Jay Walker In $1M of Hot Water

Just weeks after stepping down from his board of directors post at Priceline.com, high-tech guru Jay Walker is in the media spotlight again, and the news isn’t good.

In a formal announcement issued earlier this month, Connecticut Attorney General Richard Blumenthal said he is suing Walker’s Stamford, Conn.-based technology think tank Walker Digital for $1 million because the company failed to give 60 days advance notice to the 106 employees it laid off in mid-November. The Attorney General’s office has been investigating the case since it first got wind of the layoffs from former Walker Digital employees in early December, Blumenthal said during a telephone interview with Private Equity Week.

According to the official complaint, the layoffs were announced Nov. 20, which was “the first time that the employees received notice of any plans to close certain units of the business permanently.” As such, it states that Walker Digital violated the Worker Adjustment and Retraining Notification Act (WARN), which requires that companies laying off more than 33% of their active workforce must give employees at least 60 days notice or severance pay.

The company also delayed in notifying the State Department of Labor of the layoffs until Dec. 1.

As such, the complaint asks that the laid-off workers be compensated with 60 days of back pay – amounting to approximately $1 million based on estimates of total lost salaries and employee benefits for the same timeframe.

About 20 additional employees were retained as part of a transition team, but Walker indicated that they would be terminated within the next few months as well.

“Cutting-edge technology does not give a company the right to cut jobs without proper notice to employees,” Blumenthal said in a prepared statement. “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. These employees were blind-sided right before the holiday season, and they deserve to be compensated for the way they were treated by Walker Digital.”

He also said that cases of this nature are extraordinarily rare, especially since mass layoffs have been relatively scarce in the past few years.

VC Defense

In its defense, Walker Digital has cited a loophole in the WARN Act, which makes provisions for companies actively pursuing financing. The company relied on this exception as a reason for waiting 10 days to let the State Department of Labor know about the layoffs, although it did not give explicit details about the nature of its fund-raising efforts.

Walker Digital spokesman Kevin Goldman said that the company has been advised by its counsel that it has complied with applicable laws related to the termination of company employees as a result of its inability to complete a proposed financing.

Still, Blumenthal said he believes that the exception does not apply in this case, especially since it seems the company currently has enough available funding.

He added that Walker Digital has expressed interest in a meeting to discuss the case, however, he could not predict at this point whether or not there would be a settlement.

As an integrated business solution invention and development company, Walker Digital has received over 70 U.S. patents, some of which relate to improving existing business structures.

One issued in July 2000 is for an invention that measures the value of a caller placed on hold, rather than the traditional first-come, first-served model. For example, a caller considering the purchase of first class airline tickets for a family of four is handled far more quickly than a person on hold to buy one leisure ticket. Another patented invention allows a “restaurant to increase profits by identifying and selling aged food products that would otherwise have been discarded,” according to the patent statement.

Walker Digital has a portfolio of over 400 patents pending. In addition to Priceline.com, the incubator’s high-profile companies include RetailDNA and Synapse.

Robyn Kurdek can be contacted at Story Feedback.