Decentralized Autonomous Organizations (DAOs) are defined as the basis for managing the direction of a decentralized project through control of its assets. They provide (1) voting-based governance and (2) ownership and transfer of digital assets (the treasury). These two tools form the on-chain, trustless basis for creating almost any kind of governance structure.  DAOs offer many new possibilities for how human endeavors (labor and capital) can be organized in more efficient, impactful, and equitable structures. They enable the organization of capital through transparent systems enabling a more systematic iteration of governance structures. This paper focuses on the organization of labor for the benefit of all contributors within DAOs and the wider ecosystem.

At the beginning of 2022, there were already thousands of DAOs, comprising hundreds of thousands of individuals and billions of dollars in assets.¹, ² Technical contributors, in particular, have been leaving traditional technology companies and joining Web3 start-ups and open-source projects.³, ⁴ The preferred company structure for many of these Web3 start-ups is a DAO. Many existing businesses are attempting to transform into a DAO,⁵, ⁶, ⁷ and many new projects are starting as a DAO from the first moment they’re formed.

However, DAOs have a murky status as legal entities. The original DAO whitepaper in 2016 includes a prescient note:

Since that time, DAOs have evolved as a tool for organizing communities, with more human interaction and authority than initially contemplated. In turn, this has led to a deeper analysis of DAOs’ legal standing, with initial work broadly delineating two schools of thought about how to structure DAOs:

1. Pure DAOs are purely on-chain structures that have no recognition in existing legal jurisdictions, nor need for recognition to the extent that they never enter into regulated activities and never need a physical presence. ⁹, ¹⁰

2. Liability-wrapped DAOs seek to elect a legally-recognized entity in advance of being retroactively deemed to have been a default entity such as a general partnership (where all members are liable for all other members’ actions). The goal is to choose an entity and jurisdiction which can provide liability protection for members and the ability to transact in the physical world. ^{11, 12, 13, 14, 15}

Pure DAOs, where there is no attempt or desire to define a real-world legal entity in connection with the membership, treasury, or governance.

Liability Wrapped DAOs attempt to bind an incorporated or unincorporated entity to respect the blockchain-based governance decisions and provide a legally recognizable entity to transact with the physical world (including owning property and paying taxes).

Both types of DAOs currently exist, and it may be some time before the market settles on one approach, if ever. There may be philosophical or practical advantages to either approach, but this paper, like the original DAO paper, doesn’t seek to clarify or take sides on the issue.

Instead, we’re focused on the question, “How can either DAO structure legally hire, efficiently engage, and compensate contributors all over the world?”  For DAOs and the wider ecosystem to continue to sustainably scale, they need to overcome the challenges that this unclear legal structure imposes, specifically on employment and labor. This turns out to be incredibly difficult.

There are predictable phases in the adoption of any new technology. In the first phase, the market identifies how it can incorporate this new technology into existing systems to make things work faster, better, cheaper, more compliantly, and with greater transparency. In the second phase (once adoption has occurred), emergent and far-reaching opportunities arise. Without substantial adoption of the internet, many familiar Web2 brands from Amazon to Zillow would not exist today.

We are just entering that first phase with DAOs. DAOs are a new way for humans to organize labor and capital. It’s a new form of organization that the market is trying to incorporate into existing structures to make things better via Investment DAOs, Collector DAOs, Service DAOs, and many more.

Many of these DAOs and Web3 native companies are struggling with the task of ensuring that the DAO isn’t inadvertently entering into any regulated activities,¹⁶  in particular through employment relationships. And, if they are, ensuring that they are complying with laws in every jurisdiction where they have contributors. This part of the equation feels akin to hitting a brick wall for many DAOs, as labor regulations present perhaps the most involved requirements of any type of regulation in human history. They are among the oldest rules, with deep contextual common law interpretation, and they are often the most varied across jurisdictions.^{17, 18, 19, 20}

Alongside this, the regulatory scrutiny for Web3 has increased dramatically over the last year. The fundamental promise of a DAO is a jurisdiction-less and frictionless tool to organize contributors all over the world. Yet, human contributors are hyper-jurisdictional:²¹ They live in specific countries or states, must maintain proper residency or visa status, are required to pay taxes, and must comply with all laws and regulations in their jurisdiction.^{22, 23} DAOs’ lack of legal clarity makes it hard for many individuals to engage in DAO-based work fully without giving up on many of the things they require to live, such as taking out loans or having a basis in which to pay taxes. This presents a difficult conflict at the intersection of on-chain governance and off-chain regulatory compliance. The implications of these vary depending on the structure of the DAO:

• Pure DAOs: In the case of a pure DAO, following the reasoning that no real-world entity exists (implicit, default, or otherwise), such organizations have absolutely no legal standing; they can’t employ or contract people, or even own property (such as the intellectual property created by contributors.)

• Liability-wrapped DAOs: In the case of a liability-wrapped DAO, following the reasoning that a physical-world entity is important for the purposes of shielding members from liability and transacting with other parties, wrapping is a step in the right direction towards being able to transact with contributors. However, the wrapped DAO is now subject to all liabilities related to any employment relationship that it engages into with any person in the world. That means, for example, employing a US citizen would subject the entity to all US labor laws and regulations (and possibly tax or security laws), or hiring someone in Japan would subject the entity to following Japanese labor laws, including having a corporate presence in Japan and meticulously following a multitude of labor statutes.²⁴

However, this is just one pain point in the provision of legal, compliant, and equitable employment in Web3. There are numerous difficult problems that need to be solved, and they are complex enough that solving these issues can end up consuming the entire focus of the DAO, distracting from the original mission. A few examples include:

• Organizing and operating global payroll for crypto and fiat

• Paying proper taxes on fiat, crypto, AND token distributions, in every country and jurisdiction

• Categorizing contributors as employees or contractors

• Solving collective social / labor issues such as health benefits, family benefits, paid holiday, retirement, DEI and training, and many more

• Delivering HR services to assure good working conditions and to remove discrimination or hate from the communities (and comply with strict labor guidelines to that effect)

• Avoiding regulated activities when appropriate (No DAO wants to inadvertently find themselves regulated by or paying extra taxes to a jurisdiction where they don’t do business simply because contributors happen to be living there)

Regardless of the type of DAO (pure or liability-wrapped), the only practicable answer to legal and compliant employment is to “Employment Wrap” a DAO – that is, to choose the best corporate entity DAO wrapper for the purposes of hiring contributors.

However, employment wrapping a DAO is not nearly as straightforward as liability wrapping a DAO (already a complicated and uncertain endeavor!) In fact, there isn’t a single entity or structure which is suitable for global employment; rather a much wider conglomerate of global subsidiaries is necessary to comply with labor laws globally. This is intuitively the case as nearly every labor code in every jurisdiction requires a locally registered corporate presence as a precondition and ongoing condition to employment.²⁵  The practical costs of employment-wrapping every single DAO separately are therefore prohibitive – it would be akin to creating over a hundred corporate entities, registering with countless labor acts and statutes, engaging in cumbersome KYC processes in every jurisdiction, opening bank accounts, and generally paying lawyers many millions of dollars for all related employment paperwork (and repeat the process for every single DAO.)

A common workaround is to outsource employment through traditional EOR/PEO services. These services are designed for providing organizations access to the best global talent. However, they are “top-down,” designed by the corporation, not the individuals who benefit from it. While they work as an interim solution, they are inadequate in the long-term for Web3 organizations and DAOs.  These traditional employment services are not designed, nor have the capability to answer some of the fundamental questions, specific to DAOs, such as:

• How do we bridge the gap between existing off-chain regulatory structures and the world of Web3?

• How do we compensate contributors in a variety of tokens such as Restricted Token Units (RTUs), Restricted Token Agreements (RTAs), NFTs, and many more, legally and compliantly?

• How do we support our contributors to manage and pay their taxes on any mix of crypto, fiat or token compensation?

• How do we support contributors to be working on multiple projects for varying DAOs at the same time?

• How do you manage contributors under a distributed governance structure?

Before the launch of WorkDAO, DAOs had few effective solutions, or at the very least no legal, compliant or equitable solutions, for employment. Most DAOs are either adopting higher compliance risk or spending a prohibitive amount of time and money piecing together an inefficient solution. DAOs enable organizations and individuals to coordinate resources and people towards a common cause at an unprecedented scale,  but they are currently hampered by a failure to effectively onboard the people critical to their success.

WorkDAO: The Web3 Employment Partner

It is prohibitive for any DAO to create an employment wrapper individually, but an employment commons with centralized investment in regulatory compliance globally could share that benefit to all DAOs. That is why we established WorkDAO.

WorkDAO is the Web3 Employment Partner that enables DAOs and Web3 organizations to hire and compensate contributors, anywhere in the world, legally and compliantly.  We bridge the gap between existing regulatory structures and the innovation of the Web3 ecosystem. WorkDAO provides stability to contributors without the sacrifice, uncertainty, and legal concerns that contributors currently face, while providing DAOs legal and compliant access to the best global talent, without the cost and effort of setting up and maintaining their own employment wrapper.

Our approach is to create a common global structure that can maintain a presence in every jurisdiction to follow all relevant labor laws, assist in properly paying taxes, and meet other statutory obligations. All DAOs can contract (smart or wet-ink) with this layer to gain the benefits of employment wrapping their entity without the associated cost, time and pain.

This common layer aspires to remove every pain point and friction associated with hiring contributors throughout the world while maintaining regulatory compliance for DAOs and contributors, including:

• Web3-native employment services

• Token tax and payroll processing

• HR support services

• Indemnification of employment liability

• Intellectual property (IP) custodianship for DAOs

Today
WorkDAO has established the infrastructure today to employ, contract, or otherwise engage every contributor directly, provide full HR services and statutory compliance in over 40 different countries and 51 U.S. states and territories (including Puerto Rico), and then sell consulting services of those employees back to DAOs through on-chain smart contracts with pure DAOs, wet-ink contracts with wrapped DAOs, or a mix of both.

We are solving the most complex employment challenges for DAOs and Web3 organizations - as well as Web2.5 and Web2 structures and corporations looking to assimilate more on-chain and distributed processes in their operations. In this way, WorkDAO is building a community of the world’s most forward-thinking  organizations and contributors, and as such those community members are granted rights to participate in the governance of WorkDAO itself.

The Future
‍WorkDAO’s goal is to provide employment infrastructure for all DAOs and evolve into a future public utility by creating a sustainable economy and active community of contributors. As the contributor community grows, WorkDAO is set to solve much bigger problems for contributors and DAOs in labor and contributor experience, such as;

• Creating collective benefits and services available to all contributors like health benefits, family benefits, paid holidays, training, and career support

• Strengthening what it means to create a safe and equitable working environment for distributed contributors and communities even when not required to do so by local regulations

• Working with governments to modernize the existing outdated, contradictory, or gray area global labor regulations, and anything else which the WorkDAO community elects to tackle and deploy treasury resources against.

We believe that DAOs have created the opportunity to re-organize the world’s labor. WorkDAO’s goal is to become a public utility to support positive workplace experiences in the DAO economy, facilitate the next wave of growth within Web3, and re-imagine social labor programs for globally consistent and fair support of all DAO contributors.

As the world transitions to the community-driven model of Web3, there is a growing need (driven by increasing regulatory scrutiny and legislative pressures) to find solutions that support compliant operations without diminishing the fundamental values of the ecosystem: decentralization, autonomy, ownership, etc.

WorkDAO is that solution for Web3 and DAO employment. Designed by Web3-natives for Web3 challenges, WorkDAO is offered as a decentralized DAO-to-DAO (D2D) or DAO-to-Web3 (D2W) service and described novelly as a “Web3 Employment Partner” in this paper. A Web3 Employment Partner acts as a blockchain-to-real-world bridge between DAOs and every country/state/jurisdiction on the planet, allowing for all types of labor transactions while providing solutions to all the common challenges faced by DAOs today.

Our solution is designed to provide regulatory compliance to DAOs, Web3 organizations, and contributors alike for all matters of employment and labor, including: employment services tailored for Web3, universal contributor benefits and HR support, expertise and solutions for token and crypto-specific tax management, and much more.

We have lofty ambitions and this is only the first iteration of our service. As we grow and become a fundamental partner to some of the leading organizations around the globe, we will evolve and iterate to ease the next wave of challenges and points of friction for our customers as outlined in this section.

WorkDAO achieves this by creating a legal presence in every country and complying with all regulations related to hiring contributors in those countries, which is a requirement for legal employment. Our commitment to this task is underpinned by our guiding principles, dictating how and why we act globally:

1. Follow the Law. Don’t depend on gray-area interpretation of laws and regulations, always make it black and white, and always follow both the letter and the spirit of the law. When in doubt, clarify with relevant authorities.

2. Serve Contributors. We have the opportunity to create a better level of expectations for work, with more flexibility, more self-determination, more benefits, and safe work conditions. We can and will make the world of labor better than where we found it.

3. Shield DAOs. WorkDAO are the experts at labor regulations, taxes, HR, contributor management, and all the other hard people-related problems so DAOs can focus on fulfilling their mission.

4. Build for the Future. We are creating the foundation for the new labor economy – a public utility serving all DAOs and all contributors. WorkDAO should be self-sustaining and focused on improvement.

Both types of DAOs currently exist, and it may be some time before the market settles on one approach, if ever. There may be philosophical or practical advantages to either approach, but this paper, like the original DAO paper, doesn’t seek to clarify or take sides on the issue.

Instead, we’re focused on the question, “How can either DAO structure legally hire, efficiently engage, and compensate contributors all over the world?”  For DAOs and the wider ecosystem to continue to sustainably scale, they need to overcome the challenges that this unclear legal structure imposes, specifically on employment and labor. This turns out to be incredibly difficult.

WorkDAO offers solutions to three customer segments: DAOs, contributors, and Web3 organizations. Often a combination of all three products will be necessary to fully support all stakeholders, particularly when supporting teams and companies which are in the process or planning stage of transitioning to a DAO structure.

WorkDAO is designed so that DAOs can be free to build any contributor compensation structure which fits their mission without having to solve the regulatory and legal hurdles associated with those choices. Alongside this, we will provide leading HR and contributor experience services to support and empower contributors.

• D2D Contracting of WorkDAO’s full-time employees.
  WorkDAO hires talented employees designated by our customer DAOs; they are made available to work on those DAO’s projects, under the direction of our contributor experience partners, who ultimately take direction from our customers’ governance mandates or specified managers.
  
  To be clear, we are the employer in fact (not just of record.) However, we work carefully to ensure that those employees are made available to work on customer DAO projects as desired.

• B2D Contracting for self-incorporated contractors.
  WorkDAO manages self-incorporated entities for contributors who want to run their own Business-to-DAO (“B2D”) consulting business and qualify as an independent contractor under WorkDAO and its service provider's classification tests. WorkDAO provides lightweight HR services to ensure that B2D contributors are treated fairly by their work colleagues under our code of conduct, although overall statutory obligations may be lesser than that of our full-time employees.

• Token compensation & taxation
  ‍DAO contributors expect different options for compensation structure, including crypto, fiat, or a mix of both; however, it’s difficult for DAOs to provide these options while complying with local regulations. This has been a grey area of regulation in recent times with little clarity on the expectations or rules around how these assets and currencies are regulated. WorkDAO addresses this by having a comprehensive understanding of the labor and taxation laws in the regulatory jurisdiction in which we operate, including:
  
  - Relevant employment laws (minimum wage, etc.)
  
  - Fiat tax laws
  
  - Token & equity laws
  
  - KYC regulations
  
  - Money transmitter legislation
  
  Our proprietary Token Tax Engine leverages our jurisdictional expertise to automatically calculate and distribute the required tax burden of contributors within their local jurisdiction. WorkDAO’s comprehensive database of live tax and securities laws is vetted by our in-house team and is being audited by local experts. We have the only solution to accurate calculations, globally, which facilitates token payroll and prevents any surprise tax bills.

  After the Tax Engine calculates the relevant tax withholding, WorkDAO performs a “sell-to-cover” transaction to exchange crypto for fiat to pay the local tax authorities and ensure the employee is paid the right amount.

• Intellectual property custodianship/receivership 
  WorkDAO facilitates payments to contributors in exchange for consulting services that may create intellectual property.In the case that a WorkDAO customer is a pure DAO, it may be unclear if there is an entity that can legally own the IP, so WorkDAO acts as the custodian of the IP, agreeing to manage, transfer, or dispose of the IP as directed by the customers DAO’s governance mandates (or that of an appointed individual.)
  
  In the case of a liability-wrapped DAO, scenarios may arise whereby retaining proprietary IP within a corporate entity can risk increased regulatory scrutiny. WorkDAO can act as an offsite custodian for IP in this case to avoid this.
  
  In either scenario,  if there has been an appreciation of the value of the IP during the period of custodianship, WorkDAO optimizes for tax and other regulatory implications at the point of transfer.

WorkDAO’s employment services are open to other organizations too. This is particularly helpful for companies that hope to transform into a DAO, but are not ready to formally decentralize. By transitioning workers carefully, companies can operate in an increasingly decentralized fashion until, and if, they are ready for a full transition.

WorkDAO offers a product called DAOify, which is full-stack support for traditional corporations that intend to launch or transition to a DAO structure. WorkDAO provides consultation and a comprehensive transition plan based on the specific details of the corporation’s jurisdiction and employee and contractor roster. This product is not deemed legal advice but will provide support for transitioning and retaining employees in the process of transforming into a DAO.

WorkDAO can work with individual contributors directly, to support them for the seamless transition to a DAO-centric career. The nature of DAO contributor pools is increasingly bottoms-up – people find interesting projects to work on and start contributing. As soon as contributors receive compensation, however, they immediately have several potential problems to contend with:

• Creating a liability shield separating their professional work from their personal liability

• Paying appropriate income or contracting taxes on fiat, crypto and tokens to each relevant tax authority (and paying in the most tax efficient manner)

• Participating in benefits programs such as health insurance, retirement planning, etc.

• Personal wealth / tax planning for token and coin distribution plans

• Immigration and visas (in lieu of a full-time job there is no sponsoring entity)

In fact, the default state of a DAO might be akin to a general partnership, and the default state of a contributor might be a sole proprietorship. The contributor could even end up as part of the general partnership if they accept governance tokens and participate more directly in DAO governance. In this world, they could be personally liable for anything that anyone in the DAO did on behalf of the DAO. WorkDAO provides solutions specific to contributor needs and can help them manage these risks effectively.

WorkDAO hires contributors directly in any jurisdiction, thus assuming all the usual employer obligations of any typical corporation in that jurisdiction, including payroll, benefits, paid leave, family leave, etc.

This is a serious commitment, which is not for everyone, as it is full-time work with all the expectations which come with that type of work. Typically, WorkDAO will only hire individuals who are very skilled and committed to contributing to WorkDAO or its DAO customers directly, or who have skills that are specifically of interest to a specific WorkDAO customer.

WorkDAO mediates and assigns all work to the employee, including all HR onboarding, performance reviews, equipment, benefits, terminations, etc. WorkDAO’s typical approach is to facilitate tasks with a specific customer until there is no demand (e.g. that customer  DAO shuts down, stops investing in an area, or generally or specifically wants to cut work capacity). Afterward, WorkDAO will attempt to find a new match with the employee’s skill sets and other customer DAOs, or with WorkDAO itself.

At a certain point, if there is no work to be found, WorkDAO will amicably end the working relationship with that employee in accordance with local labor laws. This process is by no means sudden, and it is well documented, communicated, and fair, and WorkDAO always leaves the door open to re-hire an employee if there is a future need.

WorkDAO offers services to both DAOs and contributors, ultimately acting as an intermediary to allow talented people to contribute to DAOs, and DAOs to compensate their contributors. WorkDAO is designed so that DAOs can be free to build any contributor compensation structure which fits the mission, without having to solve the regulatory and legal hurdles associated with those choices. WorkDAO is a DAO-to-DAO (D2D) service, intended to evolve into a public good in the DAO ecosystem.

WorkDAO is the single point of contact with DAOs but will offload the operational lift of labor compliance to professional employer organizations (PEOs) as service providers which operate real-world corporate and HR infrastructure. WorkDAO is therefore a relatively simple organizational structure that includes a wrapping entity for contracting with the physical world and with service providers.

WorkDAO is very strict about the quality of service providers and maintains and enforces a very high bar of quality and operational standards expected of a service provider. As of May 2022, the market is distinctly lacking service providers who qualify with the Web3-native standards required, but the hope is to create an example that potential providers can aspire to. To that end, we will start by operating WorkCo to seed the WorkDAO ecosystem. 

WorkCo is a Web3-native employment platform that is designed from the ground up to fulfill all the goals and requirements set out by the WorkDAO service provider standards. WorkCo’s infrastructure and compliance programs have been built over the last 18 months. This process has been comprehensive and diligent to ensure regulatory compliance with increasingly complex global tax, employment, labor, and financial regulations and is the standard to which we hold all other service providers. 

In order to operate the service today, WorkDAO initially contracts with the WorkCo service provider.

WorkDAO is the thought leader and guardian of best practices of all service providers and HR services, including the templates and documents used for employment, contracting, taxes, and other aspects of contributor management. WorkCo is pioneering this work as the first Web3-native service provider. 

Service Providers are required to follow the standards adopted by WorkDAO. This document is a summary and does not seek to describe every detail of the standard, as they will be developed and evolved over time. 

• Employment Services: The service provider should offer legally compliant employment services in every covered jurisdiction. These services are typically called PEO or EOR services, and it is required for service providers to provide proper legal structure, registration, licenses, and compliance with all local laws. Existing EOR/PEO solutions fall short of meeting the fundamental requirements of Web3 organizations as they do not have the infrastructure in place to deal with token payroll, taxation, employment classification specific to the contribution model, and much more.

• Payroll Services: The service provider should provide crypto and fiat payroll services in every covered jurisdiction, including the fulfillment of all statutory obligations related to operating payroll. The process for fiat and token compensation are significantly distinct and varied, requiring specific competencies and understanding of local & jurisdictional regulations across the globe to ensure compliance.

• B2D Incorporation & Management: The service provider should offer incorporation services for contributors who are interested in setting up their own consulting business for DAOs. At a minimum, this service should be offered in globally accepted jurisdictions (US, Cayman, Singapore, etc.) and ideally in the local jurisdiction of the contributor

• HR Services: The service provider must offer HR services whereby contributor employees are able to do weekly or bi-weekly check- ins. These services should comply with all local labor laws, as well as the WorkDAO constitution.

• Effecient & Legal Tax Support: The service provider should be ready to provide support for all statutory obligations (withholding, filings, etc.) at a minimum, and ideally provide access to tax and accounting advice to allow contributors to make the best decisions about compensation structures. The service provider should be an expert at token-based compensation including stable coin payroll and (vesting) token distributions in the covered jurisdictions.

• DAO Governance Support: The service provider should aid WorkDAO and its customer DAOs in generating governance proposals related to contributor compensation, as well as provide advice on best practices.

• Customer Success: The service provider should appoint a customer success representative with clear SLA guidelines on response times for support to assist WorkDAO or its customer DAOs with anything necessary to ensure the smooth function of contributor engagement.

WorkDAO seeks to become a fully operational DAO as soon as practical. We believe the solution we are building is a shared good for the DAO and wider Web3 movement and are determined to be directed as such. For the community by the community.

Initially, a temporary DAO will be created and operated by WorkCo, as the sole centralized decision maker. The goal is to get the business off the ground while a constitution is adopted and ratified by the prospective community. Most items in this section relating to WorkDAO governance is specific to the governance structure which will be adopted after the temporary phase, apart from initial funding and some aspects of taxes and treasury management.

‍Every other section here is a work in progress, and the temporary DAO is expected to continue to evolve the governance structure based on feedback from the community and global experts before going live.

WorkDAO is contemplated as a Nevada-based Unincorporated Nonprofit Association, similar to Muse0 the online museum, and as described in the a16z paper. Nevada is chosen as a business-friendly jurisdiction that has adopted the full body of the RUUNAA. Further, Nevada falls under the USA’s intellectual property regime, which largely influences or governs international IP law via various conventions and treaties. This is important to the extent that WorkDAO is the custodian of intellectual property.

WorkDAO is exploring other options, such as a Delaware Non-stock company.

WorkDAO operates to some extent like a government and to some extent like a non-profit endowment. 

• Taxes on contributor payments 
  WorkDAO has a simple model: charge an X% tax on all services, initially set to 7%. The term tax is often used as a negative association typically to signify an extractive business model, however, WorkDAO uses this term to assert that with a tax by a governance body there should be commensurate services provided by that governance body and that everyone should have a vote.
  
  The initial tax rate is set at 7%  to grow the treasury, hire the initial team, vet service providers, and start considering governance proposals for additional services. This tax rate may be adjusted by a vote of all members (including DAOs and contributors) at any point.
  
  Initially, the DAO customer base will be expected to pay in liquid crypto assets for payroll or fiat currency, and the treasury will take 7% of those coins or tokens. In practice, this means that the WorkDAO treasury will likely be made up of a combination of ETH, BTC, USDC, and other stable coins on-chain, and cash in a corporate bank account controlled by the DAO.

• Taxes on contributor distributions 
  The WorkDAO tax also applies to token distributions which are made available to contributors in connection with their work. This is partly because WorkDAO sits between the contributors and DAOs in facilitating token distributions, as is necessary to comply with labor laws, create tax-efficient structures globally, and prevent customer DAOs from inadvertently participating in regulated activities. Maintaining these services has associated costs, and ultimately can provide far more than the 7% in ultimate value for all parties.
  
   NOTE: The service provider will also charge fees. The constitution may limit those fees.

WorkDAO contemplates a token for governance and a token for payments. Neither of these are intended to be a source of funding through public sales or private pre-sales. 

• Governance Token: The governance token is specifically not a part of the economy; the goal of the governance token is to give a vote to stakeholders. As in modern democracies, buying and selling your vote will not be permitted for WorkDAO Governance.
  
  Governance tokens will be awarded to DAOs, contributors, and service providers automatically by the work protocol in connection with ongoing contributor relationships. As DAOs pay WorkDAO for services they will receive governance tokens in exchange. As WorkDAO pays contributors for services, it will also distribute them governance tokens. In this way, the true stakeholders in WorkDAO will also be the voting members.

• WorkDAO Token: A potential “Work Token” is contemplated as a future means of currency for the labor economy of DAOs. At present, it is unclear which type of technical architecture for a cryptocurrency would be best to facilitate the long-term goals of the WorkDAO economy, so this is left open.
  
  Given that the labor economy of the real world is so large (the salaries of all workers in the world), it stands to reason that the digital labor economy can be just as large. By backing a currency with real labor transactions, WorkDAO is well positioned to create an economy with massive liquidity and velocity of money.
  
  Staking requirements in the case of indemnification of service providers, or as guarantees of good behavior from DAOs or contributors could be an important part of aligning all interests and adding teeth to any WorkDAO judicial system.

WorkDAO is initially funded from two sources:

1. WorkDAO can accept non-refundable prepayment for services from DAOs or companies which intend to use the WorkDAO service.

2. WorkDAO can accept non-refundable grants from DAOs or companies which want to facilitate the bootstrapping of the WorkDAO ecosystem, as approved by WorkDAO members. These granters will receive a nominal distribution of governance tokens, thus welcoming them into the membership of the DAO.

The WorkDAO constitution will be outlined at a later date, but the following is a high-level summary of the critical areas of governance that are important to WorkDAO’s success.

• Contributor Bill of Rights: This is a statement of fundamental rights that WorkDAO will always support for contributors, such as the right to a safe working environment, or the right to be treated fairly with respect to race, color, national origin, sex/gender, religion, age, etc. The CBR can be amended to create future rights, such as access to health care, family leave, etc.

• Voting: Voting is designed to make it difficult to amend the constitution, but relatively easy to admit new members (both contributors and DAOs). Safeguards are set up to protect the rights of the majority of wallet holders in the form of vetoes. (e.g. large token holders can’t force through changes unilaterally.)

• Taxation: All contributor payments and token distributions are taxed by WorkDAO as payment flows through the system; this tax rate can be amended or changed, so long as appropriate economic analysis has been conducted and included in the governance proposal

• Arbitration: WorkDAO sits as the intermediary of DAOs and contributors, DAOs and DAOs, and contributors and contributors. Any disputes that arise under the WorkDAO constitution can be governed through escalation to human intervention, ultimately to duly elected adjudicators who serve as a form of a system of courts that uphold the constitution.
  

• Social Programs: WorkDAO starts off with large long-term ambitions to create the best possible working conditions for DAO contributors that the world has ever seen. Out of necessity and true equity, however, WorkDAO starts off relatively modest with respect to the initial inclusion of those programs. Future programs will require funding and study, so the goal is for the structure of the WorkDAO governance model and bureaucracy to facilitate that evolution over time. Here are some examples of programs that may be contemplated:
  
  - Universal collective health insurance
  ‍
  - Universal paid holidays (even when not required under statutory local law)
  
  - Universal family leave
  
  - Universal retirement / pension planning and contribution
  
  - Career development and placement services
  
  - Fair access to higher education and training
  
  - Universal immigration and visa support
  

WorkDAO has two seemingly contradictory goals: (1) to comply with all labor regulation and statutory requirements in every country on earth, (2) to create new self-mandated and enforced regulations for the global work pool. However, these two goals are not contradictory and can be achieved in parallel. 

WorkDAO will always choose to follow its guiding principle of “Follow the Law” in terms of adhering to the letter and spirit of the law in each jurisdiction. However, WorkDAO also seeks to follow the spirit of all labor laws in creating new self-regulations where no global standards exist, particularly in the area of cross-border regulation gaps.

WorkDAO is therefore set to bring many non-compliant companies and DAOs into immediate compliance, and further ensure compliance with future regulations as they evolve.

WorkDAO considers itself the ultimate employer of any employee in any jurisdiction and considers its service provider the employer of record (EOR) in those jurisdictions. Therefore, WorkDAO expects its EOR to be incorporated in the jurisdiction and possess all relevant licenses and registrations necessary to employ people. Further, WorkDAO mandates proof of HR services, benefits, holidays, and compliance with all other statutory requirements.

It is clear that many global EORs (sometimes called PEOs) are not fully complying with local labor laws, and are being used as a means to circumvent regulation. Therefore, WorkDAO takes a dual-pronged approach:

1. An exceptionally high bar of proof that a service provider (as EOR) is properly following all rules and regulations

2. WorkDAO itself is responsible for any mistakes that occur. WorkDAO expects to be held accountable for situations when a service provider EOR/PEO makes a mistake, accepting responsibility as a co-employer.

Simply put, no other EOR / company relationship is structured this way or admitted to being structured in this way, such that typically there is no ultimately accountable party. With WorkDAO, there are multiple accountable parties with (hopefully) sufficient resources, and a mandate to partner positively with every local jurisdiction.

Almost every body of labor law is focused on businesses that operate and employ people within that jurisdiction; however, there is a gap in how to apply cross-jurisdiction labor laws. In many cases, the gap means that it might, for example, not be illegal for a company to condone a B2B contractor in the UK harassing an employee in India. Other examples include fairness, equity, and equal access might not apply across jurisdictions, allowing for “second class” workers.

WorkDAO’s philosophy is that global regulatory frameworks will eventually fill in these gaps, but there needs to be a forward-thinking model. The WorkDAO Constitution and Labor Bill of Rights is an attempt to fill those gaps in the most forward thinking, labor-friendly, and aligned-in-spirit ruleset and implementation. 

Ideally, as WorkDAO grows our constitution can serve as an example framework for global regulators to model global treaties and conventions. When that happens, to the extent that those new rules are incompatible with the WorkDAO constitution, we will amend.