Uber Lawsuit Alleges Employees Were Misled On Equity Compensation (techcrunch.com) 39
An Uber employee has filed a lawsuit accusing the company of misleading employees about their equity compensation. Uber "devised a fraudulent scheme to recruit highly sought software engineers," according to the case. From a report on TechCrunch: The lawsuit claims that Uber promised a more tax favorable type of options at the time employees were hired and then later changed the plan. The case alleges that at least 100 others on the Uber staff may have been impacted and that these stock options can potentially be worth "hundreds of millions of dollars" to employees and also save Uber "millions of dollars of tax deductions." The plaintiff, Lenza McElrath, who was previously a lawyer and is now an engineer at Uber, says that he was under the impression that all his shares could be treated as ISOs, which do not require an upfront tax bill. He said he was later given a notice about a change to the exercisability schedule, that effectively turned most of his shares into NSOs, which are taxed at the time they are exercised. While many startups allow their shares to become exercisable over the course of a four-year vesting agreement, Uber has share agreements that become exercisable after just six months. In other words, Uber employees can buy the stock they are entitled to shortly after they gain employment.
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Equity is the biggest scam there is
If you work for someone trustworthy, equity is a gamble that can pay of bigly. Particularly ISOs subject to an 83(b) election.
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The lottery is also a gamble that can pay off bigly. But I wouldn't recommend it as a career.
I can't influence the outcome of the lottery; but I and my fellow equity-holding colleagues can influence the outcome of our equity, and we are strongly incentivized to do so. Which is a large part of equity's value. It's a calculated risk, and characterizing equity as "the biggest scam there is" is shortsighted and ahistorical.
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Have you checked the small print? You might have a lot less influence than you think if you own a different class of shares to the founders, who can issue more whenever they feel like it.
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So few software engineers seem to know about early exercise and 83(b) that I have ended up having to make it part of my negotiation demands -- successfully, but it's more painful as the lawyers need to get involved.
In one case, they insisted I meet with the company's lawyer (from a firm, not on staff) just so the lawyer could tell me about the "risks" of early exercise and 83(b) -- of course with the disclaimer that "we are the companies lawyer, not your lawyer and we recommend you consult a qualified tax a
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You might want to read the article or summary, this isnt about drivers its about developers.
Not sure why developers being thrown under a driver-less car is news. Must be a slow day.
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You want a full time job being a taxi driver, go apply at a taxi company.
At least in America, most taxi drivers are either self-employed or contractors that either own their taxi or lease it on a per-shift basis. Few taxi drivers are W2 employees.
Uber is an extra money deal, not a job.
That is true for drivers, most of whom work part-time. But if you read the summary (or even the headline) you will see that this is not about drivers. It is about programmers, who are full time employees.
Nice one... (Score:2)
Who would have thought about that.
Now, I would get that they exercize their share options a lot sooner than most. So, I would think there would be a catch.
Re:Nice one... (Score:4, Insightful)
A company that behaves in an unethical manner in the marketplace also deceives employees.
Or in this case, a company that behaves in an unethical manner towards low paid employees also deceives their more skilled employees. These developers didn't seem to care they were helping their company create a new servant class, but they sure noticed once their company started acting in a similarly unethical manner towards them. It's kind of like a spouse who knows their partner makes money being deceptive and ignoring regulations at work and then is outraged when that spouse has another lover on the side.
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People in power require others to do their bidding, some are more complicit than others.
But in the end, the powerful will try to discard themselves of their promisses and of people.
Uber stock isn't worth anything though (Score:2, Interesting)
Uber lost 800 mil this quarter. They're projected to lose 2.6 billion next year. And that's not even accounting for cities turning on them and employees wanting proper compensation.
Uber is fucked. So go ahead, fight for your worthless equity.
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There is negative brand association though, for instance, I use Lyft almost exclusively because the owners of Uber are such well known douchebags.
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As numerous failures from companies like Apple, Microsoft, and Google show, it takes more than tons of money, a lot of engineers, and a desire to enter a market in order to actually be competitive in it.
shocking! (Score:4, Insightful)
You're saying that a company that is infamous for skirting the law and screwing people over is skirting the law and screwing people over?! How unpredictable! ;)
Hindsight is 20/20 (Score:5, Insightful)
You're saying that a company that is infamous for skirting the law and screwing people over is skirting the law and screwing people over?! How unpredictable! ;)
But were they infamous for that when they were hiring the early-hire developers in question? Or did they only develop the reputation AFTER the developers had built the platform and the executives used it in ways that screwed over the "line workers".
Hindsight is 20/20. How were the engineers hired to build the infrastructure to know, at the time, that they were going to be shafted in a way even the early-hire shafting executives of most Silicon Valley startups would never dare? This strikes at the fundamental draw for engineer hiring for startups. If it becomes common practice, the startup-driven innovation cycle could collapse. Uber needs a big, public, spanking over this, to nip it in the bud.
Tigers never change stripes (Score:2)
But were they infamous for that when they were hiring the early-hire developers in question?
If they are unethical scumbags now they probably were back then too. We just know more about it now.
Re: Hindsight is 20/20 (Score:3)
Yes back then they were illegal in all their markets. They hadn't yet gotten anyone to write special laws for them retroactively legalizing them a few places.
Re: shocking! (Score:2)
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Many executive teams screw everyone they can for everything they can. They rip off customers, cheat their staff, scam their investors and plot tax avoidance schemes. This whilst fluffing the books to inflate their salaries and bonuses. They then jump out crashing companies with golden parachutes to land safety whilst everyone else crashes and burns. This they all arranged by stealing company funds to pay corrupt lobbyists to buy ever more corrupt politicians to write laws, which allow those executives to ge
Re:I don't understand (Score:5, Informative)
I must be misunderstanding something. "Does not require an upfront tax bill", to me, sounds exactly like "taxed at the time they are exercised".
You do indeed misunderstand. Let me mansplain it: If you exercise an ISO, you now own the stock, but you don't pay tax until you sell it. So if you hold onto it for at least a year after you exercise it, you can then sell it and only pay tax at the low long-term capital gains rate. An NSO is considered like cash income at the time it is exercised, and is immediately taxable. If you hold onto it, and the stock price declines, you can get royally screwed because you still owe tax at the exercise price, not the sale price. During the dot-com implosion, this bankrupted a lot of ex-tech employees that were slammed with a huge tax bill at the same time they were laid off and holding worthless stock.
Short answer: ISOs are always better than NSOs.
Only guy complaining? (Score:2)