Ask HN: Where do I report ethics violation at a YC startup?

[startupethics]

I have a report of a YC startup that done the following:

* Dismissed a summer intern with no pay and no recommendation (to save money). Intern stayed with us 2.5 months. Salary was promised upon good performance. Intern was dismissed at the end of internship, told off he is no good. I have the experience to tell, kid was actually fine and it simply was a 'frugal' money saving move.

* Hired H1Bs from India with no prior announcement in the office. This was not following legal immigration procedures. Had effect of changing cultural dynamics with no warning (became 100% Indian).

* Announced new stock grant to early employees as a reward (with 1 year cliff). In reality, diluted early employee stock 50% without any notification. At a later time (months) some employees accidentally learned that new stock issue had barely covered dilution. Employees who left lost money because of that dilution/cliff effect (on the order of 100k).

This had happened quite some time back, and wouldn't affect outcome of the startup and YC investment (company was acquired, years passed).

Where do I report it? Where other employees should report similar issues with YC startups? Would a report like this be of any use to YC? Will it kick out a founder from alumni network?

[trcollinson]

This sounds somewhat unethical, I guess. IANAL but frankly it sounds like the biggest mistake are:

1) If the intern was released and promised money but was not treated or paid fairly according to the written contract, then they should contact a lawyer and sue. If they did not do this, then it's hard to make an ethical argument about the situation. You might be 100% correct, but how can the issues be verified?

2) What you describe is against the law. However, it is not an ethical violation necessarily. It could be that they were not aware of their legal requirement. You could have turned them in and they might have been fined. But it's very hard to judge intent. Maybe they made a mistake. Maybe they posted but you missed it. Maybe their are unethical. How do you prove it? As for the cultural effect, that's not unethical. That may have been their intent. Why would becoming 100% Indian be unethical? If you don't like it as an employee, leave.

3) If you feel that the stock was diluted in a way that was against the law or in some way against your contract, you get a lawyer and sue. If you were slighted illegally for $100,000.00 get a lawyer. Prove it in court then prove it is unethical.

Proving ethical issues is like proving defamation. It's really hard. I guess you could write to the the partners at YC but you might come out looking poorly yourself.

[startupethics]

1) Yes. I still have connection with that former intern. Value of his contributions - my judgement and his following career is enough to make a clear call on that. 2) Unlawful practices are also ethics violations right? No, it should have been e-mailed + posted on the wall. No chance of missing it. 3) I don't care about $100,000.00. Not worth a lawsuit. And it is extremely easy to see 50% dilution and its effect. It's in the documents.

I'd rather avoid conflict and let YC deal with their founders / alumni. So what I'm asking, if there is an official public channel to report issues like this to YC?

[trcollinson]

Again, the members of the YC board are public, go ahead and write to them. They'll do what they do.

But do realize there is nothing at all that would require anyone to keep this quiet and not share that you were the one who made the complaint. If all of your points are true and provable, they are illegal (in some cases only civilly) and unethical. I would not make accusations like these without first proving that they happened in a legal sense.

I imagine being a successful YC alumni is worth quite a lot. If you were to make accusations against me and it lead to an adverse effect on my alumni status, you had better believe I would not hesitate to use my rather substantial amount of funds to sue you into a small ball of carbon. You had better be ready to defend yourself.

I'm not saying you shouldn't report the issues. But I would suggest you do so through the legal means to protect yourself.

[startupethics]

I'd be willing to risk lawsuit, if there is an official channel in the incubator to report ethics violations. And a general practice by the incubator to keep such reports and investigations relatively confidential. I think this would make risk/reward ratio to be good enough for me.

I don't know, if there is value for incubators to spend resources on that mechanism (maybe wealthier in a long term, if nerds could keep their lunch money? as per http://www.paulgraham.com/wealth.html ).

If there is no such established mechanism, I don't think risk/reward of reporting ethics violations is good enough. Precisely because the most likely outcome is being sued into a small ball of carbon.

[startupethics]

As a side note, the 50% dilution was not a normal dilution during funding round. No significant new money was invested into the company on that dilution.

[samfisher83]

Oral contracts are binding as well. If they didn't pay the intern he needs to go report it to his state workforce commission.

[trcollinson]

Exactly! Again, get a lawyer, go about things the legal way, make them pay for the unethical and illegal behavior.

[SmellTheGlove]

I'm not going to address the merits of any of the above, as I really can't get into legal advice, so please take this as simply some things to think about:

First, not all ethical violations are legal violations. You probably have a mix of things here. Consider what you want to raise, and who to raise it to, for each bullet. You may want to discuss with an attorney to decide whether any of these have merit line by line.

Most importantly, and especially if this is your employer, you absolutely should talk to your lawyer first before doing anything. I say your lawyer in the sense that if you do not have one, find one. Whether you're right or wrong, whenever you might stir up trouble for someone, you need to know what the blowback could be and your lawyer is the person to advise you on that.

I know I'm not really helping with your question head-on, because I really don't want to suggest who to raise ethical and/or corporate legal issues to - it's best to have that discussion with someone who is your attorney. I'd want anyone looking at this thread for similar reasons to get the same message.

[yshiran]

Obviously some of the actions are illegal (like not paying an intern, no matter the reason) and should be handled in court. Other way is to write about them in social media and create bad press on the company.

[techthroway443]

This happened quite some time back? Forget about it man, why bring this up now?

[startupethics]

I think it is a good idea to have official public channel to report ethics violations of founders. My guess is that YC partners would try to uphold https://www.ycombinator.com/ethics/ And quietly weed out rogue founders from the network. But this is just a guess.