Bitwise Lawsuit Alleges WARN Act Violation

Fresno, CAOver 100 furloughed Bitwise Industries employees have file a class action lawsuit against the tech company for violating the WARN Act and other California labor law violations. The workers claim they were not provided written notices of their furloughed status, and that Bitwise failed to notify the Economic Development Department and the City of Fresno of the mass layoffs. On May 30, Bitwise Industries announced it is furloughing its entire workforce.

Bitwise Class Action Lawsuit

The lawsuit was filed June 7 in Superior Court of California, County of Fresno by several Bitwise workers who claim they were terminated without cause around May 29, 2023, and within thirty days of that date, the plaintiffs and other employees were not provided sixty days advance written notice of their terminations. The plaintiffs further accuse Bitwise of:

• Failure to properly pay wages at the time of termination
• Failure to pay wages during employment
• Failure to issue and maintain compliant wage statements
• Passing checks that bounced
• Engaging in wage theft, and
• No longer making matching contributions to employees’ 401k retirement savings as of March.

According to court documents, just before the layoffs, Bitwise was under media scrutiny for nonpayment of property taxes and other business practices. In response, co-founders and CEOs Jake Soberal and Irma Olguin told their employees that nonpayment was an innocent oversight, and that BITWISE remained financially healthy, so much so that Soberal and Olguin said under oath that Bitwise had $81 million in available funds in its Central Valley Community Bank account as of March 9, 2023. The lawsuit doesn’t mention the source of that statement, saying that “This information and representation was material to Lenders to induce Lenders to provide this loan. Lenders would not have entered into any loan agreement with Borrower but for this information.”

The lawsuit states that Soberal allegedly told investors privately that “Bitwise is done” and “(the board) have been meeting twice a day to manage the situation,” and that Bitwise purposely mislabeled the employment action as a furlough “to both mislead the public and the Bitwise employees.” (The Bitwise board of directors fired co-CEOs Jake Soberal and Irma Olguin Jr. on June 2, reported GVWire.)

Given this information, the plaintiffs’ attorney believes that Bitwise had no intention of bringing employees back to work. But the main issue in the 24-page complaint is violation of the Worker Adjustment and Retraining Notification (WARN) Act, which requires employers to notify workers at least 60 days ahead of mass layoffs.

Furlough vs. Layoff

Furloughs and layoffs are two ways employers deal with not having enough work or enough budget for their employees. But a furlough is supposedly temporary and allows workers to keep their jobs during a period of change, while a layoff is typically permanent—a termination of an employee’s contract. Investopedia explains the difference:

• While you might not get a paycheck in either circumstance, if you've been furloughed, you can often expect to keep receiving benefits through your employer, possibly at increased cost.
• If you're laid off, you'll likely only be able to keep benefits that are portable—and only if you pay their full cost.
• A furlough will reduce your hours, with a commensurate reduction in pay. Your employer might cut your hours by 10%, by half, or might have you stop working entirely.
• While furloughs are meant to be temporary, they can turn into layoffs if the turnaround your employer is hoping for doesn't happen.
• Layoffs are usually permanent, although some industries have seasonal layoffs

A third option is Reduction in Force (RIF), used when an employer terminates employment with no intention of rehire. In some instances a layoff could turn into a RIF when a permanent decision is made not to recall workers.

Blindsided

Meanwhile, The Fresno City Council voted 6-0 to cancel any remaining business with Bitwise on Thursday. The city awarded to Bitwise last year a $1 million grant through federal ARPA funds, purportedly to help small businesses in the area connect to digital tools, post-pandemic. The Fresno Bee reported that Bitwise received half of that grant, $500,000, but has only accounted for $120,00 thus far, according to city officials. The next accounting documentation is due next month. “We believed in them just like … investors believed in them. And just like the employees believed in them,” said Fresno Mayor Jerry Dyer.

Bitwise describes itself as a tech company that focuses on underserved communities, helps start-up companies, and is known to inspire the next generation of tech leaders and entrepreneurs through training. Its goal was to become the nation’s largest tech apprenticeship. On its blog from 2022 employees wrote “11 reasons why we love Bitwise Industries”. Perhaps those employees don’t feel the love anymore.