Zirtual may have been saved by an acquisition, but its 400 or so former employees are still left picking up the pieces.
The virtual assistant company dissolved overnight on Monday and fired its entire workforce with an email at 1:34 a.m. Within the next 48 hours, its CEO Maren Kate Donovan apologised for the last-minute shutdown and said the company has found an acquirer, Startups.Co.
Donovan, in an interview with Fortune, insisted that she was working hard to save the company until the last minute and that an external CFO firm made an error with projecting payroll in April. (The same CFO firm told Fortune that they are not to blame for any of this).
It’s clear Donovan knew she needed more funding, but it appears she was counting on a round that never came through.
“We thought we were going to pull through until Sunday because things kept lining up,” Donovan told Fortune. The funding fell through after an investor pulled out, and the company was forced to close its doors.
But a lot of former employees are saying that things had soured long before Sunday.
Benefits only paid through July
The company’s HR chief had quit abruptly a week before, allegedly posting in a Facebook group that she didn’t want to be party to doing anything illegal. (Donovan told Fortune that the HR chief’s departure was because she wanted to let the employees go and Donovan wasn’t ready to give up on securing the funding.)
But former employees say that Zirtual had already stopped paying for benefits in July even though it charged employees for this month. Insurance coverage had stopped July 31.
“Anyone who went to the doctor in August won’t have it covered,” said Katy Boyle, a former Zirtual Assistant or “ZA”. Her visit to the doctor on August 3, while still employed with the company, now has to come out of her own pocket.
Moreover, employees were only paid through August 7 — but they didn’t know this until the email arrived in the early morning of August 11.
The acquisition by Startups.Co won’t be a saving grace for many employees, either.
While Zirtual is scheduled to turn its lights back on Monday, its new workforce will be made up of independent contractors, not full-time employees, according to an announcement on the site. This means they will not be eligible to receive benefits like health insurance or paid time off, like they were in their old positions.
Re-hiring all 400 ex-Zirtual employees is also unrealistic, especially since burn was a problem to begin with.
“Ideally we’d like to keep everyone, but given that the previous state of the company was unsustainable, it’s not reasonable to think we can continue to do so. Prior to the announcement, the company had employed over 400 professionals, so we have a lot of work to do to determine how many we can retain,” the acquisition announcement said.
While there are some Zirtual assistants who are interested in returning to the company, many like Boyle have said they have opted to leave or sign their own contracts directly with their clients. By signing their own contracts without the Zirtual middleman, they can keep 100 per cent of the money themselves, said Daniell Wells, another contractor who is not returning to the company either.
Those who have applied to return will be accepted based on client demand, according the Startups.Co announcement, and they’re already trying to re-book clients — although some assistants on Twitter are claiming that the company is also going about that in an honest way.
We’ve reached out Startups.Co for comment and will update if we hear back.
Next up: A lawsuit
Even once it reboots, Zirtual has a new hurdle to face: a class-action lawsuit.
Business Insider has a copy of a lawsuit filed in Delaware — where Zirtual is incorporated — alleging that the company violated the WARN act (short for Worker Adjustment and Retraining Notification) by not giving employees enough notice. The WARN act is supposed to protect workers from sudden shutdown by requiring a 60 days notice if its reasonably foreseeable.
If Zirtual is found to have violated it, the company would be responsible for 60 days of backpay and benefits.
Wil Schroter, CEO of Startups.Co, told the Las Vegas Sun that he had no comment on the lawsuit at the moment because the company was still working through the acquisition process.
Whether or not the layoffs violated federal law will be an issue left up for the courts, but in the hearts of Zirtual Assistants, many are left feeling betrayed and blind-sided.
“You knew long ago it was not going to be able to be sustained and you did nothing morally and ethically responsible toward fixing it,” one anonymous ex-Zirtual Assistant said on Medium. “If you had only been fair and honest with us all along, as you said you were being, things could have been so much different.”