A few weeks ago, the founder of our startup informed us that the company was out of money and that unless we secured external funding we would not be paid. We were encouraged to continue working in the hopes that funding would come in, we would be paid, and the whole affair would just have been a "bump in the road".

Everyone did continue working, but also looked for new jobs. All of us are salaried employees with some options, but no ownership in the company. We all have fairly standard employment agreements stipulating semi-monthly payment. All of us are located in Texas. Our employer is a Nevada LP whose managing partner is a Nevada LLC owned by the founder.

After six weeks, two of us found new employment and will start it this coming Monday.

I doubt that the company has the ability to pay us now. But I also believe that the founder has no intention of shutting down the company and that at some point it may be in a position to pay us.

I'm looking for any insight anyone has on the situation and have a lot of questions, but ultimately it all boils down to:


Despite the "bump in the road" speech, could the founder claim that our employment was terminated when our wages were not paid?
If not, is there anything we can do to strengthen our claim to our unpaid wages? i.e. submit formal letters of resignation to note the date on which we officially terminate our employment - in case the founder tries to assert that the termination happened earlier
Is there anything we need to be doing in order to ensure that we get paid if/when the company has the means to pay us?

Oh I forgot to mention that each of us had about 3 weeks of unpaid vacation. I'm also wondering if that would factor into a claim.

Quitting is never a good thing as far as UI claims go. Quitting will not certainly cause the claim to fail, but quitting will certainly greatly decrease the chance of claim suceeding. If we are talking about UI, it does not matter when the employer claims to have terminated you. The key is wages paid. Even if all parties agree that no termination has occured, the lack of wages generally is enough for the UI claim. The fact that you are still working complicates the issues. TX is not my state, and this is unusual enough that I do not know how TX will react.

Unpaid wages are legally very different then UI. You file a wage claim with federal or state DOL or a small claims or general court action. The big question is whether there are any assets to resolve the claim should you win.

Your decision, but I would take the following actions in order.
1. Start looking for another job now. Do not quit.
2. File a UI claim if you go as many as two weeks without pay. It sounds like that point has been passed. Again, do not quit. You quitting helps no one but your current employer.
3. At what point you either find another job or the doors on your current job, file a wage claim or court action for the unpaid wages. Or do so sooner if you want, although I am not sure how well the story you are continuing to work for no pay will play out.

TX is not my state but I am pretty sure that TX does not require vacation to be bought out. It is possible that your employer's formal policies could create such an action, although this would be very detail specific, generally starting with the exact wording of the policy.

I agree with DAW. I also recommend asking your boss, to write something that states that you are not getting paid for the work you are doing, so you can apply for any state assistance that can help with food, shelter etc, if you tell the boss this is why you are wanting the letter, and not to sue him later, there may be a better chance that he/she will comply with the request, if not, ask why not, it is the least he/she could do for the free work, is to make sure you can get government assistance because you DO NOT HAVE MONEY FOR FOOD. Here in Oregon we get food stamps if we have no income, or little income, I do not know what they offer in Texas sorry. I hope your boss does this, not just for the future wage claim, but so you can really really get any assistance that is possible when you have no income.

Thanks DAW and turbowray!

On Unemployment Insurance...

I'm a bit embarrassed that UI hadn't even occurred to any of us. It's probably too late for the two guys who are starting their new jobs tomorrow. I may give it a shot. I just reviewed our finances and we could use any help we can get.

When you say "don't quit", do you mean that I would need to continue working full-time (which would impede a job search) and try to collect UI during that time?

On Non-Payment of Wages

The main thing we are concerned about is non-payment of wages.

I learned that Texas has a Payday Law (http://www.twc.state.tx.us/news/efte/texas_payday_law_basics.html). Employees file a claim (within 180 days of non-payment) and the state (TWC) tries to recover the unpaid wages, including potentially putting a lien on the Employer's assets. It looks like we would all qualify for that, but I wonder about timing.

I don't think our Employer (the LP) or the managing LLC has any assets besides IP. The founder has a house with (I'm guessing) minimal equity. And I'm not sure if the Payday act would go beyond the LP. But in a few months they might all be doing fine.

I don't totally understand how liens work, but I'm wondering -- would it make sense to wait until the employer is in a better position to pay us and then file a non-payment claim, or should we just go ahead and do it now? Are liens only put against assets that might be sold, or can the state also put a lien on a bank account that effectively says "whenever you get some money, you must pay these guys"?

When you say "don't quit", do you mean that I would need to continue working full-time (which would impede a job search) and try to collect UI during that time?


If you quit, you probably will not get UI. If your employer fires you for taking time of work to interview you probably will get UI. Working full time may indeed impede a job search, but quitting will almost certainly impede getting UI.

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Regarding non-payment of wages, TX is not my state. If there are no assets, then obviously recovery is a problem. However, if you do not file a wage claim or court action, there is no chance of getting a judgement, and recovery is not even an issue if you cannot get a judgement in the first place.

IMO, your primary issue is finding another job that actually pays wages and that all other actions are secondary to that. No matter how you rephrase your question, that is going to be my answer. A maybe/possibly recovery at some distant point in the future IMO takes back stage to getting a real job now.

Your second issue is that qutting at best reduces your chances of UI, and with some employers reduce your chances of gettting another job. File the UI claim now why you are still working and not getting paid. If your employer wants to fire you for looking for another job, that is a GOOD THING for UI purposes.

At what point you have given up on this job, and you might be there already, file a wage claim or small claims court decision or talk to an attorney. Pick one, at random if necessary, but any one of these actions is better then no action.

When you apply for unemployment, they will ask your employer how much you are making, this information would be vital to your UI and also your future wage claim, if you go that route later. If your boss states you are making wages, and you are not, that can be used against them. Please let us know what happens when you go for UI. I agree 100% again with DAW that you should make UI first and formost, for to get any kind of state assistance, you need to show that you have tried to get help in ways available to you, and UI should be!! Good luck and please let us know the outcome of this.