Ethics of startup company side-consulting during slow times, and who keeps consulting pay

Question

I've worked for a startup tech company for the past year. It has 4 people. The startup started to run out of funding 3 months ago, and we took on a BtoB consulting gig with a partner company that would pay our 4 salaries exactly. It would take about 60% of our time and allow us flexibility to reconsider a pivot for our original startup in the other time. It kept paychecks coming too.

Around the same time, we came across a side freelance gig that we as a group would do in the off time, each of us a different role for it. It would be paid through the company, though one of us personally found the gig on the side. This was considered a side project to normal high priority work, and to get it done when we could. We're all used to side projects so this meant in the off hours of the work day or at home.

The question I'm asking, is whether it is appropriate for the company to accept all the freelance contract pay or if it is more ethically inclined to split the payment amongst workers in addition to normal salary? We're paying paid salary for one role we do, and the freelance gig is in all ways a side project with some significant hours. We are not a consulting company by nature. The founder has suggested he might use the freelance gig to pay down some of the company debt, some of which he personally seeded. ie, it goes in his pocket to recoup company debt.

Aside from ethics, is it even legal for a company to have employees doing side consulting work beyond the scope of their job role, and not paying them for it? Is there a limit to what is considered within the scope of excempt from overtime, full-time salary?

Answer 1

Regardless of what you say your company does, it is largely doing service work. If all your revenue is via services, you are a services company.

There is nothing unethical or illegal about what your company is doing. This no different than any other professional services company in that your time is contracted to deliver an outcome at an agreed upon price within a specified time. What is unethical (and possibly in breach of a legal contract) is agreeing to work and taking the money knowing you can not complete it.

If you are an hourly employee then you should need to be paid for all time. If you are salaried and are working "longer" hours to cover additional services work, then you are still getting paid, it is just diluted. You need to discuss this with your CEO if you feel this is unfair. There are many options to comp for the type of work being done.

It seems like the company is at a fragile stage and sometimes you need to put the extra time in to fight through rough patches. This happens. The real question is this really where you want to be? Extended, long hours that are not exactly in the defined role happen in many other companies. If you like the work, the team, then talk to your CEO and try to work something out.

Good luck!

ps I'm sure the founder has extended himself financially, so I'm can appreciate his situation. Keep that in mind he generally has the right to take some revenue as a return on his investment.

Answer 2

The key thing is whether this extra work is part of your job. If you are in doubt, then you should ask, but some of the normal ways to tell are:

• Who is the contract between? If it is between your startup company and the company that wants the work done, then this is part of your work. If it is betwen you individually and the people who want the work done then it isn't.
• Are you doing this during your normal working time? Not just 9-5, but during the time you would normally work (probably longer than 9-5). If it's mostly during work time then it will be part of your work.
• Is it being done with company property? Same applies.

If the additional work is 'part of your work' then you can't expect any extra money for it. The contractee pays your startup for the work, and the startup uses that money to pay your salary. You might say "That's not part of my job description" and refuse to do it, but in most startups its expected that everyone does everything necessary to keep the company going.

Also, if you getting your salary while you work on the contract, and not doing all your usual work for the startup in addition to the contract work, then you can't exact to be paid extra for work you are doing instead of your usual work.

Logically speaking, the whole point of getting this additional work was to improve the funding situation of the startup. If all the money from the contract goes straight to you, how does that help the company? (Unless you agreed not to take salary while you were working on the contract.)