Technology

Nextbite layoffs broke federal law, lawsuit claims

The proposed class action alleges that the company fired 130 workers last month without giving them the 60 days’ notice required under the WARN Act.
Nextbite developed virtual brands like Thrilled Cheese. | Photograph courtesy of Nextbite

A former Nextbite employee is accusing the virtual brand company of firing her and about 130 other people without giving them the 60-day heads-up required by federal law.

In a proposed class-action lawsuit filed earlier this month, Alitza Portuhondo, a former supply chain analyst for the company, said that she was fired on May 15 along with about 90 other employees at Nextbite’s Denver headquarters. Another 40 people had been let go on May 5.

According to the suit, none of the fired workers were given 60 days’ notice that they would be losing their jobs, a violation of the federal Worker Adjustment and Retraining (WARN) Act. WARN applies to most companies with more than 100 employees.

The suit is asking for 60 days’ worth of back pay and benefits for Portuhondo and other employees who were part of the mass layoffs.

According to the lawsuit, the sudden firings left Portuhondo and others in dire straits. Portuhondo, it said, was on maternity leave through July 17 when she was let go. Two days later, she learned that her Nextbite health insurance would be ending May 31. Her newborn had been hospitalized and needed special care. 

“Although she has applied for insurance, Plaintiff is uninsured and faces mounting financial burdens caused by the sudden cessation of coverage,” the lawsuit said. It argued that if Nextbite had given employees a WARN notice, Portuhondo would have had two months to find a new job with health insurance.

The suit also indicated that Portuhondo was not the only Nextbite employee to be fired while on maternity leave.

It is the latest chapter in the unraveling of Nextbite, which earlier this month split itself in two and sold both parts after apparently struggling to make money.

The company was founded in 2017 as Ordermark, which offered software for managing orders from different third-party delivery apps. The company later created Nextbite, a group of delivery-only virtual brands such as HotBox by Wiz and Crave Burger that restaurants could operate out of their existing kitchens under a revenue-sharing deal.

In October 2020, the company landed a $120 million investment led by big tech investor SoftBank Vision Fund. Over the next year, it tripled its headcount and changed its name to Nextbite, signaling a shift in focus to virtual brands. But it ran into trouble in 2022 as the economy slowed and fresh capital dried up. It has gone through at least four rounds of layoffs since last spring, including the significant cuts last month.

In mid-June, Nextbite sold the Ordermark part of its business to India-based software provider Urban Piper. A few days later, the Nextbite division was sold to hospitality mogul Sam Nazarian.

Alex Canter, the company's co-founder and former CEO, did not immediately respond to a request for comment Monday.

CORRECTION: A previous version of this story said restaurants could license Nextbite brands. Nextbite operated under a revenue-sharing model, not licensing.

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