing technology companies through all phases of their lifecycle, from pre-incorporation, seed & VC financings, exit transactions and IPOs (read more)
Copyright © 2012 Matthew S. Bartus | Disclaimer
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