> If they can do this, they can pay salaries another month
If leadership decides to use the remaining funds on salaries rather than severance - then they should be judged on that! What good is buying one extra month for a doomed company? That month is more valuable to individual employees who can use it to look for new jobs
> What good is buying one extra month for a doomed company?
You don't know it's doomed. Plenty of companies have turned around while running on fumes. This is fundamental to start-ups.
> month is more valuable to individual employees who can use it to look for new jobs
Everyone who lost their jobs at Convoy is eligible for unemployment. The same unemployment most workers get when they're fired. Perhaps the discussion should be around improving this benefit for everyone?
It's swell when people gamble with employees well-being on the miniscule odds of a miracle. And even better idea is to offer severance, and those employees with the same appetite for risk can get additional options from the folks who leave. That'd be a win/win, except for the leadership who would rather gamble using other peoples chips but keep most of the winnings.
> Everyone who lost their jobs at Convoy is eligible for unemployment
Unemployment benefits don't come anywhere close to tech salaries! They take time to process.
> Perhaps the discussion should be around improving this benefit for everyone?
We can multitask. What is in my power to control is to avoid working with anyone associated with this decision and encourage everyone else to do the same - board-members and the entire C-Suite. We have a - let's call it poor culture fit
> It's swell when people gamble with employees well-being on the miniscule odds of a miracle
You don't know the odds ex ante! Again, they would have been roundly criticized if they'd prioritized severance (which means more for the highly paid) and preferred stockholders over their rank-and-file common holders.
> Unemployment benefits don't come anywhere close to tech salaries! They take time to process
You're arguing for special treatment of well-paid tech workers over e.g. truck drivers [1].
> What is in my power to control is to avoid working with anyone associated with this decision and encourage everyone else to do the same
The solution is to not work for a start-up. That, or gain empathy for the tens of millions of Americans who work for a restaurant or with variable hours or on contracts that provide them with zero heads up when business conditions change or their employer goes under.
So tired of companies that raise hundreds of millions from some of the wealthiest and most powerful people in the world trying to pull the “we’re a startup” card. You’re not two dudes eating ramen in a garage and you don’t get to use that image to excuse your shitty behavior.
Also tired of the “other people in poverty are exploited even worse! You asking for basic labor protections shows your lack of empathy for them!”
I’m seriously having a hard time imagining any of this was written in good faith.
The real solution is, and always will be, collective bargaining. These VCs aren’t going to make sure you have healthcare. They could give it to you directly, or they could use their wealth and power to make sure the government gives it to you.
People ask “what can a union do? My office already has free kombucha”. Imagine if all the SWEs at all these VCs backed companies went on strike unless the laid off Convoy employees got six months of healthcare (it would have been in the initial employment contract). The money for this stuff would magically materialize. It doesn’t materialize because there’s no organization to advocate for it, it’s that simple.
> tired of companies that raise hundreds of millions from some of the wealthiest and most powerful people in the world trying to pull the “we’re a startup” card
But they are one! If those wealthy people were getting perks in this failure, the way e.g. workers at Good got screwed, I'd agree with you. But if you're running with massive fixed costs and volatile revenue, knowing whether you're weeks or months from shutdown is difficult.
And again, people are assuming if he shut down six months ago everyone could have gotten severance. Convoy is $100+ million in debt. Wages are privileged; new severance obligations are not.
> real solution is, and always will be, collective bargaining
The closer solution is civic participation. How many people in Silicon Valley have written to their state elected to raise unemployment benefits? (Note: I'm not saying anyone deserves what's happening. But union participation in America is stubborn and dropping. We need another drum to beat.)
tech is fundamentally incompatible with unions for several reasons:
1. it will drive down the wages and give power to just another bureacracy
2. Union participation does not differentiate between highly skilled (and sought after) tech worker, from mediocre tech worker who gets by using copilot and chatgpt
3. I dont need union to negotiate with company on my behalf - I can negotiate by myself just fine
4. If startup goes bust - I can easily find a job at another startup, probably will even get a pay raise - just because my skills are highly sought after and in demand. There is literally zero upside for me that union can do
5. I dont want to share my specialist employee's power with faceless union burearacy
I know what it means to be a union worker - and trust me, it will never gonna work in software engineering
1. Hollywood unions disprove this
2. Hollywood unions (SAG, DGA) disprove this
3. Unions don't mean you can no longer negotiate. DiCaprio still does
4. One upside: Unions represent members who are no longer able to work
5. Hollywood unions have some pretty specialized folk and it works well for them
As an individual - you only bargaining chip is your ability to do work. If you lose capacity to work - temporarily or otherwise - you lose the ability to negotiate. Unions don't suffer from that weakness.
The things you can negotiate for are capped at the value of your work. You can't forbid your employer from replacing you/your teammates with AI foe instance, but unions can, because the collective value of their output is beyond what the employers may gain from ML models. Not so on the individual level.
You skipped the downsides of hollywood unionization:
Cost of hiring increases and there are fewer gigs around. Unionisation adds nontrivial transaction costs, so there will be fewer opportunities for new entrants, and fierce competition among existing workers for shrinking number of gigs.
For example look at how women actors get their cast roles with harvey weinstein studio - did union protect them from sexual predators?
Look at average unionized actor - very few are making big bucks, most are just surviving and have other day jobs.
UAW workers are still at the mercy of their employers, and are only dragging their companies down, while non-unionized automakers are taking over market share.
I am totally fine that my bargaining chip is my ability to work - it is the only austainable way. Otherwise there will be a lot of useless dead weights who dont contribute to the topline, and leech off of bottomline. (There is already unemployment for this use case).
Look at NYC MTA - all unionized and completely inefficient, unionisation can only work in monopoly situation.
Tech in the other hand is high growth particularly because all monopolies are being attacked by more flexible and lean startups.
Hollywood is not growing at all, while big tech is carrying the whole world
you are looking at the wrong stuff, box office revenues go to Motion Picture companies and Hollywood fat cats like harvey weinstein.
just look at labor data: it is not pretty. $28/hr mean pay in Hollywood! Much less in other areas.
There is a reason why successful actors prefer to become producers/directors: because it pays better to be your own boss, rather than be at a mercy of union. and you don't have to engage in high end prostituion and literally sell your ass to people like Weinstein and Epstein, just to get a role at a high profile movie.
SAG really is a gold-standard union. Critically, it has a monopoly to multiple buyers of its talent. (Sort of like the UAW.) Single-employer unions are more constrained.
You're taking a remarkably short sighted position here. Blacksmiths and cobblers were once highly in demand workers as well. Do you really think writing code is such a special beautiful skill that it's immune to the same forces of automation?
Software development is a trade skill, like any other. We're in a very brief window of time where it's a very lucrative skill to have. Don't expect that to last forever. When that stops being the case you'll want something between you and the harder facts of life that you might have had the privilege of ignoring for a while. There's a reason people bled and died to make these organizations. The moment it's possible the capital class will grind you into a fine paste and sell you in tubes to make a few extra percent on the quarterly financials.
> You're taking a remarkably short sighted position here. Blacksmiths and cobblers were once highly in demand workers as well. Do you really think writing code is such a special beautiful skill that it's immune to the same forces of automation?
No, but that's not required for the argument. Do you think any amount of unionisation would have forced society to keep lots of well paid blacksmiths and cobblers around?
(And if the answer to that is Yes, isn't that an argument against tolerating unions?)
I am not at the mercy of my employer or capitalist class for that matter.
And I will be the first one to automate my job and reap the benefits of automation myself.
This is the way of life - if you cannot adapt - those more flexible, more adaptable, smarter, younger, hungrier - will eat your lunch.
There is no way any tech union can enforce monopoly, because there will always be new entrants ( ew grads) and offshore workers and immigrants willing to take the job, if union workers decide to strike.
In fact, I will be the first one to create outsourcing and offshoring consulting company to help companies fight unionisation.
This is the way of capitalism, the way of life. Smarter, faster, nimbler will get larger piece of the pie.
If union is willing to get $xxx mln in labor costs from a company, I will happily help this company fight unionisation for a fraction of that - to drive unions out of business while pocketing the profits by myself
I hate to break it to you but if your job is automatable it won't be you reaping the benefits, it will be the people who have the most capital to deploy automating. That ain't you buddy, sorry. Your world view is basically peak HN techbro-iterianisim. I hope you never get the opportunity to experience exactly how wrong you are.
it shows that you have zero experience in automation, because no high value job is fully automatable.
Human augmented+automation will always be more superior/flexible/valuable and large corporations with a lot of capital will never be able to be as flexible and nimble for all customers and all their use cases, as a small player like myself can be
> it shows that you have zero experience in automation, because no high value job is fully automatable.
That's sort-of a tautology. What used to be a high value job can become a lower value job with some automation, and then be automated completely later.
Up to about a hundred years ago, many reasonably well-off people in the US and Europe used to have domestic servants. Those jobs could go to fairly high levels of skills and value. Nimbleness was rewarded. (But to be fair, they also could go down to pretty menial labour.)
Nowadays even really well-off people barely have any domestic servants. Instead they have dishwashers and vacuum cleaners and order their food delivered to their doorstep, and perhaps hire a part time cleaner for a few hours a week.
When stakes are high you are not going to ask a robot. When you have serious health condition or legal problem - you will find youself the best doctor/lawyer and seek their counsel.
Google search or chatgpt wont gonna cut it.
Same with tech - if you create a startup with big ambitions - copilot and chatgpt wont gonna cut it for your product.
and I see no mechanism for union to provide any value to tech workers. Hell, there is no even a category of tech workers: thousands of different specializations. I would never wanna be in a union with grandpas coding in COBOL for example
You sure make a lot of declarations about who is right and wrong and the poster is literally talking about their job. Is it possible you want unions in software so badly that you’re blind to successful models that work without them?
Physicians and Lawyers have been around forever and they don’t unionize.
technically they dont unionize, but they have cartel that regulates supply of specialists to the market (State Bar for lawyers and State Medical Board for doctors).
the reason why healthcare is such a mess and so expensive - is because Medical Board artificially limits supply of doctors to the market, by allowing very very few Medical Residencies perspecialty. This severely limits supply of doctors, keeps their pay high and leads to ever increasing cost of medical care for patients
Raising lots of money doesn’t mean it’s a sustainable business. I don’t think you know the colloquial definition of startup in Silicon Valley.
Raising millions doesn’t mean making millions either. If you took a bunch of investor money and just paid it all out to your employees and closed up shop that’s a misappropriation of funds.
> Imagine if all the SWEs at all these VCs backed companies went on strike unless the laid off Convoy employees got six months of healthcare
Why would they do that? I’m not going to go on strike because other employees are incapable of understanding the risks of joining an unprofitable company that is default dead. If you want 6 months of paid healthcare, quote it and demand it as a signing bonus before you start.
Startups blow up. It’s your responsibility to prepare for it. Established companies blow up too. Sometimes you even just get fired because you suck.
SWEs have zero excuse to not have saved enough money to pay for cobra for six months if things fall apart.
> Imagine if all the SWEs at all these VCs backed companies went on strike unless the laid off Convoy employees got six months of healthcare (it would have been in the initial employment contract).
Congress made secondary strikes illegal a long time ago. Maybe it would still be OK since that wouldn't technically be cross-industry; I'm not sure.
There was a time when US unions striked despite being met by a risk of people getting outright murdered. Without hyperbole, the 8 hour working day was won with blood. The question needs to be whether you think a strike is right and morally justified, and worth the potential consequences, not whether it is legal.
> In economics, a normal good is a type of a good which experiences an increase in demand due to an increase in income, unlike inferior goods, for which the opposite is observed. When there is an increase in a person's income, for example due to a wage rise, a good for which the demand rises due to the wage increase, is referred as a normal good. Conversely, the demand for normal goods declines when the income decreases, for example due to a wage decrease or layoffs.
It's entirely expected that people will want to consume more comfort and safety at their income increases.
If you compare different countries, you will find that these kinds of things track with income much more than with history of union activism.
For a striking example see https://pseudoerasmus.com/2017/10/02/ijd/ which is an article on the divergence between Japan and India. Japan has a long history of labour repression, especially compared to India. But by and large Japanese workers have a it a lot better today than workers in India, especially if you go by what's happening in reality and not just by what's promised on paper.
And that difference tracks with the difference in incomes between the two countries, but stands in stark contrast to what we would expect from your sketched theory of union activism driving these things.
"Will want to" yes. But it was not being offered until after that extensive union activism despite decades of demands. To the point that people died for it. May 1st is the international day for labour demonstrations because of the US union fight for the 8 hour day. The demand long preceded a rise in income allowing people to risk walking over it, or be able to afford to offer to take less pay for less work.
It took decades from the demand was there until it became normalised to offer it, with concession after concession won as direct and explicit outcomes of industrial action.
That good conditions are offered far more easily when a working population is in a financial position to walk if it's not offered is entirely unsurprising and irrelevant. That you can't possibly win the same level of outcomes when the financial position of employers doesn't allow it is also entirely unsurprising and irrelevant.
Nobody expects magic. Nor does anyone suggest that there aren't other factors also at play.
Given we can look back at history and see direct causal links between industrial action and subsequent improvements, there is no way to take this seriously.
I have no doubt you're right that it correlates neatly with different income levels, but I find it comical that you think that addresses the issue.
I also note that you claimed working hours as a normal good whose demand would rise with income but ignored the point that the demand far preceded the economic ability to bargain for it with money, and that the demand was not constrained by lack of money. The notion that it fits your description at all is bizarre.
EDIT: I'll also note that after having had time to skim the article you linked, it does not appear to even attempt to make an argument aligned with yours. The author very specifically points out significant confounding factors, such as whether or not unions resistance in the specific given conditions affected productivity negatively or hindered productivity improvements.
A union certainly can make a wrong tradeoff - Indian unions prioritised keeping the intensity of the work down, at the cost of reducing their then-future ability to demand higher incomes. But they were only able to have that negative effect on future wages because their activism had a substantial effect on working conditions and by extension productivity.
That their goal was short sighted does not change that if anything it is a demonstration of the substantial impact unions do have.
That there is a risk that a too successful union can end up having an adverse effect by accident is nothing new either - it's if anything one of the historical conflicts within the labour movement in terms of outlook on the approach between seeing it as about conditions at individual workplaces or tied to local concerns vs. inherently a political and society-wide and international concern.
> I also note that you claimed working hours as a normal good whose demand would rise with income [...]
No, leisure is the normal good. And so is safe food and clean air etc.
> Given we can look back at history and see direct causal links [...]
How do 'see' direct causal links? Just because people work to achieve X, and then X happens, is not a direct causal link. Eg praying for winter to be over, doesn't mean that there is a direct causal link with spring coming eventually. And fans cheering for their sports team to win, don't have much of an influence on whether their team actually wins.
Or to give an example from history: the assassination of Franz Ferdinand is often seen as the event that triggered the Great War; but few people assign it much importance as an underlying cause.
> I have no doubt you're right that it correlates neatly with different income levels, but I find it comical that you think that addresses the issue.
If income levels explain all the variation between countries, and levels of union activism are just noise, I am not sure why you need to appeal to union activism as a cause?
It's like looking at the correlation between taking antibiotics and recovery from infection, but then adding fervent prayer as a causal explanation for some reason.
The tide eventually receded from King Canute, but that's not because of anything he did.
EDIT: I mostly agree with your edit. A parasite should be careful not to kill the host.
> No, leisure is the normal good. And so is safe food and clean air etc.
You got what I meant unless you're being obtuse. The point remains that the demand preceded the financial ability to bargain for it. It was independent of income.
> How do 'see' direct causal links?
By looking at when employers offered concessions in order to end strikes etc. Now you are being obtuse. Go back and look at newspaper archives from major labour conflicts and the concessions negotiated with the union actions as the direct and immediate reason cited by employers themselves, even at times after having spent fortunes on people like Pinkerton to try to intimidate and harm workers to get them back to work first.
> If income levels explain all the variation between countries, and levels of union activism are just noise, I am not sure why you need to appeal to union activism as a cause?
I've seen no evidence that they explain all the variation. I've agreed they likely correlate with much of it. Now consider that income-differences do not just magically spring into existence either, and while there are certainly multiple factors again we have extensive examples of direct cause and effect in terms of negotiation and subsequent agreements.
> A parasite should be careful not to kill the host.
When you describe workers as parasites, that is utterly vile and explains a lot. And so we are done here.
Unions are bureaucracies and have an organisational life of their own. You can't just equate them with workers. (In addition, there are also non-unionised workers.)
> but ignored the point that the demand far preceded the economic ability to bargain for it with money, and that the demand was not constrained by lack of money
You don’t know what demand means in an economic context here. Ops point is that as wages increase, people aren’t going to accept 70 hour workweeks if they can get by on 40.
> Given we can look back at history and see direct causal links between industrial action and subsequent improvements, there is no way to take this seriously.
Feel free to point them out and show how unions were required in every country to get the same thing. Things happening around the same time does not imply causation.
Union members were likely emboldened as pay increased because they could ride out strikes. At the same time, people could just get by on fewer shifts because pay increased. This creates downward pressure on required weekly hours (because many people to value their time), regardless of the union activities.
“The 8 hour work day was paid for in blood” is a great signal that you’re already very pro union (it’s literally union propaganda), so I don’t expect your view to shift much here. But consider that many professions flourished without unions (tech, law, banks, engineering, etc).
> You don’t know what demand means in an economic context here. Ops point is that as wages increase, people aren’t going to accept 70 hour workweeks if they can get by on 40.
Which misses the point that when these changes started being demanded and won people couldn't afford to walk away.
> Feel free to point them out and show how unions were required in every country to get the same thing.
Nice try, but that was not the claim I made, nor one I even agree with. The 8 hour working day was largely won by US unions, after which it became substantially easier to win elsewhere as the doom and gloom predicted by employers didn't materialise and reduced the perceived need to resist it.
With respect to US unions, there is plenty of material you can easily google, but you can start by looking at e.g. the 1835 Paterson textile strike, which was one of the first major ones, and which "failed" when employers only offered about half the reduction in working hours employers demanded, but it nevertheless gained them a significant reduction as a direct result of the strike.
> Union members were likely emboldened as pay increased because they could ride out strikes.
History largely shows the opposite. Workers coming to the cities facing lack of employment opportunities were relentlessly exploited, and were a major factor in the growth of labour unions.
In the US you also saw major effects of actual salary drops in some cases, e.g. the Great Railroad Strike of 1877.
Union members risked life and limb and imprisonment early on because the conditions they were working in were horrific. Unions have softened and their membership has cratered as pay then increased because if anything better paid workers are less interested in disrupting what they already have and tend to be less interested in putting effort into it.
> At the same time, people could just get by on fewer shifts because pay increased. This creates downward pressure on required weekly hours (because many people to value their time), regardless of the union activities.
This is just entirely counterfactual. Taking fewer shifts wasn't generally an option on offer, and didn't become an option until decades into the fight to lower working hours.
> (it’s literally union propaganda)
It's literally true, whether you're pro union or not.
See e.g. the Bay View Massacre, when the Wisconsin National Guard fired at strikers demanding an 8 hour working day and 7 people died as a result. It is by no means the only incidence of US government or Pinkerton agents and others firing directly at strikers.
The reason May 1st is the international day for labour demonstrations are incidentally a direct after-effect of the Chicago Haymarket Massacre, also an outcome of the eight hour working day demonstrations. I gave the Bay View Massacre because it's a simpler one - not nearly as murky. Preceding the Haymarket massacre police murdered workers the day before. During the demonstrations at Haymarket, someone - who is unknown - threw a bomb, and so while the police ended up killing multiple murders, it's unclear how to assign blame. Several union organizers were then executed without any evidence they had anything to do with the bomb.
> But consider that many professions flourished without unions (tech, law, banks, engineering, etc).
>
> They are by no means requisite for improvements.
Yes, in roles that are either highly regulated and/or high skilled so there is a reasonable balance of supply and demand people can do well, yes. Nobody has claimed no improvement can happen without them, nor that there are no groups who won't do well without them, so that is irrelevant to the claims I've made.
Im not sure I agree with your normal good characterization. It only applies to goods purchased with money - not ones purchased with time, blood, or death.
Someone with more income might exchange more money for time/comfort, if all things are held equal including the price.
I think the inverse is true when you consider exchanging things other than money for more comforts.
That is to say, people will pay more money because they have more of it the higher their income (because the marginal value of each dollar goes down)
Asking would you be willing to risk your life for more comfort, that answer changes. The higher your income/comfort/happiness, the less willing you are to risk your life for more comfort.
The less people have to work, the less they are willing to risk their lives for more free time.
Who would risk death protesting for more leisure: someone working 80, 40, 20, or 2 hours?
> . The higher your income/comfort/happiness, the less willing you are to risk your life for more comfort.
And indeed both the level of union membership and the militancy of union actions supports that. Union membership cratered in developed countries and conditions have improved, and labour conflicts have gone from being outright armed in some cases in the past to being mostly relatively tame and regulated affairs.
No, you can simply choose your cut off time for a hail-mary at 2 months of runway, rather than 0 months of runway. Leaders don't have to rundown the clock (and bank balance) to 0 - they may choose to, like they did in this instance.
> You're arguing for special treatment of well-paid tech workers over e.g. truck drivers
Again, no. I'm arguing against your suggestion that the Convoy folks without severance are going to be alright because they have unemployment. I hope none of them are on H-1B visas as they just lost all control to when their clock starts ticking.
> The solution is to not work for a start-up
This is a false dichotomy. There are plenty of startups led by people who do right by their employees; I have worked with some before of them, and I will not hesitate to work with them again in the future because I trust them not to screw me over like this.
> you simply choosing your cut off time for a hail-mary at 2 months of runway
I'm saying it isn't that simple to project runway in some businesses.
> arguing against your suggestion that the employees without severance are going to be alright because they have severance
Sorry, we agree on this. This will suck for everyone involved. If it was preventable, that's on management.
> plenty if startups led by people who do right by their employees
When push comes to shove, constraints apply. Shutting down a start-up with cash in the bank isn't something that happens without a fight. There will be lawyers, possibly lawsuits, and delays. Convoy had $100+ million in debt; the employees would have had to fight claims of wrongful conveyance.
Put another another way: the CEO paid employees another few months' salary instead of handing that cash to its lenders.
>millions of Americans who work for a restaurant or with variable hours or on contracts that provide them with zero heads up when business conditions change
wouldn't you consider your statement itself to be a giant heads up, right now? Heads up! save some money, don't spend everything you earn. And don't tell me you didn't get a heads up.
> wouldn't you consider your statement itself to be a giant heads up, right now
No, I'm saying it's fucked this is the status quo across the country. Making severance--particularly in cases of business failure--the private obligation of the employer is recapitulating employer-funded healthcare.
(That said, yes. If you work at a start-up you should maintain a cash cushion if possible. That, and check your contract's severance terms and ask for them to be proper before the company enters shitsville.)
Don’t join a fucking startup if you can’t handle it shutting down at any given moment.
If you want employment stability join a profitable company or the federal government.
> That'd be a win/win, except for the leadership who would rather gamble using other peoples chips but keep most of the winnings.
It’s a startup! You’re there to try to make the options work out as an employee as well. I would 100% rather ride to the end with any chance that it will take off.
They failed to get a loan in time, it’s not like they knew it was a fantasy that could never work out. They had a viable business and got caught in counter-party risk.
> Everyone who lost their jobs at Convoy is eligible for unemployment. The same unemployment most workers get when they're fired. Perhaps the discussion should be around improving this benefit for everyone?
I think you can take out private unemployment insurance, if you are worried about that? (Or just have savings.)
You’re calling this poor leadership, can you share a time you were in a similar situation and did something different or are you armchair quarterbacking?
We don't have enough information to know if it was reckless leadership. If the CEO had an email from a reputable lender saying we'll have funds in your bank account in two weeks, it would have been irresponsible for him to shut down the company to pay off creditors, preferred shareholders and severances.
I'm not advocating for the CEO. Just against condemning him while in the maelstrom. More fundamentally, there is a thread through this discussion which essentially holds that tech workers--we're highly paid!--should have post-termination benefits others don't.
You responded to that with even more mental gymnastics - this time a ‘reputable lender’ who will jump in with an emergency loan then run off.
Then you’ve thrown in another red herring claiming this thread argues that tech workers should have more options. Nobody said anything close. Rather, the argument is that letting your company run down to zero is irresponsible.
If the hypothetical of terms on the table for a loan is a red herring, so is the supposition that management had months of visibility into their demise.
Convoy wasn't a pure software business. It didn't operate on massive gross margins; it was operationally (and financially) levered. Decades-old trucking companies are going down unexpectedly; I'm not sure why HN's armchair executives figure they could have called this cleaner.
At least two ex-Convoy employees have posted in this thread saying they are "extremely unsurprised" that this happened, and could see it coming.
Handwaving away things like you have doesn't add value - many of us have worked at startups, and the warning signs are common and repeated. A handwaving dismissal along the lines of "plenty of companies have turned things around at the last moment, running on fumes, so it would have been irresponsible for Convoy to do anything but run it to zero!" is disingenuous, fatuous or both.
> two ex-Convoy employees have posted in this thread saying they are "extremely unsurprised" that this happened, and could see it coming
They were laying people off every few months for over a year. There is a difference, however, between a material chance of default and being completely fucked.
> it would have been irresponsible for Convoy to do anything but run it it zero!"
They should have put severance terms into their original employment contracts. Providing employees with de novo severance after you know it's going under guarantees creditor lawsuits. (Remember: Convoy was heavily indebted.) One thing worse than getting shafted like these guys would be receiving a subpoena months later clawing back severance.
If there is a non-civic action item from this, it's to put good severance terms into your employment agreements before shit hits the fan. (Counterpoint: it could accelerate your demise.)
> Providing employees with de novo severance after you know it's going under guarantees creditor lawsuits.
Citation needed. Providing executive suite with bonuses and parachutes does. Indeed, even law firms talk about this:
> Severance payments to “insiders” (generally defined under the Bankruptcy Code as officers, directors, persons in control of the business, and relatives of such individual(s)) could be subject to lawsuits to avoid or clawback the severance payments.
Fraudulent conveyance, there. No mention is made of creditors issuing lawsuits against rank and file employees.
Indeed, even for severance payments that were never in employment contracts, courts place them at/near the front of the line in bankruptcy proceedings, witness Toys R Us.
But I'd be very curious to see any cases where creditors have been able to block severance payments that are not to the C suite.
Clawback is one year for insiders, 90 days for all others [1]. We're describing something closer to simultaneity, where "the debtor enters into a severance agreement simultaneously with an employee’s termination" [2]. This is precedented for clawback, and would almost certainly be litigated given the number of employees involved.
TL; DR The moment you find the business insolvent, it belongs to your creditors. Many commenters are treating Convoy like a run-of-the-mill equity-funded start-up.
> No mention is made of creditors issuing lawsuits against rank and file employees
Most likely, the creditors would file an injunction and put the company into bankruptcy on the basis of management having essentially said that it’s insolvent.
> even for severance payments that were never in employment contracts, courts place them at/near the front of the line in bankruptcy proceedings
Closer to the middle [3]. With Toys ‘R’ Us, the creditors voluntarily provided the severance [4]. No court forced it. And it wasn’t provided by management or shareholders.
In [1], it'd be hard for a trustee to argue that making severance payments to rank and file employees is not something "made in the ordinary course of business" (which is a statutory defense against clawback).
Your reference in [2] refers to an executive, an "insider", which is exactly what I said - that there is precedent against allowing such payments to insiders (hence the one-year clawback window).
I still can't find any cases where unsecured creditors have successfully injuncted a bankrupt company from making severance payments to non-executive employees.
> With Toys ‘R’ Us, the creditors voluntarily provided the severance [4].
The creditors did no such thing. From your source, emphasis mine:
> Two of the private equity firms that used to own the defunct toy store have allocated $20 million to a severance fund that will be distributed in the coming months."
The mediators who were handling part of the bankruptcy proceedings agreed to administrate the disbursement of funds.
> it'd be hard for a trustee to argue that making severance payments to rank and file employees is not something "made in the ordinary course of business"
Typically in exchange for value and in Chapter 11, where you’re trying to preserve asset values.
> can't find any cases where unsecured creditors have successfully injuncted a bankrupt company from making severance payments
Senior unsecured. Higher priority than employee claims.
> mediators who were handling part of the bankruptcy proceedings
Mediation is voluntary. In the Toys ‘r’ Us bankruptcy, the original equity was wiped and creditors took over. They may have owned both debt and equity. But they were acting qua former creditors.
I’m not going to argue who would win. What I will say is the creditors would sue. There would be months of litigation, not a smooth transition to handing the firm’s last cash to employees. (Different picture had they never issued debt.)
The problem is you don't always know it's doomed. A company I co-founded got to within 5 days of insolvency before we secured the next $5m round. The company never got a big exit, but it did sell a few years later, and the product still exists 22 years after.
I think the big question is how well communicated the risks are. In our case I believe everyone knew, and there'd have been no hard feelings if people had chosen to look for new jobs once funds got tight.
FedEx famously got to within days of running out of money early on, and there is a story Fred Smith made payroll by taking the remaining cash to Las Vegas and gambling.
We have laws. There’s a trade off between more vibrant economies (easier to start, fail, start again) and more stagnant ones (harder to start but more safety nets).
There’s no perfect set point and the trade offs will always have downsides.
Given the risks of working for a company in the stage Convoy was in I’m not exactly sure this is a bad outcome.
If leadership decides to use the remaining funds on salaries rather than severance - then they should be judged on that! What good is buying one extra month for a doomed company? That month is more valuable to individual employees who can use it to look for new jobs