Trucking marketplace startup Convoy is facing a proposed class action lawsuit from a former employee, less than a week after the company’s sudden shutdown.
The complaint, filed Wednesday in federal court in Seattle, alleges that Convoy violated a federal law passed in 1988 known as the Worker Adjustment and Retraining Notification (WARN) Act.
The law aims to protect workers by typically requiring either a written warning at least 60 days before a layoff, or 60 days of severance if advanced notice is not provided, for companies with 100 or more full-time employees.
The complaint alleges that Convoy laid off staff without providing 60 days advance notice.
The Seattle-based startup, which built technology to match truckers and shippers, abruptly shut down last week. On Tuesday, Convoy submitted a WARN notification to Washington’s Employment Security Department (ESD), stating that 533 people were laid off due to a closure.
Convoy did not provide employees with severance, according to an internal video call last week viewed by GeekWire.
The complaint asks the court to provide affected employees with 60 days of wages and benefits.
We’ve contacted Convoy about the lawsuit and will update this story if we hear back.
The WARN rules include exemptions to the notification and severance requirements “when employers can show that layoffs or worksite closings occur due to faltering companies, unforeseen business circumstances, and natural disasters,” according to the U.S. Department of Labor.
A “faltering company” can be eligible for a reduced period of notification, according to the WARN Act, if an employer has been “actively seeking capital or business at the time that 60-day notice would have been required.” That includes seeking financing or refinancing via loans, issuing stocks or bonds, or pursuing other sources of money or credit.
However, the act notes that this exemption “should be narrowly construed” and does not apply to mass layoffs, but only to a “plant” that is closing.
Convoy told employees it spent the past four months trying to find a buyer but ultimately wasn’t able to ink a deal.
Convoy CEO Dan Lewis said Wednesday that he was “heads down” working on a deal “that will include some of the Convoy team and our tech/services,” according to a post on LinkedIn.
Michael Pfingsten, a former customer experience specialist at Convoy who joined the company in 2021, filed the complaint on behalf of similarly situated employees.
Pfingsten is represented by Tacoma, Wash.-based attorney Julian Hammond, who separately represents tech workers in a series of class action suits filed earlier this year related to wage theft law.
GeekWire earlier this week reported about Convoy’s potential WARN Act violation. A Detroit-based law firm focused on labor rights said it was investigating legal claims related to Convoy’s sudden closure.
Convoy raised $260 million in equity and venture debt at a $3.8 billion valuation 18 months ago. The company at one point employed around 1,500 people.
Source: Geek Wire