A Sample of HR Crises Solved (So You Don’t Have To)
Even with a solid product, unmanaged people risk can sink a startup.
The missteps usually don’t start loud. They start small: a contractor agreement, a promise of equity, a manager given too much rope. But under investor due diligence or legal scrutiny, those “little things” can quickly become existential threats.
Here’s a sample of the HR crises we've been called in to fix and what founders can learn from them.
The Misclassified Hire
A SaaS founder had been paying a senior engineer as a “contractor” for two years. Looked fine ... until they went to raise. Investor counsel flagged it: back taxes, penalties, and unpaid benefits exposure. The raise almost died.
What we did: Reclassified the role, negotiated a backpay settlement, and built compliant hiring protocols. The round closed clean.
Founder takeaway: Misclassification risk is a deal killer. If you’re raising, fix it now, not in the investor room.
The Harassment Complaint
A Series A startup brushed off a junior employee’s harassment claim because “we’re a small family.” Six months later, the employee’s attorney came calling. The founder was blindsided and terrified of reputational fallout.
What we did: Led an internal investigation, implemented a complaint-handling process, and trained managers. The employee accepted resolution, and litigation was avoided.
Founder takeaway: “Family” isn’t a compliance strategy. Even small startups need a clear process for complaints.
The Wage & Hour Time Bomb
A growing e-commerce brand never tracked hourly employee breaks. One disgruntled ex-employee tipped off the Department of Labor. Suddenly: a six-figure backpay bill.
What we did: Audited pay practices, corrected timekeeping, and negotiated compliance terms. The company avoided a class action and reputational damage.
Founder takeaway: Wage and hour violations are low-hanging fruit for regulators. Track time right from the start.
The Equity Oops
A founder promised early employees equity through handshake deals. Years later, acquisition talks stalled when lawyers demanded documentation. Chaos.
What we did: Cleaned up offer letters, drafted proper equity agreements, and built a cap table policy. The deal closed without lawsuits.
Founder takeaway: Equity is not a handshake deal. Get it in writing — properly.
The Toxic Manager
One “star” sales lead was burning through team members. Exit interviews revealed bullying and threats. The founder ignored it because of revenue. Eventually turnover spiked, and investors started asking questions.
What we did: Documented performance issues, coached the founder through termination, and rebuilt a healthier culture. Churn slowed, investor trust held.
Founder takeaway: Protecting a toxic “star” costs more than it saves. Culture risk is investor risk.
The Bigger Lesson:
Startups can survive product pivots. What they can’t survive is unmanaged people risk. Each of these crises could have tanked a deal, a brand, or the company itself.
That’s why we built the HR Fire Drill: fast, founder-friendly triage for when you can’t afford to get it wrong.
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