04/24/2026
"I'll pay them in equity!" Founders and early employees frequently work for “free” or for sweat equity, viewing their unpaid labor as a badge of honor or a necessary bridge to a seed round. But, this team player mentality is actually a legal time bomb waiting to explode.
Many founders believe that if a team member agrees to work for free in the early stages of a startup, that agreement is a binding contract. Under California law, this is a fallacy. Minimum wage and overtime protections are non-waivable statutory rights. Even if a co-founder signs a document stating they are happy to work for equity alone, that agreement is void as a matter of law.
Contact Sutter Law today if you are involved in a founder dispute and believe you need legal assistance navigating with the complexities of wages, and check out Tyler Smith's Blog Post on this exact topic on our website https://sutterlegal.com/business-law-blog/