Former Zulily employees are bringing a class-action lawsuit against the online retailer, which shut down in December before being sold in March.
The lawsuit, filed Monday in the U.S. District Court for the Western District of Washington, centers on whether Zulily's former private equity parent company Regent complied with the federal Worker Adjustment and Retraining Notification Act of 1988 while conducting mass layoffs last year. According to the lawsuit, remote employees, who were still assigned to physical Zulily locations, didn't receive the required 60-day notice or pay-in-lieu-of-notice the WARN Act requires.
The lawsuit alleges Regent consulted with its lawyers and decided it could avoid giving the notice or pay to fully or partially remote employees due to a loophole.
"This was not accurate, however, and the WARN Act does in fact cover remote workers who are affected by a 'plant closing' or 'mass layoff' as defined by the statute," the lawsuit reads.
Neither Regent nor Zulily's current parent company, online retail company Beyond Inc., have yet responded to a request for comment on the lawsuit. HKM Employment Attorneys is representing the plaintiffs.
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According to the lawsuit, Zulily's closure resulted in layoffs to 839 employees, including 292 employees assigned to the company's former headquarters in Seattle as well as and hundreds in Nevada and Ohio. The lawsuit, which is on behalf of applicable remote employees in Washington and Nevada, alleges Zulily and Regent only provided notice or pay to in-person employees.
The lawsuit also notes that even if Zulily employees worked remotely, they were still assigned to a physical Zulily location. The plaintiffs are seeking damages, attorney fees and other costs.
The WARN Act 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.
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, according to the U.S. Department of Labor. The employers must provide at least 60 days' notice of a facility closure or a layoff of at least 50 employees at one site, but there are exceptions for "unforeseeable business circumstances, faltering companies, and natural disasters."
The Department of Labor notes faltering companies can 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.
Zulily, founded in 2009, offered clothing, toys, shoes and more, and it went public in 2013 with a reported valuation of $2.6 billion. In 2015, Qurate, then Liberty Interactive Corp., acquired the company for $2.4 billion. West Chester, Pennsylvania-based Qurate also owns the home shopping networks QVC and HSN. The company recently decided to focus on its core business of video streaming commerce, leading to the May 2023 sale to Los Angeles-based Regent for an undisclosed amount.
Zulily went through multiple rounds of layoffs last year, including one just weeks after the sale to Regent. Multiple vendors last year complained of unpaid invoices, and some filed complaints with the Washington state Attorney General's Office.
Zulily in December decided to sell its assets to satisfy creditors, and liquidation firm Gordon Brothers in January announced it was selling all of Zulily's inventory and two warehouses in private treaty sales.
Beyond paid $4.5 million for the brand assets and intellectual property of Zulily this year. Zulily's website is again selling goods, but the website is still soliciting ideas and says more is coming soon.
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