Dive Brief:

• Nextbite and Ordermark are facing a class action lawsuit alleging the company violated the Worker Adjustment and Retraining Notification Act (WARN Act) by laying off approximately 130 workers in May without the legally required 60-day warning or continuation of benefits.
• The suit was filed in the U.S. District Court for Delaware on June 2 by Alitza Portuhondo, a former Nextbite employee who was laid off without warning on May 15 and whose maternity leave was terminated on May 17, rather than July 17 as initially scheduled.
• Portuhondo alleges the company did not provide any notice to workers it fired in May, and claims Ordermark Inc, Nextbite’s former online order management arm, fired about 40 workers on May 5 and 90 on May 15.

Dive Insight:

Portuhondo’s class action WARN Act suit is the first public indication of the scale of Nextbite’s layoffs since the company’s job cuts became public knowledge in May. The complaint states, however, that Nextbite/Ordermark alone know the complete scope of the job cuts. 

The WARN Act stipulates that companies employing more than 100 employees provide notice for mass layoffs — defined as layoffs impacting more than 33% of the workforce at a single jobsite, and at least 50 workers — give workers 60-days advance notice. The act also requires such companies give notice for plant closures, defined as the closure of a single jobsite that impacts 50 or more workers.

The suit claimed the laid off workers were based out of Nextbite’s Denver headquarters. Per the complaint, the workers were not given the 60-day notice, which would have given workers time to find alternate employment. The WARN Act gives workers the ability to sue for pay and benefits for unnotified layoffs.

Portuhondo is seeking backpay and benefits, according to the lawsuit. Portuhondo’s child required neonatal hospitalization, and Nextbite’s job cuts left Portuhondo “uninsured and fac[ing] mounting financial burdens caused by the sudden cessation of coverage. She is uncertain as to level of healthcare she will be able to provide for herself and her child.”

In workers’ posts on LinkedIn detailing the job losses, employees said they were informed of layoffs the day they occurred, or the Friday before the week in which the layoffs took place. Other workers said they were cut without severance or warning.

After firing an alleged 130 workers in two weeks, Nextbite sold the Ordermark business to UrbanPiper, an Indian software company, in early June. Ordermark primarily served to streamline online ordering, while Nextbite operated a virtual brand platform, according to a blog post on the company’s site. Several days later, Sam Nazarian, founder of competing virtual brand and restaurant tech business C3, bought what was left of Nextbite for an undisclosed sum.

Portuhondo’s attorneys did not immediately respond to a request for comment about the impact of Nextbite’s partition and sale on the proceedings, or on the participation of other impacted employees. Alex Canter, who founded Nextbite and Ordermark, and still works as Nextbite’s CEO according to his LinkedIn profile, did not respond to requests for comment.