Do all startups knowingly break California employment laws?

Lots of startups hire employees for equity only or for less than minimum wage.

According to an HR/employment attorney I know, it’s illegal under California law for someone to agree to work for less than mimimum wage. (not talking about founders) Independent contracting is technically not legal either since the company directs the person’s work. As a result, the current state of affairs is “hire for less than minimum wage and hope you never get caught or sued.” And this person further reports that acquirers have been known to try and lower a price when they do due diligence and discover early employees were paid under less than legal circumstances because the employee/contractor can always come back and sue, even IF they signed an independent contractor agreement.  

Why does no one ever talk about this? How is it we’re all ok with this as a community? What is everyone else doing? I want to do the right thing by my hires, my company and the law.


  • If Airbnb and Lyft’s business models are based on breaking the law, breaking minimum wage laws is small potatoes.

  • Why does no one ever talk about this?

    It’s due to the fact that the number of “start-ups” ignoring state minimum wage laws constitutes a small minority.

    How is it we’re all ok with this as a community?

    Who constitutes “we”? I don’t find such practices acceptable.

    What is everyone else doing?

    I don’t know what everyone else is doing but I advise you not to ignore the law. As you have pointed out ignoring the law comes with its’ consequences. Just because it seems to be working out for others does not mean it will work out for you. Attempting to save a few bucks now via illegal means could cost you millions in the not-to-far-from-now future.

    • I can tell you that there are hundreds of companies on Angel List offering well below minimum wage for “interns.” talkign to founders 1×1 the standard rule of thumb is “hacking the system” and hoping not to get caught.

      I don’t personally plan to do this, but it does seem that there’s a dark side to “move fast and break things” that should be discussed more.

      taken farther it applies to airbnb and lyft too. at what point is breaking the law disrupting positively, and at what point is it just being a lawbreaker?

      I’m guessing it’s directly proportional to how much money you have in the bank.

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