I was told by a lawyer that I can file a wage claim against the startup I've been working with for the last 3 years. I am in the middle of equity talks with the owners of the startup. I want to use the wage claim as leverage during equity talks because the owners do not believe my argument that I was underpaid during my first 3 years at the startup; thus, their equity offer is below what I believe it should be.
Background: I helped start an online startup 3 years ago. I have run the operations at the startup since inception. We're an online educational startup selling training programs in a particular field. The startup is fully owned by two people (not me). I was working for these two people at another company they owned 4 years ago. A year in we started the online startup. Basically, the two owners developed content for a training program used for employees at the original company I worked for, and the online startup idea was to put the content online and sell it to people outside of the original company. My job in the startup was to turn the training program into something that would work for people online, sell it, market it, and train and manage trainees and developers (most everything).
At first, I never worked out equity with the owners, because I was still focusing on my job at the original company (a job in which I never made a dime), but now I only work on the startup. In my first year I agreed to take a small commission, 5% gross, from the sale of training programs I sold to people online, with no base salary. Several months later the owners agreed to give me 1k of the first training program I sold along with 5% commission; which moved to 7% commission if I sold 5 training programs or more. I made around 18k my first year and 24k my second year off commission in the startup (since I made no money off the original job, I was struggling to get by those first 2 years).
In the 3rd year the commission moved to 10%. I sell training programs every month now so they moved me to a base salary structure instead of giving me 1k of the first training program sold. Now I get a base salary of 1.5K every month along with my 10% commission.
The lawyer I talked to claims that I was supposed to receive at least 24k a year as a base salary for the startup to be exempt from minimum wage or overtime and other state & federal law. I never really had a base salary my first 2 years. Even now my base is only 18k. The lawyer claims that the commission I made on sales does not count towards the base salary as well. The only exception to the 24k base salary minimum would be if I owned 20% or more of the company (or if I was in the service industry).
Is this correct? I want to be sure before using it in negotiations. thx!
I have not heard the 24k figure exactly, but I think I know where it came from. If an employee is making commission on sales while working full time there are laws to handle the minimum wages for the salesperson.
My disclaimer is this applies to me in the US, in the state of Virginia. I believe it applies across the US but I am not sure about that.
So if you do not have a guaranteed constant supply of sales leads, then you must be paid at least the equivalent of minimum wage for your hours worked. This includes time-and-a-half for overtime worked, which is why I don't think the 24k figure is exact but is instead the average for 40 hour work weeks.
So if a salesperson is expected to find leads and close sales for commission, and does not manage to do so, the company must pay minimum wages.
Again, not a lawyer or a CPA, but had to do this with my own salespeople at a small web company.