is my old boss giving me a bad deal?

October 27, 2012 5:59 AM

I was terminated three months ago and have recently been offered to take over my old division as a new company. Details inside.

I was terminated from my company about three months ago but I am still (maybe?) great friends with the owner. I am a professional in a highly specialized area of technology and am under a non-compete for 9 more months. Needless to say, its been very difficult to find a job in which I specialize in. She also has not provided me my final check which I understand why because the company was always struggling financially. Still, I am upset by this immensely.

She has since offered to me in several emails the division I was the lead in because, hey, we were good friends and I can't get a job in what I am good at anytime soon. What would happen is that my former division would split off into another company and that I would be the new owner of that division.

My skills involved directly handling projects from our clients, bringing in between 650 to 50,000 dollars per project. She has offered me a Lehman formula based system of compensation, which after my review appears to be insulting. The percentages she proposed work heavily in her favor; the more I bring in, the higher the percentage she gets. For example, on the low end of the scale she wants 60/40 her way on everything below 10k and on the high end of th scale, she wants 80/20 her way if the project exceeds 100k. Her reasoning is that she is providing the equipment, referrals, insurance and office space. These are specialized tools that were expensive but have certainly depreciated in value since I was there.

Is it common to use the Lehman formula in situations like this? On a personal end, I am the caretaker of several family members and have a mortgage to pay, funds are dwindling fast and have even interviewed for several jobs but was turned down because I appear to be over qualified.

I am meeting with her again to discuss this and would like to know if her offer is really fair or is she really taking advantage of my situation.

Please let me know if there's anything I may add that may help understand this question better.

posted by anonymous to work & money (22 answers total)

This totally sounds like a way for her to continue earning that money without having to pay for your entire division. Which is skeevy as hell.

She knows you're desperate, and she's taking advantage of you.

If she was really looking out for you, she'd give you your last check and get rid of that no-compete clause. It sounds like she's looking to get rid of the whole division, so it's not like she's going to be competing that much in the market.

But, instead, she gives you a formula that essentially rips you off, where you're working for her but not getting paid.

Run away. Run away now before it all ends in tears.
posted by Katemonkey at 6:13 AM on October 27, 2012 [11 favorites]

I agree: this situation is bad news and should be avoided. And you know it's illegal of her to withhold your paycheck, yeah?
posted by Specklet at 6:23 AM on October 27, 2012 [7 favorites]

Why would you want to work for someone that has refused to issue your last paycheck after three months?

This sounds sketchy, I would refuse this offer.
posted by HuronBob at 6:23 AM on October 27, 2012 [3 favorites]

I'd refuse this first and foremost because you haven't received your last paycheque. If she won't pay that, how can you trust she'll pay you at all?
posted by toerinishuman at 6:33 AM on October 27, 2012 [1 favorite]

This sounds sketchy, and the non-compete is almost certainly unenforceable unless she's paying you severance. Talk to a lawyer.
posted by snickerdoodle at 6:36 AM on October 27, 2012 [3 favorites]

Note that IANAL, but I have been a business owner, and have received legal advice regarding non-competes.
posted by snickerdoodle at 6:38 AM on October 27, 2012

"I am a professional in a highly specialized area of technology and am under a non-compete for 9 more months."
Can you talk to a lawyer if this agreement is valid?

IANAL: Generally, courts will enforce non-competition agreements if....the covenant not to compete is supported by consideration, meaning that the employee received something in exchange for it. (Like higher pay, pay period after layoff etc.)

"What would happen is that my former division would split off into another company and that I would be the new owner of that division."

Well, how much of this company would YOU own? On the other hand, as long as it does not reinstate or extend your non-compete agreement you are not loosing much and can always walk away later. And again, your non-compete might not be valid.
posted by yoyo_nyc at 7:30 AM on October 27, 2012

This sounds sketchy, and the non-compete is almost certainly unenforceable unless she's paying you severance. Talk to a lawyer.

This. And, don't talk to this person anymore, this kind of arrangement does't sound common, and moreover, why would you work for a company that's always struggling? If it's struggling, there's probably some serious flaws in it's model or execution, including shady practices like firing someone, pretending they can't get a similar job elsewhere while withholding their last paycheck and trying to hire them back at a fraction of the cost! Classic sinking ship techniques. Go get a new job and let them sue you if they have the resources.
posted by Potomac Avenue at 7:48 AM on October 27, 2012 [2 favorites]

Wait just a minute! This could be an opportunity for you.

How often does one get a shot at their own business, without all of the immense start-up costs?

If you don't like the offer, come with a counter offer that is significantly in your favor, after consulting with a CPA, lawyer, and biz specialist. You'll likely end up meeting in the middle, since you will now have a "gauge" to how close/far you'll be to your desired structure.
posted by Kruger5 at 7:56 AM on October 27, 2012

Your non-compete applies if you are terminated? Have you discussed this with your local employment commission?

Anyway, no. This is a scam. Go get whatever job you want, they can't afford to sue you.
posted by Lyn Never at 8:05 AM on October 27, 2012 [5 favorites]

How often does one get a shot at their own business, without all of the immense start-up costs?

It doesn't sound like this would in fact involve ownership of the business. It sounds like an unpaid managerial position with a weird upside-down commission structure. It's also a heads I win tails you lose situation for the real owner: if the business succeeds she gets most of it, if it fails it's your problem.

Run like the wind.

Also, noncompetes are for suckers. The first step in negotiating your next salary is to refuse to sign the noncompete clause. Talk to a lawyer and find out if your current one is enforceable; it may not be.
posted by ook at 8:37 AM on October 27, 2012

So you're under a noncompete clause, and this woman is dangling an offer to let you run a new obviously competing business? It sounds like she's fishing to try and get you to break your noncompete so they can never pay you that last paycheck by claiming you broke your contract. They may be working hard to ensure that there are as few outstanding debts as possible before filing for bankruptcy.

Neither of those things are going to fly. Your noncompete is most likely bunk (as most are when written by a bunch of morons of the type who is trying to get you reeled back in), and it's illegal to just not pay a final paycheck regardless of employment termination situation.

Run fast and far, screw the noncompete. If you need help retooling your resume, feel free to MeMail me, I can help.
posted by juniperesque at 8:51 AM on October 27, 2012 [1 favorite]

Run like the wind. 

Without a 1stattempt at negotiating things in his favor? That would make no sense. I clearly wrote consult with a CPA, lawyer, and biz specialist first. Then, come with a plan that the OP loves. If she accepts, it is a win for the OP. To suggest that the OP simply walk away implies the OP is a simpleton, easily duped, and "safer" to run away.

non competed are for suckers

This is a reckless statement - many many companies require a non compete, and refusing to sign one could easily lead to an offer being withdrawn, and false bravado to people reading your advice who may inadvertently shoot themselves in the foot. Instead, one can negotiate the terms of the non compete to reduce the restrictions (scope, time, etc). Signing one does not make you a sucker.
posted by Kruger5 at 9:11 AM on October 27, 2012

Noting about this smells right, at the very least you need to lawyer up if you even consider this, which I personally wouldn't, and I'd lawyer up just to evaluate the non compete.

A couple of things:

1) This is a business relationship, not a friendship - you don't get paid by friends.
2) This is a BAD business relationship, you haven't been paid. In most places this is bad news, no matter what shape the business is in.
3) You signed a non compete, fine great, whatever it's likely unenforceable depending on your field and language, you need to speak with an attorney about this because it's clearly impacting your ability to find work in your field and may be totally irrelevant.
4 ) The compensation model offered is *bad* for you and sounds great for her, if you go in to this offer her a commission or rent the necessary space/gear/etc from her...and most importantly, you haven't even been paid for work performed thus far or a hybrid.

The comments saying to view this as an opportunity - there are limited details on the sector, base costs to start up, etc. The narrative in your question indicate a less that trustworthy relationship and someone taking advantage of a friendship. You don't owe this person anything and even after terminating your employment they are still trying to get an edge up on you.

This is not how friends or responsible business owners treat people.
posted by iamabot at 10:11 AM on October 27, 2012 [1 favorite]

I'm going to disagree pretty strongly with the other posters - the offer actually gives you a leg up on getting what you need.

First, you can get your final paycheck out of her by telling her that you can't negotiate in good faith while you're still owed money.

Second, it sounds like this pay structure is bizarre and incentivizes fucking it up on purpose. Counter with something that is more in your favor that you'd be willing to take. Might be worth consulting with a lawyer to help shore up your counter offer, since this sounds like a pretty big deal.

The worst that happens, if negotiations fall though, is nothing. You'll be exactly where you are now. There's really nothing to lose by trying to work with her to come to agreeable terms, so I really disagree with everybody saying "run".

Also, as others have mentioned, your noncompete is very likely to be unenforceable. Go find another job in your field if this doesn't work out (after double-checking with a lawyer, of course).
posted by zug at 10:51 AM on October 27, 2012 [1 favorite]

I recommend a bit harder line than zug: "I can't consider anything before I receive pay already owed." Simply leave it at that, and respond to any entreaties with the ol' "I'm sorry, that won't be possible." That said, this is a ripoff, but it sounds like you're going to have to string her along in order to get paid. If she still won't pay you, go to the Department of Labor. I also agree that at any rate, you should ignore any noncompete.
posted by rhizome at 12:02 PM on October 27, 2012 [2 favorites]

Yes, its a terrible deal, and you are being too nice and too understanding. Get your last paycheck from her. Go and see a lawyer about the non-compete, because it is preventing you from finding employment. This is not what non-competes are intended for, and I'm pretty sure (IANAL but I did sign a non-compete at my current job) that its unenforceable in your current situation. Get that sorted out first.

If you are interested in this deal, then you need to negotiate the deal to your advantage. The current deal is ridiculous. Use it as leverage to get that paycheck first, as a "show of good faith". Then re-negotiate so that the percentages don't favor you failing. Then bring a lawyer on board to check everything out. Then if you are unhappy with the deal, or she won't pay you your last paycheck, walk away with the secure knowledge from your lawyer that you aren't bound to the non-compete, and can find employment elsewhere. Keep that in your back pocket. You need that to give yourself negotiating space. Right now you have convinced yourself (or she has convinced you) that your choices are to struggle in poverty without finding equivalent employment, or to take her ridiculous offer. This is a falsehood and you have other choices.

My take on it is that your ex-boss knows you are too nice to negotiate strongly in your own favor, and is hoping you will agree to these ridiculous terms. The only one risking anything in this deal would be you. She already pays for this stuff, she is just hoping you will do her work for her, for a pittance. Its insultingly bad.
posted by Joh at 1:38 PM on October 27, 2012 [2 favorites]

Run away, but not before filing a wage claim with your state or local government. It's illegal to withhold pay and you don't need a lawyer- most states have online forms for just this kind of situation.
posted by drjimmy11 at 2:45 PM on October 27, 2012

1) You've been terminated from this company before, and they're not paying you what they owe you from before? Screw that.

2) The Lehman formula, based on my quick lookup, is a formula for paying commissions on things like financial offerings, where there is basically one transaction or related series of transactions under consideration. It's in essence a discount for doing a bigger deal, since the workload is similar regardless. I've never heard of that in ordinary sales, since larger projects/sales almost always involve significantly more time, more risks, and longer cycle times - your commission rate shouldn't go down. You could just as well make an argument they should go UP (but most sales commission plans are linear). Screw THAT.

If the noncompete is making it difficult for you to find work in a field you have training or education in, there's a good chance you can break it. I'd get a lawyer. I wouldn't work for these people again. I don't think this person is your friend.
posted by randomkeystrike at 2:45 PM on October 27, 2012 [1 favorite]

Are noncompetes enforceable in your jurisdiction? They are not universally enforceable in all US states.
posted by catlet at 8:11 PM on October 27, 2012

many many companies require a non compete

True story from my long ago corporate past: company lawyer hands me my contract. I flip thought it immediately to find the noncompete and cross it out. Lawyer nods approvingly and suggests I might want to take note of clauses X and Y as well. After the deal was concluded he acknowledged that they basically just put that stuff in there to see if you're paying attention. He is the one who used the exact phrase "noncompetes are for suckers" to me.

There's been a noncompete clause in every single employment contract I've been asked to sign (and even in a few freelance contracts, if you can believe the chutzpah of that). In all cases I've refused that clause, and it's never once caused the slightest hitch. Maybe my experience is atypical; there may be some companies that absolutely require noncompete agreements. If so they'll make that clear when you flag it as unacceptable, and by making an issue of it you have the chance to negotiate proper compensation if you do ultimately choose to sign it. (it'd be a deal breaker for me, personally, and I think for most experienced workers who don't want to get caught in the situation of being basically unemployable after leaving the job.) They're certainly not going to just peremptorily withdraw the offer at the first sign of you looking out for your own interests. Or if they do that's a bullet dodged, not an opportunity lost.


As for trying to renegotiate this deal: I tend to find that when someone offers me an insultingly bad deal as their opener, it's usually not worth the time to try to negotiate into something reasonable; better to just walk away. This is an appallingly bad deal.
posted by ook at 9:20 AM on October 28, 2012

From the OP:

I'd like to add another anonymous response sincerely thanking everyone for their sound advice. This is why I really value the MeFi community above others because of people like them. Even though funds on my end are short, I am meeting a business consultant and a lawyer to hammer out a counter offer and at the very least, I will demand my final check and to be released from my NDA since I basically was the division she has offered me, it'd be like preventing me to compete against my ghost.
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posted by jessamyn at 9:50 AM on October 30, 2012