25

I work at a company that has been on its last leg since it was born. But the boss somehow always pulls off a half-court shot at the buzzer and has kept us going for way longer than it seemed possible.

Recently things have gotten much more grim. He cut pay; there was a payroll issued late; he took out a loan and blasted through it; and now he is informing us that he only has enough money to pay us till the end of this week. That all seems very cut and dry, but he is the kind of guy who must go till the bitter end. So to this end, he is encouraging his 5 employees to continue working with the hope that he will scrape something together.

Some of the employees seem to be willing to go along with it, but I'm annoyed by the whole situation. I do not want to quit and be left unable to get unemployment while I job search. I also do not want to work for free for as long as he drags this thing out. One thing I considered was asking him to lay me off and turn me into a contractor so that I could collect unemployment while continuing to work without pay from him, but I suppose that would be illegal if I ever received the backpay for that period later. I would be willing to pay back the unemployment in that event, but I really doubt there is accommodation for such an arrangement.

What is the right course of action for an employee asked to gamble with the company and work for free while the payroll is dry?

[Edit: for everyone who was wondering about jurisdiction, I live in California, US]

  • 21
    I think it would be best to mention what country you're at. In Israel if your pay is cut or unpaid you can resign and you are considered as being fired because the employer didn't meet its side of the contract. So, you will get all your compensation funds and you will be paid for the term of unemployment. – Sigal Shaharabani Apr 8 '15 at 7:43
  • 3
    Ask the boss to lay you off. Say that your finances care too fragile for you to be able to rely on an irregular flow of income. – Vietnhi Phuvan Apr 8 '15 at 10:20
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    In Canada if there are significant changes to your wages or salary you can quit and still collect employment insurance servicecanada.gc.ca/eng/ei/digest/6_5_0.shtml#a6_5_8 – Myles Apr 8 '15 at 15:14
  • 5
    For anyone who is wondering about the outcome, I asked what the most, least and likely amount of money he would be able to pay me on the next pay cycle based on how many invoices he was expecting. Based on the least amount of money he would likely be able to pay, I demanded to be laid off and told him I would come in as a contractor to work those hours for the next pay period. Now that I am a contractor I will be able to use my own judgement to guess how much he might be able to pay me, and I will spend the rest of my time looking for a new job. – Brimby Apr 10 '15 at 17:46
70

Start looking for another job. Now. Right now. Stop reading SE and get to it.

You aren't getting paid. You have every reason to expect you aren't going to get paid. Don't work for free. Don't rationalize it as "my boss will pull off another miracle at the wire" or "he's a nice guy and I should help out". He kept things going so long not because he's a finance magician, but because he was very lucky. Just because he wants to stick it out to the bitter end does not mean you should. Any time spent trying to bail out the sinking ship would be much better used to look for a new job, especially since you think it will be difficult to find one.

One thing I considered was asking him to lay me off and turn me into a contractor so that I could collect unemployment while continuing to work without pay from him

This is half of an idea. The second part - collecting unemployment while continuing to work - is to be avoided like the plague. It's illegal and unethical. However, asking your boss to lay you off is worthwhile, if you think he will go along with the idea. Consider your options:

  • Continue working. You don't get paid. You waste time that would be better spent looking for a new job.
  • Quit. You don't get paid, assuming voluntary resignation means no unemployment. You have time to devote to job seeking.
  • Your boss lays you off. You get unemployment benefits. You have time to devote to job seeking.

This is a very easy decision to make. Only one of the three choices ends up with you getting any money. Even if being laid off isn't an option, it's still an easy choice, because either way you are not and will not be paid.

  • 24
    +1 "He kept things going so long not because he's a finance magician, but because he was very lucky" - a viable business stays going because it has something worth selling; the OP's clearly doesn't. It's surprising how long the death throes of a company can be, but if your boss isn't paying employees, you can be sure he isn't paying suppliers, landlords, banks and other creditors promptly either, and the house of cards will collapse when someone finally loses patience. – Julia Hayward Apr 8 '15 at 7:34
  • Yes and when it collapses, all fo those other people/businesses will get paid ahead of employees. – HLGEM Apr 8 '15 at 13:43
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    In almost every industrialized country, if you quit because you are not being paid you will be considered as having been terminated for purposes of getting unemployment benefit. – DJClayworth Apr 8 '17 at 20:39
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    No, a substantial cut to your wages would also be considered a 'significant change to the conditions of employment', and likely be considered constructive dismissal. But only a lawyer would know for sure. – DJClayworth Jul 11 '17 at 3:02
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    @DJClayworth Yes, that's why he has to stop working immediately. Continuing to work could be construed as constructive agreement to reduced wages. (And if his employer is desperate or a scammer, that's what they'll argue. Been there, done that. It's critical not to accept a reduction in wages.) – David Schwartz Jul 18 '17 at 20:28
41

You need to start looking for a job immediately. The company is dying and it's taking you with it.

Don't play games to try to get unemployment while you're still on the sinking ship. You'll risk getting hit with fraud charges. You cannot collect unemployment if you're employed (even if it's as a contractor who hasn't been paid, yet).

It's unlikely you'll ever see the back-pay owed to you at this point. Your only viable option is to get a new job right now, as soon as you can.

Even if your boss is a nice person, who's really trying hard to succeed. Your financial and professional life is at stake.

You should explain to your boss what you're doing: Looking for a new job, interviewing whenever you can, and you'll make up the expected hours working evenings (if necessary). Don't cheat your employer, even if you feel he is cheating you.

EDIT: Check with your state about qualifying for unemployment if you quit. This site has some general advice, but it will be up to your state laws: http://unemploymenthandbook.com/unemployment-articles/all-about-unemployment/180-can-you-get-unemployment-if-you-quit

  • 2
    Yes I do need to find a new job. But consider this: I work in a very competitive field, and my experience, though not nonexistent, does not place me in the most desirable subset of potential employees. It's very possible that it will take me a month or two to find a new position, and my company is completely out of money as of now. Do you still believe that I should continue to work for likely no pay while I job search rather than demand to be laid off and take unemployment? – Brimby Apr 7 '15 at 23:57
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    @Brimby unfortunately that question can only be answered by judging the likelihood of your boss (who you say "somehow always pulls off a half-court shot at the buzzer") coming up with some more money. Multiply the amount of salary you would be eligibly for by the percentage chance you estimate of him being able to pay you; compare that result to the unemployment benefits you would be eligible for if you were laid off. – Carson63000 Apr 8 '15 at 0:25
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    +1 for this. Even if your boss is super nice or even a good friend: (1) first and foremost this is a business relationship and (2) you need money in order to live. Even if it's the greatest and most awesome workplace, I wouldn't work with that financial insecurity always hovering over my head... What if you have a family ? Children ? Those would be huge responsibilities which you can't ignore... – Radu Murzea Apr 8 '15 at 8:16
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    @Brimby If you decide to leave, make sure he has actually missed a payday. Also, Unemployment is not instantaneous - you should expect it to take a few weeks before benefits begin to be paid. Now is the time to hone your salesmanship skills and make a new employer excited to bring you on board. Don't go into an interview assuming you're the least qualified applicant they have. It will be obvious to the interviewers and will lower their opinion of you. Be confident and optimistic. Good luck to you! – Kent A. Apr 8 '15 at 12:49
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    @Brimby If you haven't already done so, you need to take home all of your personal belongings from the office. It is very likely that you will soon be locked out of the office. – Kent A. Apr 8 '15 at 16:19
25

I'm not a lawyer, and this is not legal advice, but you might want to look into the concept of constructive dismissal. You don't say what jurisdiction you are living in, but generally in the US, if you quit because you haven't been paid, it isn't regarded as a voluntary resignation, and you will likely be eligible for unemployment insurance. You aren't expected to work for free until your employer pronounces "I herby lay you off". Once the pay has stopped, you've effectively been laid off, whether the employer wants to admit it or not.

  • Yes yes a million times yes. – HLGEM Apr 8 '15 at 13:48
  • Will depend on jurisdiction. In Spain, if you leave the company because they are not paying you, it counts as if you were voluntarily leaving. That said, there are social funds that (in the case of bankruptcy) will give you a significant % of the salary that you did not perceive. – SJuan76 Apr 8 '15 at 17:01
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    @SJuan76 In Spain you can file a lawsuit against your employer if you haven't been paid for three monts, it does not count as voluntary leave if you do that. – Konamiman Apr 9 '15 at 10:43
  • Yes, but his employer can just pay him minimum wage to avoid this, and he will have agreed to the pay cut by being notified prior to doing the work. This is terrible advice. – David Schwartz Jul 10 '17 at 20:47
  • @DavidSchwartz the details depend on jurisdiction, but in the US a "substantive" change to compensation can in itself constitute constructive dismissal. Different courts have set different thresholds, but cuts ranging between 6% and 40% have accepted as evidence of constructive dismissal. The OP should of course find out what the local law is. – Charles E. Grant Jul 27 '17 at 20:54
18

Immediately today go to your local office that pays unemployment (it will be called different things in different jurisdictions) and ask them if you can collect unemployment because your employer has stopped paying your paycheck. If they say yes (and I suspect they will), then stop going to work. Today. There is no reason at all to waste your time in this place. I would walk out of the office right this minute to do this.

12

If…

  1. You are working for a startup, and
  2. You have been offered ownership of a significant portion of the company, and
  3. You strongly believe in what the company is doing — if it succeeds, it's going to change the world, and
  4. Your contribution is uniquely important to the future of the company, and
  5. You believe that potential future gains could be substantially better than whatever normal-paying job you can get, and
  6. You have financial assets that could let you take a gamble that a miracle will happen before the company goes bankrupt, and
  7. You have audited the company's accounts to verify that things aren't worse than they seem, then

Sure, keep this job! ← Sarcasm That's a lot of ifs, though. From your description, I haven't seen any indication that any of these conditions is true, let alone all of them. There is no rational reason to stay.

  • Best answer. #3 - Your boss has already shown that he is not the person who can make this happen. – Wesley Long Apr 8 '15 at 14:27
9

Been there, done that. The fact that the boss has already taken a loan and blown through that money indicates that there are no more rabbits to be pulled from the hat.

Start looking right now.

That aside, you have a choice. Either you spend your days working for free or you just go home. The answer to this depends on whether you believe this guy has the potential of finally paying you. In order to make an educated guess on that you need information. Namely you need to figure out if this is a cash flow problem or a complete dead end.

For example:
- What invoices are outstanding to be paid to the company?
- Who is calling on those clients?
- Have they indicated when payment is coming?

If there are no outstanding invoices that your clients owe money on OR the clients have not indicated when/if payment is coming then this is a complete dead end. For the boss to just hope for future sales to come in to make payroll is disingenuous at best. Quite frankly (s)he should have known months ago exactly when the money would run out and notified everyone of the impending disaster.

If there are outstanding invoices, then you need more detail.
- How much is outstanding?
- How much are the monthly expenses? - When were the invoices due? If prior to now, why haven't they been paid?
- How does the boss intend to cut expenses?
- Do the outstanding amounts cover enough of a time frame for the boss to continue paying people or will it only take care of the back bills?

If the boss is unwilling to give you all of this information OR the boss needs a "few days" to compile it then just leave. This information should be at a small business owner's finger tips 24x7 and (s)he should be more than willing to share this info with you due to the situation.

If the amounts aren't coming in soon or aren't enough to cover 3+ months of expenses, then leave. If the boss has paid himself but not the employees, then leave and let the workforce commission (if you have something like that) sue him.


I've personally been in the boss's shoes when we had a slow sales cycle. I gave everyone 30 days notice of when the money would run out and let each of them decide if they wanted to go to the end. The end being the last day I had money to make payroll. Some did, some didn't. In our case, it worked out as we had a few very late paying clients whose checks finally showed up with a couple days left in our "Startup death clock".

I would never have asked people to work for free in the hopes of getting a future check. Never mind that it's illegal where I'm at, it's just unethical. So if we wouldn't have finally been paid by a few clients then I would have closed the whole thing down.

4

While you should indeed be job searching immediately, the unemployment situation is not so cut and dried in your jurisdiction (or in most).

  1. As soon as you are not paid for work performed, you should call your local CA unemployment office and file for unemployment to get a determination of benefits - http://www.edd.ca.gov/Unemployment/FAQ_-_Eligibility.htm. You can always file, they have processes to determine eligibility - it's not "fraud" assuming you answer all the questions honestly. In any pay period you don't get paid for work performed, you should be filing - don't wait. Even if the automatic phone or web thingy says you're not eligible this will trigger a followup phone call with a person who you can explain the situation to and they can tell you if you're eligible (or if you would be if you quit). They will never do a determination of benefits if you don't apply, so apply. Worst case is they don't pay out.

  2. Or you can up and quit. Specifically in CA employment law you can still be eligible after a "voluntary quit" if it was for "good cause". Only the EDD can make the determination if this is the case in your specific situation, but not getting paid seems to me to fit the category pretty well.

In the end, anyone's opinion on this other than the State of California Employee Development Department is irrelevant, so call them!

0

I think it is reasonable to negotiate something else from your employer by taking this risk.

  1. Will the work being done get paid at a later date?
  2. Add a bonus for postponing salary. Probably not possible with this company's financial situation, but it's better than nothing.
  3. Equity - for your sacrifice you should get a piece of the company.

Whatever you do, get all this in writing.

As a last resort, I wouldn't be working very hard if you feel like this person is not going to pay you for work. You may want to consider not working at all. Of course, you could get fired (which is what you want), but there is a reputation and a risk of not getting a good recommendation from your boss and possibly your coworkers. If they're willing to keep working, they may resent you slacking off and making this recovery even harder.

-1

Whatever you do, under no circumstances should you continue to work after you've been told that you won't be paid as previously agreed. That is quite possibly the worst thing you can do and I'm shocked that other answers are suggesting you do it. If you do that, and you get paid at least minimum wage, your employer will be paying you as agreed, and you will make any claim that you were terminated much weaker.

Many of the answers above are answering a different question. This is not a case where you have not been paid for work you've already done. This is a case where you have been notified that you will not be paid as agreed for future work. That is, you've been told that the company you work for no longer intends to honor the agreement under which you were working for them. You have been verbally told that your employment agreement has been terminated by the company.

You do not have to quit. You have been constructively terminated. Your boss may not have told you that he has terminated you, but he has. He has stated that he will no longer honor the agreement by which you were employed by him -- the guarantee of reliable pay -- so he has terminated it.

Depending on your jurisdiction, you may be required to provide notice to your employer. You should do it in writing.

You must make it absolutely clear that you are not agreeing to any modification to the terms of your employment.

"You have notified me verbally that you will not be paying my salary on a regular basis as agreed. However, the guarantee of a regular salary is precisely the reason that I was working for you. Your removal of that guarantee and threat to fail to meet your payroll obligations despite my satisfactory work on your behalf renders my working conditions intolerable. If you cannot repair this immediately, I will consider myself to have been constructively terminated due to these intolerable conditions as of this Friday, the date on which you informed me that you no longer intended to honor the agreement under which I was employed."

  • 1
    I'd appreciate an explanation from the downvoter. If I'm unclear, I'd like to clarify what is unclear. If I'm incorrect, I'd like to know it. – David Schwartz Jul 10 '17 at 1:03
  • I didn't down-vote, but I suspect the down-votes came because you're providing legal advice, and you should, at a minimum, disclose your qualifications (or lack thereof) to provide legal advice. – Kent A. Jul 11 '17 at 16:49
  • At least I'm not giving him the terrible advice that many of the other answers are giving him -- to constructively agree to a reduction in his salary by continuing to work. All his employer has to do is pay him minimum wage and argue he agreed to the reduction in salary and he's screwed. (Been there, done that.) – David Schwartz Jul 11 '17 at 17:02
  • "I'm not qualified to give legal advice, but at least I think my advice is better than the other advice given here." Your advice is actually good advice, but since legal questions (and answers) are out of scope for this site, anyone providing legal advice should at least let folks know whether they're really qualified to give it, or whether they've just read enough legal stuff to sound official. – Kent A. Jul 11 '17 at 17:08

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