Ask HN: What to do when you have your employer over a barrel?

[ontheground]

I'm in a weird situation. I'm a "freelance developer" with 1 client. That client is currently more than 12 months and $250k behind on payroll. They are presently on both on the verge of bankruptcy and projecting that an update I'm supposed to deliver tomorrow will generate 10M in revenue in the next year with silly growth beyond that. While their long term projections are a bit doubtful their short term projections are based on their customers' verifiable infrastructure commitments which are between 10x and 100x of the projected revenue.

I'm under intense pressure to deliver the update with the idea that it will enable them to generate enough money to pay off their debt, but this seems fundamentally wrong to me. Is there some other deal that we could work out quickly that would be fair to both parties and something that their board might agree to?

[yason]

First, consider your $250k written off. Don't hang on to it: doing so will only make you dig yourself deeper into ground and giving in to the client's demands in the hope of maybe getting paid. This will ruin any strategy to recover from the situation. You can't negotiate anything if you remove your ability to walk away. Leave the $250k and call that the clean state. That's the worst case that might happen so why not accept and start from it.

Secondly, do not deliver the update. That's the only thing you have that might give you some leverage. If they can't pay now, don't count on them being able to pay later. As others have suggested, a sizable portion of the company stock might be another option if you like to gamble. You'll have to think about the valuation, of course, and what the company might be in the future: a reasonable compensation might be 0.1, 1, 5, or 20% of the company. Given the current state of affairs, the stock becoming worthless is also one fair possibility.

If the company is as penniless as it seems there's no point in even suing to get paid. Next time, stop deliveries after one month if payments stop coming in.

[tata71]

They never said they were the only employee not being paid...

[RA_Fisher]

Yep. I wonder how realistic a 51% option would be?

[10x-dev]

Why don't they borrow $250k from somewhere else and pay you?

Spoiler: because it's easier and cheaper for them to sucker you into doing work for IOUs.

Ask for the cash or a piece of the company. Once you hand over the code, you don't have a lot of leverage.

[jbverschoor]

Don't try to get a piece of the company... Cut ties with them, as the headache and bs is not worth it. They will always try to screw anyone over.

Try to get whatever you can get out of it. Don't give a license of your code and technology.

[dpeck]

You have a very different view of “over a barrel” than most people.

Hard truth: the chances of you getting any of the money you’re owed, and any more on top of that is incredibly small. So small that the probably might as well be 0%.

Businesses that are going to be successful do not have a year+ of unpaid debt. And they are not betting their farm on an outsourced deliverable. The people you’re dealing with are “playing business” the way children “play house” except they’re doing real economic damage to everyone around them, yourself included.

That said, I can’t imagine this is real and is likely just someone trolling which is becoming increasingly common on HN.

[glaucon]

If the company owes you $250K then : don't deliver and; get a lawyer.

Make dam sure the company does not have access to the code in the interim.

If the company is in as dire straits as you believe there's every chance you're never going to see your money.

Sales projections for the new release are just hot air, the may come true and they may not. If the principals are so sure of the sales projections they can go and find some investors to raise the $250K. In the meantime you not providing the update may leave you open to various types of legal pressure and that's just one of the reasons you need legal representation.

I've been in this position for much, much less money. Like you the amount outstanding slowly, slowly grew and because I was more interested in tech than money I allowed it to happen. Don't allow the same thing to happen to you.

[Biologist123]

Talking from the perspective of a business owner:

Firstly, on the face of it, it looks like you are taking all the risks of equity without the possibility of a payday.

Secondly, if the business is owner-managed you’re in a strong position to ask for an equity stake in lieu of cash payment. That might be preferable to you.

But as suggested above, legal advice would be useful at this point.

[errantmind]

I agree with another comment posted here. If you are confident your work will generate a huge sum of money, and they haven't yet paid you, I'd ask for an equity stake with similar terms to the owners' stake (don't get screwed with an inferior share type).

Do not deliver the work until you get paid or they give you equity.

[mod]

Are they behind paying you? That's unclear. If they owe you 250k, I would probably have stopped a long time ago.

If it's not you they owe, you shouldn't be doing anything different than your contract specifies.

[rasz]

>12 months and $250k behind on payroll.

Do you mind working for me instead? My projections are $20M revenue in 6 months after deployment. I estimate it will only take you 6 months of free labor to finish my project.

[petrut_m]

Do NOT DELIVER!!!! Once you deliver you are disposable! You will not see a dime!!! Best thing would be to force them to pay in advance, and if they become bankrupt buy the client contracts and try to deliver the value with the help of a SW eng consultancy or other partners.

[jazzyjackson]

I'm reading "The Prize", a history of the oil industry. Chapter 1 introduces a Professor Silliman [0], who was commissioned to write a report on the practical fractionation of what would later become kerosene. When the investors became stingy and failed to make even a down payment, the professor left town, knowing their venture would fail without him. He was paid his asking price shortly thereafter.

[0] https://en.m.wikipedia.org/wiki/Benjamin_Silliman_Jr%2e

[xupybd]

This sounds crazy. They stand to make 10M and are relying on one external contractor to get them over the line. Yet they have not paid the contractor. Something is very wrong here. Either they are so hard up for cash flow they're almost done or they're abusing a key third party. I'd love to know more of the story.

[cyanotes]

It’s just manipulation tactics. These things wouldn’t work on intelligent people unless they go all out

[mbrodersen]

Don’t believe anything an employer tells you. Ask for hard evidence.

[danr4]

If they were that confident they would've found a way to get $250K and pay you for it. Sounds like they are putting that risk on you. Don't give them the code and get an attorney, I presume they broke the terms of your contract.

[mcv]

Are they 12 months and $250k behind on their own payroll, or on paying you specifically? Because that's an insane amount that never should have gotten that far.

Also, if they have a board, it sounds like they're not actually a small client, which means they can easily pay you what they owe you. Can they pay the salaries of their management? Then they can pay you.

[ontheground]

That is just me, though as I mentioned in a cousin comment it took some time for this to happen. Its not like I've just been working for the last year with out pay. Its more of a natural decay of their ability to pay... so 2.43 years +-

[justsomehnguy]

Var NFN: you don't deliver, they fail and don't pay

Var DFN: you do deliver, they fail and don't pay

Var DSN: you do deliver, they succeed and don't pay

Var DSP: you do deliver, they succeed and .. pay you? Why should they?

Your chance is 1/4 at best and 1/8, 12.5% realistically.

You credited them with $250k (1/40 of a potential revenue?), you won't find a quarter of million lying around.

As others already said - forget about that $250k. You now have a gambling chance to get something (way lower than $250k), but only if you demand the cash upfront.

PS: technically there is a variant NSP: you don't deliver, they succeed .. and pay you. It is only interesting in what it lowers your chance to 1/10. *grin*

[lrhegeba]

i suppose you are a freelancer, not an employee. 1. this debt shouldn't have accumulated in the first place. make sure it won't repeat itself 2. your update may resolve the liquidity crisis or it may not.

case 1: it resolves the situation. you probably get paid? case 2: it won't. you loose a lot of money

your bargaining chip is the update and you should use it as collateral. as one can easily misstep by impulsive action, you should get advice from a lawyer how to proceed to secure as much payment as possible. probably additionally implementing kind of a kill switch so your moneymaking update cannot be used after bankruptcy without your help/key. from my own experience: when we talk about bankruptcy it helps to act fast, so speed and options to pressure money from them help most. threats will just complicate the situation so please get a competent lawyer involved as soon as possible as you are entering a legal minefield; doing it yourself just guarantees higher risk to step onto a mine.

good luck

[mbrodersen]

Sorry but it is the employer who has you over a barrel not the other way around. They clearly have managed to manipulate you into working for free for a long time, and are continuing to say whatever it takes to squeeze even more work out of you for free. The rule is to never ever let a company owe you more than a month of work, and stop delivering the moment they don’t pay. My advise would be to say to them: pay me what you owe and I will deliver. Otherwise forget it. The claims made by the company are obviously BS. Unless they can provide evidence that they have (say) a signed contract with a customer worth $ millions.

[faangiq]

Exploiting code monkeys. So easy, yet so profitable.

[GrumpyNl]

It should never have become to 12 months and $250k.

[ontheground]

FWIW, it didn't happen over the span of 12 months. It took ~3 years to get this far behind.

[mod]

So did you deliver the update today?

[rdtwo]

No money no work. Make sure you get everything you are owed plus interest and penalties before you do anything more. Even better call your lawyer and figure out how to sue them into bankruptcy for what’s owed so you get first dibs.

[rmk]

Have an attorney draw up a demand letter for 250k and see how it goes from there. You are likely not going to get the amount that is due. Why throw good money after bad and waste even more of your time on an employer who is apparently not solvent?