A senior employee of a start-up company was dismissed together with all other employees due to financial difficulties the company suffered and filed a claim against the company and one of its founders who also served as CEO as of the incorporation of the company. Among other defenses it was argued that the employment laws are more flexible in startup companies and the company reached an agreement with the employee that the remuneration will be given by way of options to purchase company shares.
The Labor Court held that the employment laws fully apply in startup companies and the burden of proof to show that it was agreed with the employees to issue options in lieu of salary is on the employer. In any case, in order to issue options in a company a board of directors resolution is required and this does not exist. The labor Court also held that the shareholder is personally liable for the debts of the company to the employee because he was well aware of the company's economic status and that it will not be able to meet its obligations to the employee and also because he mixed his assets with the assets of the company and even charged the company high sums for his work and thus emptied its pockets.