Connecticut Sues Walker Digital

Connecticut Attorney General Richard Blumenthal said Thursday that his state has filed a suit for alleged labor law violations against Walker Digital, the technology company that owns the rights to the "name-your-price" software used by e-tailer Priceline.com.

The suit asks that the workers recently laid off by Walker Digital receive 60 days of back pay -- an amount estimated at US$1 million.

"Cutting edge technology does not give a company the right to cut jobs without proper notice to employees," Blumenthal said. "These layoffs clearly violate the spirit and letter of the law designed to protect workers and our economy from layoffs without any warning or notice."

Walker Digital is headed by Priceline founder and former vice chairman Jay Walker.

Massive Layoff

The lawsuit, which was filed in U.S. District Court in Hartford, comes as a result of an investigation launched in November by Blumenthal's office into Walker Digital's layoff of 106 of its approximately 126 employees on November 21st.

In the lawsuit, the state of Connecticut contends that Walker Digital did not provide advance notice of the layoffs as required by federal and state law. Federal employment law requires companies with 100 or more employees to give 60 days notice to employees when they lay off 33 percent or more of their workforce.

The complaint also alleges that the announcement of the layoffs on November 20, 2000 was "the first time that the employees received notice of any plans to close certain units of the business permanently."

Walker Digital spokesperson Kevin Goldman said that "Walker Digital has been advised by its counsel that it has complied with the applicable laws and regulations related to the termination of company employees."

According to Walker Digital, the termination resulted from the company's "failure to complete a contemplated round of financing."

However, according to the state attorney general, Walker Digital's employees were "blind-sided right before the holiday season, and they deserve to be compensated for the way they were mistreated by Walker Digital."

Transition Time

At the time of the layoffs, Walker Digital retained about 20 employees as part as of a transition team, but the company indicated that those employees would be terminated in the next few months, according to Blumenthal.

Although companies are also required to give state employment authorities 60 days notice prior to massive layoffs under the state's Worker Adjustment and Retraining Notification Act (the WARN Act), Blumenthal said that Walker Digital did not notify the state of the layoffs until December 1st. The attorney general also said that Walker Digital did not provide the documentation required to support a claim that the financing exemption should be applied to its layoffs.

"A major objective of the 60-day notice required by the WARN Act is to help dislocated workers make a smoother transition to a new job," said Susan G. Townsley, Acting Commissioner of Labor in Connecticut.

Legal Loophole

In providing late notice to the state of the layoffs, Walker Digital relied on an exception to federal law for companies actively pursuing financing to avoid layoffs.

However, the attorney general points out that in requesting the exception, Walker Digital did not specify the exact efforts made to obtain the additional financing and did not "address the potential availability of funds from related businesses, with the same ownership and management, and individuals who are principals in such businesses."

Blumenthal said, "Walker Digital's claim of an exception to the law is nonsensical. It fails to meet the tests of fact, law, common sense, or fairness."

Walker's Woes

Jay Walker announced at the end of December that he was stepping down from his role as vice chairman of Priceline to devote more time to Walker Digital.

The employment lawsuit in Connecticut is the latest in a string of troubles to befall companies founded by Walker. In the past several months, five firms he established -- Atlantis Interactive, High Circle, Pulse 23, and Priceline affiliates WebHouse Club and Perfect Yardsale -- have shut down.

Priceline's Problems

Priceline has also seen its share of woes in recent months. In November, Priceline said it would incur an unspecified fourth quarter charge because it had doubts that Walker Digital -- which undertook internal restructuring after its workforce reductions -- could fulfill its obligations to pay certain legal fees.

Other setbacks to befall Priceline include the cancellation of its plan to offer auto insurance and the scuttling of plans to introduce its services to Australia and New Zealand. The company has also canceled a planned expansion project in Japan.