Trucking marketplace Convoy last week laid off a majority of its workforce without any severance — a surprising and sudden shutdown for one of the Seattle region’s biggest startups.
Now a Detroit-based law firm focused on labor rights is looking into the situation.
A federal law passed in 1988, known as the Worker Adjustment and Retraining Notification (WARN) Act, 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.
UPDATE: On Tuesday, Seattle-based Convoy submitted its WARN notification to Washington’s Employment Security Department (ESD), stating that 533 people were laid off due to a closure.
“We are investigating legal claims relating to the sudden closure and are providing information to workers who contact our office regarding their rights,” John Philo, executive director and legal director of Maurice & Jane Sugar Law Center for Economic & Social Justice, told GeekWire via email.
The Sugar Law Center regularly represents employees in WARN Act litigation across the country.
A Convoy representative declined to comment for this story.
In a video call with employees last week, viewed by GeekWire, Convoy CEO Dan Lewis became emotional after telling laid off employees they would not be receiving severance.
“Unfortunately, in the final hour of this, our ability to make that decision and our available budget was taken away by our lenders,” he said.
Lewis told employees they would receive wellness benefits through the end of October, and be eligible for COBRA through November.
The rapid response manager for the Workforce Development Council of Seattle-King County has contacted a human resources representative for Convoy regarding assistance for laid-off workers, according to ESD. Rapid response services include help applying for unemployment benefits, writing resumes, job search tips and more.
Convoy told employees it spent the past four months trying to find a buyer but ultimately wasn’t able to ink a deal.
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.
For now, it’s unclear what Convoy’s ultimate fate will be. In last week’s call with employees, Convoy President Mark Okerstrom said the company was still “exploring strategic options” with potential acquirers, but the language of the WARN notification called the event a closure.
Convoy previously laid off employees four separate times, beginning in June 2022. In April of this year it closed its second office, located in Atlanta. According to public records, Convoy filed a WARN notification for the Atlanta closure impacting 119 workers.
The WARN Act made headlines when former Twitter employees who were laid off filed multiple lawsuits against the company after Elon Musk took over the business last year and ordered mass layoffs. The former workers said they were let go without sufficient notification or severance, among other alleged labor law violations. One suit was sent to arbitration.
“Loyalty to a company’s workers involves more than public expressions sentiment, it also requires providing advance notice to workers of life-changing layoffs, so that individuals, their families, and their communities can plan for their future without the catastrophic upheaval that sudden job loss causes,” said Philo, the Sugar Law Center attorney. “And it requires following the minimal protections provided by federal and state law.”
Editor’s note: Story was updated Oct. 24 at 1:45 p.m. with information about Convoy’s WARN notification.
