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Not sure if this the right place to ask but here it goes:

We (myself and 2 founders) found our startup about a year ago. Then we brought on an employee to work part-time and had him sign a contract. This is before we were incorporated. The contract said something like this:

  • 2% equity which will vest over two year
  • Employee must put 15 hours per week minimum
  • If he leaves or gets fired before 90 days then contract is voided

It worked out OK for first few months but then he (part-time employee) got busy with work, so he didn't participate much. Then he took a month long vacation. Then we had some family obligations and didn't work on he idea for few months. We haven't heard from him since June of this year.

Now, we are back on it full speed and we have incorporated the business. Here are my questions:

  1. He wasn't as good as we expected, how do we end or void his contract

  2. Since we said contract will void if he leaves or gets fired before 90 days. The 90 days have passed and we didn't fire him and he never said he is leaving. Are we still obligated to give him the 2% equity.

What is the best way to go about this and get the contract without giving up any equity.

Thanks in advance.

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You're going to need to talk to a lawyer about the specific wording of that second clause, especially in regards to vacation time. However, while it might be legal, I'd consider it immoral to consider him 'breaking' contract if you weren't providing him work. From the (current) information provided, I'd likely consider him eligible for that 2% (but IANAL). Other than that, the contract should eventually 'expire', and any well-written contract has early-termination clauses. – Clockwork-Muse Oct 2 '12 at 23:42
Thanks for your reply. We were providing work but he was not able to complete due to work/personal reason. I'm also thinking about reaching out to him and see if we wants to end it with a good note. Maybe we can pay him for the hours he worked. – user19965 Oct 2 '12 at 23:51
Was the 2% equity his only compensation? – Kekito Oct 3 '12 at 2:16

2 Answers

up vote 1 down vote

You're going to need a lawyer, or at least an HR professional. There's really no way round that unless you want to leave yourself open to lawsuits later. You might try talking to the guy and seeing if you can agree terms to terminate the contract voluntarily (and make sure you have him sign something to say that he has agreed to that). Firing someone is a minefield, and firing someone 'with cause' (i.e. trying to prove they haven't done what you asked) is and even bigger minefield.

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up vote 0 down vote

I'm not a lawyer, and I'm UK based, so seek local advice but:

Anyone in the UK who is an employee for less than 1 year is easily sackable. You don't even really need a reason.

Anyone part-time is easily sackable.

The part-time employee broke the contract - a) he didn't work 15 hours per week minimum, b) the vesting is not happening because you're sacking him.

So if you want to be heartless, it should be easy to sack him and pay nothing. Probably better would be to pay him for the time he put in if equity was his only compensation.

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