Tech layoffs fuelling rise in severance complaints, lawyer in Shopify class-action suit says

Shopify stock image

A lawyer who has launched a class-action lawsuit on behalf of recently laid-off Shopify employees says he’s seeing a rise in complaints from tech workers across the province who allege they’re not receiving adequate termination pay amid mounting job cuts in the sector. 

“We’re seeing situations where (employers) should have offered six months’ (severance pay) and they’ve offered one or two,” Lior Samfiru, co-managing partner at Samfiru Tumarkin LLP, told OBJ in an interview on Thursday morning.

“We’ve consulted with hundreds of employees across Ontario and many, many from the Ottawa area over the past year or two. We’ve had to be engaged by many employees in the tech sector to help them get (adequate) severance packages.”

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Samfiru’s firm landed in the spotlight earlier this week when it announced it is pursuing legal action against Shopify.

The class action alleges some of the Ottawa software business’s employees laid off at the start of May were presented with departure packages outlining hefty severance sums they would be entitled to should they sign the agreement within a few days.

However, once workers signed the agreements and before the deadline passed, Shopify allegedly told departing staff they would instead be given substantially smaller sums than were initially offered.

Samfiru, who has been practising employment law for more than two decades, said he’s “never seen anything” like the current scenario involving the ex-Shopify workers.

“It’s not like those offers were windfalls for the employees,” he said. “It’s a situation where someone was provided with an offer that’s in line with what we expect to see, only for Shopify to come back and say, ‘No, we’re just not going to do that.’”

The class action’s plaintiff Iain Russell, who worked for Shopify for seven years, says he was initially offered more than $88,000, which he accepted. Then, Shopify allegedly put forward a roughly $44,000 agreement. If he did not accept the $44,000 offer, he was told he would receive about $36,000.

Samfiru alleges Shopify’s actions constitute a breach of contract and is seeking $80 million in damages and $50 million in punitive, aggravated and exemplary damages.

“There has to be repercussions for a company treating its employees this way,” he said. “They should have known better.”

Samfiru told the Canadian Press this week the amount of damages sought could change based on how many workers were presented with shifting offers. On Thursday, he said his office continues to get calls every day from former Shopify workers looking to join the suit. 

“We keep having people contact us, saying, ‘This also happened to me.’”

Shopify did not respond to a request for comment on Thursday.

The Ontario Superior Court has yet to certify the class action, a process Samfiru expects could take “several months.”

However, he’s hoping Shopify reconsiders its offer and court action can be avoided.  

“Our hope is that Shopify is … not going to want to put their employees through a lengthy legal process that’s unnecessary,” Samfiru said. “Nothing’s stopping us from resolving this case this summer if Shopify is interested in doing that. Maybe that’s being overly optimistic – I don’t know.”

Samfiru, whose firm has offices in Ottawa, Toronto, Calgary and Vancouver and employs three full-time lawyers in the nation’s capital, acknowledged the case has generated a lot of publicity, but he said that’s not the reason behind it.

“It’s certainly high-profile, but I’m not looking at it that way,” he said. “I consider this to be one of the most unique cases I’ve ever had the opportunity to work on – although it’s also from a legal standpoint one of the more straightforward ones. That’s why it will be interesting to see how Shopify wants to deal with it.”

Shopify reduced its head count by 20 per cent at the start of the month and by 10 per cent last year.

The company refused to give the number of staff that would be departing the company during the May cut, but it reported in a regulatory filing that it had 11,600 employees at the end of 2022. Twenty per cent of that amounts to about 2,300 people.

In an open letter announcing the layoff, Shopify founder and chief executive Tobi Lütke promised departing staff at least 16 weeks of severance plus a week for every year of tenure at Shopify. Medical benefits and an employee assistance program will cover departing staff over the same period.

Those leaving will also be able to keep their office furniture and, though they’ll have to turn in their company laptops, Lütke said Shopify promised to help pay for new ones.

He positioned the layoff, which came at the same time as Shopify sold its logistics business, as an effort to reduce distracting “side quests” that divert attention away from the company’s main goals.

“I recognize the crushing impact this decision has on some of you, and did not make this decision lightly,” Lütke wrote.

– With files from the Canadian Press

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