Seattle-based freight network startup Convoy is facing a legal challenge after the company's abrupt shutdown this month.
On Wednesday, former employee Michael Pfingsten filed a class action lawsuit on behalf of Convoy employees who were laid off on Oct. 19, when Convoy co-founder and CEO Dan Lewis announced the shutdown of the company's core business and the termination of most employees, resulting in 533 layoffs.
The lawsuit alleges Convoy violated the federal Worker Adjustment and Retraining Notification (WARN) Act, which requires certain employers to provide at least 60 days' notice of a closure or mass layoffs.
The complaint, filed in the District Court for the Western District of Washington, is seeking 60 days of severance and benefits for Pfingsten and other laid-off employees, plus attorney fees.
A press contact for Convoy didn't immediately respond to a request for comment on the lawsuit.
The WARN Act, which took effect in 1989, is meant to give laid-off employees and their families time to adjust and find new employment. Affected employees can seek damages and back pay for up to 60 days if they don't receive notice from their employers.
According to the U.S. Department of Labor, employers must comply if they have 100 or more employees, excluding those on the job less than six months and those who work an average of less than 20 hours per week. The employers must provide at least 60 days' notice of a facility closure or a layoff of at least 50 employees at one site. There are exceptions, however, for "unforeseeable business circumstances, faltering companies, and natural disasters."
Faltering companies, according to the Department of Labor, include companies actively seeking new business or capital that can't disclose the layoffs because doing so would prevent them from getting the capital or new business.
Convoy filed a WARN notice with the state of Washington on Tuesday disclosing its 533 Seattle layoffs. Pfingsten, a customer account specialist with Convoy, started with the company in September 2021 before getting laid off as part of the shutdown. Tacoma-based class action firm HammondLaw is representing former employees in the lawsuit.
Lewis on Wednesday posted on LinkedIn he was "heads down working on a deal that will include some of the Convoy team and our tech/services, and more generally working to support others who were impacted." On Sunday, Lewis took to LinkedIn to respond to a post about the challenges of selling a company, saying Convoy had "credible inbound interest earlier this year" for an acquisition.
"We had strong relationships with other companies who periodically asked about deals," Lewis wrote on LinkedIn. "It was a warm start vs. just calling around. We got to the actual 1/2 yard line in a couple months, and then again. Something happened. We reset and expanded. There was no lack of interest in how the tech and biz worked."
Convoy, founded in 2015, connected shippers to trucking companies, or carriers, with the aim of reducing the number of empty miles truck divers spend on the road. Its customers included Home Depot, Unilever and Anheuser-Busch.
In April 2022, Convoy hit a valuation of $3.8 billion after raising $260 million between equity funding and venture debt. Since June of last year, however, Convoy conducted four rounds of layoffs and closed its Atlanta office, followed by the Oct. 19 shutdown. Chief Growth Officer Ryan Gavin said Convoy had about 1,300 employees, including more than 800 in Washington, at the time of the April 2022 funding.
