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So was I an employee, or not?

Discussion in 'Business & Corporate Matters' started by JSC2019, Sep 4, 2019.

  1. JSC2019

    JSC2019 Law Topic Starter New Member

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    Jurisdiction:
    California
    Hello all, I am hoping someone can point me to a more definitive answer to this question than I have been able to find in my own searching.

    I am in California. In 2018 I began to work with a couple of people who were starting up a business that I had great interest in. As a self-funded startup they did not have the money to pay what my role would have cost, so they offered me exclusively an equity share in the company. My interest in what they were setting out to do was great enough that I agreed to work with no pay.

    After about a year I decided that it was no longer a good fit for me and decided to cease working with them. I received no wages in that time. Now they are asking me to sign a whole bunch of what I would call "exit paperwork" that is deeper and more complicated than anything I ever signed when terminating gainful employment at large companies in the past. The main point that jumped out at me is that they are calling this a resignation, and stating that I was an employee. I didn't think this was the case, but I'm not really sure what the legal status of what I was would be.

    I worked from home the vast majority of the time, mostly set my own hours (except for occasional meetings and a few other things that had to be at a specific time), and ultimately did things the way I saw fit. Was I an employee?
     
  2. PayrollHRGuy

    PayrollHRGuy Well-Known Member

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    Have a lawyer look at what they want you to sign. Odds are they are divesting you of your shares in the company.
     
    hrforme likes this.
  3. JSC2019

    JSC2019 Law Topic Starter New Member

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    Actually, believe it or not, it's just the opposite. They are giving me a (very) small cash payment (though it is not explained why) as well as all of my shares that would have vested in the past year. Of course they are worth next to nothing at this time, and I have no idea if they will ever be worth anything. But they are issuing them to me.

    I could certainly have a lawyer look over these documents but at $400/hr to do so, I can't justify it. At the moment I'm simply not going to sign anything for other reasons (there are a couple of other things in the documents that I don't agree with that are unrelated to my question) and really I have no incentive to sign them other than the cash payment and shares, assuming I believe they will have future value.

    I just don't feel right signing something saying I am an employee who is resigning, when I don't believe that to be true. I just don't know what the legal designation of "employee" is in this circumstance.
     
  4. adjusterjack

    adjusterjack Super Moderator

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    Did you have any kind of written agreement when you began working with these people?
     
  5. JSC2019

    JSC2019 Law Topic Starter New Member

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    There was a "Consulting Agreement" that I signed. A primary reason why I never understood myself to be an employee.

    In fact on reading it again now, it clearly states that I was engaged to function as an independent contractor. So I think that pretty much sums it all up. I should've just gone back and reviewed that again in the first place... I just forgot about it!

     
  6. cbg

    cbg Super Moderator

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    I'm not being snarky here, really I'm not. This is an honest question asked for a specific reason.

    If you do not believe you were an employee, what DID you think you were?
     
  7. JSC2019

    JSC2019 Law Topic Starter New Member

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    I understood that I was a consultant/contractor. Which as it happens is precisely what I originally signed on as. I've put it back to them that I am not an employee so, it's in their court now.
     
  8. cbg

    cbg Super Moderator

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    It is very easy to be an employee, legally. It is not so easy to be an independent contractor, legally. Essentially, you are an employee unless the IRS agrees that you are not.

    Again, I am not being snarky. I have not seen the paperwork. Given that you will be receiving your shares in the company, in what way do you believe it will be to your detriment if you sign the paperwork that says you were an employee?
     
  9. army judge

    army judge Super Moderator

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    If you don't understand a document you are asked to sign, don't sign it until seeking the advice of a lawyer.

    Bear in mind that what anyone tells you here isn't legal advice, myself included.

    Hire yourself a lawyer BEFORE you sign the document so that you fully understand what signing the document will do to (or for) you!
     
  10. JSC2019

    JSC2019 Law Topic Starter New Member

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    Ultimately I doubt it would make any major difference since I don't expect to be continuing to work with these people again in the future. I just didn't feel right about the sudden "employee" designation when I had previously signed a document stating that I was a consultant, and that I never operated as I would expect an employee to operate (coming in to work set hours, receiving compensation, etc.).

    Anyway it's moot now, after I pointed this out to them they have disposed of the entire document and we are merely going to sign an updated consultancy agreement that spells out the disposition of shares. Much simpler and more accurate IMO, so I'm happy with that outcome.

    I appreciate the input from you all... thanks!

     
  11. cbg

    cbg Super Moderator

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    Just keep in mind that "employee" and "contractor/consultant" have legal definitions. Employee is the default - if you do not meet the legal definition of contractor you are an employee no matter what you sign.

    I don't know enough about your situation to say what your legal designation is, but I do know if you legally are an employee, you and your employer cannot make yourself into a consultant by signing something.
     

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