- Online mortgage startup Better laid off around 900 people via Zoom in December, sparking a backlash.
- The company increased severance pay for laid-off workers from one month to 60 days.
- But former employees said they felt cheated on their severance packages.
Digital mortgage lender Better faced an outpouring of public anger when it abruptly laid off 900 staff in December. Since then, some of the company’s former employees say they were shortchanged on their severance pay by up to $5,000. Lawyers said it would be difficult for them to make more money, but the uproar is just the latest misstep by the once-leased company.
Three former employees told Insider that Better’s apparent inclusion of unpaid weekends in severance calculations effectively reduced their expected payouts by up to 20%, since there are only about 48 days left. work over a period of 60 calendar days.
After initially pledging to provide one month of severance pay to the approximately 900 employees who were made redundant via
in early December, the company subsequently increased the severance package to include 60 days of lost wages.
Most employees and attorneys attribute the 30-day increase to the Worker Adjustment and Retraining Notification Act, a federal regulation that requires some employers with more than 100 employees to provide 60 days written notice of termination. If a company does not give notice, it will have to pay its workers and maintain their benefits for 60 days, as if they were employed for that duration.
Employees expected their severance pay to be 60 working days, but instead found that their payout was for a 60-day period that included unpaid weekends. However, that doesn’t automatically mean they’ve been wronged – the Department of Labor, which administers the federal WARN Act, States payment term can cover “60 calendar days”. The courts also have some leeway in interpreting the appropriate duration of wage arrears.
And while the inclusion of unpaid weekend days in the WARN Act’s 60-day notice period is likely legal, the lack of transparency with which Better conducted its termination process added further confusion to a tumultuous December for laid-off workers.
While founder and CEO Vishal Garg has been pilloried for his mismanagement and temperamental issues, legal experts told Insider that Better’s handling of this issue would be difficult to challenge in court. Better did not respond to multiple requests from Insider to comment on this story.
“The way this company went about it – I can’t comment on whether or not it was WARN compliant,” said Meredith Campbell, who leads the employment and labor practice at Shulman Rogers and represents companies. and executives in employment affairs. .
“But I can tell you that if they ever want to hire employees again in the future, everyone will have to exercise caution before getting involved with a company that treats its employees with so little compassion,” she said.
“The way it was all done was just very disorganized”
Within eight days of the Dec. 1 Zoom meeting in which the employees were fired — and with class-action attorneys mobilizing to attack the company over potential WARN Act violations — Garg announced the extension. of the dismissal period.
“They knew they were in hot water,” a former employee told Insider of the company’s decision to extend the notice period.
The former employee spoke to Insider on condition of anonymity out of concern for her relationships with her colleagues still at the company. She said that when Better informed her and other employees of the new, longer severance package, the company did not indicate that unpaid days were included in the total.
“They said 60 days. They didn’t say two months or 48 days,” the former employee said.
The discrepancy only came to light when the severance package arrived in a single lump sum via direct deposit on December 15. the figure she expected to see.
Insider spoke with another former employee who worked for the company for eight months and estimated his severance pay on Dec. 15 was less than about 12 hours’ pay. Additionally, his layoff left him four months before acquiring several thousand dollars worth of Better stock.
A third employee also told Insider that his severance package was about $1,100, or 10%, lower than he calculated based on working days rather than calendar days.
“The way it was all done was just very disorganized,” he said. “There was no personal interaction about it.”
How the WARN Act protects employees during mass layoffs
The WARN Act and similar state laws aim to prepare employees and state unemployment agencies for mass layoffs.
There are certain scenarios in which employers can apply for exemptions, as many did at the start of the COVID-19 pandemic when companies temporarily closed stores and furloughed staff during shelter-in-place orders. state and local.
But the WARN laws are basically about instituting a safety net during extraordinary layoffs, such as when a company closes stores or facilities or goes bankrupt, Campbell said.
“There is only general accountability to your employees and your staff,” she said.
Employees have little legal recourse
WARN rules can be difficult to enforce in practice, and it’s usually up to workers and their attorneys to enforce them through civil lawsuits.
Few of the plaintiffs’ lawyers, who often work on an emergency basis, are willing to take on a case unless a large group of workers joins their claims in a class action lawsuit, the lawyers said.
Even then, recoveries for employees terminated without notice are limited to back pay for up to 60 calendar days, the value of benefits during that period, and possibly legal fees. Unlike personal injury cases, for example, there are no compensatory or punitive damages to be won for WARN Act claims.
Even to sue, employees should not be subject to any forced arbitration clauses in their employment contracts, the lawyers said.
“I think it’s one of those laws…that’s on the books and traditionally followed, and so for that reason it serves a good purpose,” said Linda Friedman, founding partner of Stowell & Friedman Ltd. which represents civil society workers. – case of rights.
“For me, the benefit of this law is not the 60 days’ pay, it’s the notice,” she added, referring to payments made after a layoff has already been announced. and implementation, as Better did.
“What people were being denied was the right to have time to adjust to losing their job, to be able to write a CV, to be able to start interviews, to have no interruption in their job, to avoid being unemployed,” Friedman said. “And that was kind of the concept – if it works right then you don’t have unemployed people, because they had 60 days to find a new job.”
“People will talk”
Beyond legal liability, employers must also consider the reputational fallout of breaching standards for acting in good faith, said Robert Sheridan, partner at Nelson Mullins Riley & Scarborough LLP, which represents employment companies.
“People will talk, employees will talk, and reputations in business are hard won,” he said.
On December 10, Better announced that Garg was “taking immediate leave” as the company reeled from the layoffs. The CEO had previously been exposed for posting derogatory comments about former employees on online forum Blind, claiming they were “stealing” the company.
Insider later reported that in conversations with top Better executives before the layoffs, Garg argued for just one to two weeks of layoffs for staff who had been laid off, leading to some executives walking out of meetings over the layoff. question.
“This is unfortunately not my first rodeo,” said the first of three former employees, explaining that she left another company earlier this year to join Better, but that former employer owed her back pay that ‘she says she did not receive.
“I can’t believe I’m going through this again,” she said.
Even though the third employee feels aggrieved, he says he wants to see the company learn from the episode and grow.
“It sucks to be fired,” he said, “but if it sucks for 900 people to lose their jobs, it would be even worse for 10,000 to lose theirs.”