Shopify facing $130-million lawsuit for alleged attempts to slash post-layoff severance pay

Shopify building
Lawsuit claims severance packages were reduced by “tens of thousands of dollars.”

Shopify is facing a $130-million class action lawsuit for allegedly breaching severance pay contracts with recently laid-off employees.

The Canadian retail tech giant has had several mass-termination events since the COVID-19 pandemic. However, this lawsuit filed with the Ontario Superior Court deals with the most recent layoffs in May, which involved Shopify eliminating 20 percent of its global workforce and selling its logistics business to Flexport.

Shopify has had several mass-termination events since the COVID-19 pandemic.

BetaKit has reached out to Shopify for comment. No judgment on the allegations has yet been made in court.

According to Samfiru Tumarkin LLP, the law firm leading the case, Shopify offered severance to approximately 2,000 employees, which would have cost about $150 million.

When the layoffs were initially announced, Shopify said that those who are impacted will receive a minimum of 16 weeks of severance pay, plus a week for every year of tenure at the company.

However, the lawsuit alleges that after people accepted those offers, Shopify did not comply with the agreed-upon terms, with severance amounts reduced by “tens of thousands of dollars.”

Samfiru Tumarkin LLP noted it is rare for employers to go back on termination offers for their former employees, and that legally, what Shopify is alleged to have done would constitute a breach of contract.

Plaintiff Iain Russell, for example, who worked for Shopify for seven years, said he was initially offered more than $88,000. After Russell accepted the package, the Canadian Press reported that Shopify put forward an agreement worth approximately $44,000 in its place, slashing the severance offer by half of its initial amount.

Lior Samfiru, a lawyer involved in the class action, told the Canadian Press that workers received a “vague statement about miscalculating” the severance by way of explanation.

RELATED: Shopify cuts 20 percent of staff, announces sale of logistics division

“For many people … the difference is significant,” Samfiru said, noting differences could range between $10,000 to $60,000. “It appears that Shopify took deliberate action to minimize its financial liability, resulting in considerable losses for potentially thousands of people,” he added.

As a downturn continues to sweep the tech sector, an increasing number of companies are being subject to legal proceedings as a result of the way they allegedly handled layoffs.

Over 1,300 individual arbitration cases have been filed against Twitter for similar allegations of breaching severance-pay contracts. The former workers, who were laid off shortly after the Elon Musk takeover in October, said they were promised more compensation than what was finally offered to them in January.

Twitter could face north of $130 million USD in costs to settle the cases that have been filed thus far, Business Insider reported.

Charlize Alcaraz

Charlize Alcaraz

Charlize Alcaraz is a staff writer for BetaKit.

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