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Summary:

Earlier this week came reports that the daily-deals site, suddenly unpopular with both users and investors, is considering shelving its long…

Groupon homepage
photo: Groupon

Earlier this week came reports that the daily-deals site, suddenly unpopular with both users and investors, is considering shelving its long-expected IPO. Now comes more bad news — Groupon’s own employees have filed a class-action suit against the company.

In a filing in Chicago federal court this week, former salesperson Ranita Dailey confirmed she will be lead plaintiff on behalf of Groupon employees who seek to recoup overtime that the company allegedly failed to pay. The suit claims that Groupon violated federal and state labor law, and demands three years of back wages and punitive damages for hundreds of employees.

The lawsuit coincides with a rise in negative comments on sites like Glass Door by people claiming to be Groupon employees. They have posted comments like: “a boiler room”; “Immense pressure to hit unrealistic sales goals” and “Sales staff cries all the time.”

Groupon did not immediately respond to requests for comment on the class-action suit.

After months of being the toast of the startup world, Groupon has hit a rough patch lately. In August, the company lost 50 percent of its web traffic from its June peak, while traffic for rival deal site Living Social rose 27 percent, according to Experian Hitwise. Also last month, a federal judge in San Francisco permitted a tour operator to proceed with a merchant class action lawsuit over alleged false advertising. Meanwhile, this week, Google (NSDQ: GOOG) — which offered to buy Groupon for $6 billion last winter — expanded its daily Offers program to five new cities.

The new class-action suit, originally filed last month, doesn’t contain detailed allegations, but does include a bimonthly pay stub that shows Dailey worked 106 hours at a base rate of $15.62 an hour. During this time, she received 19.75 hours of overtime pay and $478 in commission.

Groupon has yet to make a profit despite soaring revenues. In the second quarter of this year, the company lost $103 million on revenues of $878 million. SEC filings from last June indicate that Groupon expected an IPO would bring in $750 million and $1 billion and that the company’s valuation was between $15 billion and $20 billion. Investors have recently questioned if those figures are realistic.

  1. Am I wrong in noticing that it has been nothing but bad news for Groupon since Rob Solomon stepped down as President?

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    1. I think you are right. In addition I have to say that many small business owners tell me that Groupon had a bad after taste for them – a great idea but bad execution.

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  2. I think this whole thing will blow over soon, but not in a pretty way. Groupon’s model simply doesn’t scale, so they will not become profitable. You might find this commentary interesting: http://mentionllc.com/news/article/groupon-breaks-down-at-scale/

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    1. You are correct. There is no long term value to the merchant, and the local media (radio, newspaper & tv) are parsing this market with their own databases and merchant contacts.

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  3. Actually, it is just you Rob.

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  4. The poison is finally starting to take affect. The whole company and anybody connected to it is now toxic. I give it another year or so before this company takes its last breather.

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  5. no doubt the groupon model kinda is not so goodpon

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  6. Ponzis all end the same way.  Look at Greece or the housing bubble as larger scale examples.  Doesn’t give me confidence in our Social Security system or the national debt.

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    1. Chris O'Rourke Friday, September 9, 2011

      Why don’t you have confidence in Social Security? It currently has a 22 trillion surplus. I keep hearing people grouse about SS being a ponzi scheme. It is no more a ponzi scheme then a savings account is. 

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      1. And the average Ponzi scheme has plenty of money to pay back what is promised UNTIL more money starts going out than is coming in. Growing employee pool now declining PLUS increasing pool of retirees equals more money now going out than is coming in…. I could start receiving full SS within 7 years, at the current rate SS won’t exist in 10 years and there is possibility it would even be around when I should be able to retire.  When SS was started, you didn’t start getting paid untill almost two years AFTER the average person was expected to be dead. There a lot of changes that need to be made. 401K style option is one – Money Market/Treasuries/Stock Spyders (nothing fancy), increase the retirement age. You shouldn’t change the rules for those who are retired or will soon retire, but 3 years to retirement? delay the start by 3 months, 5 years? delay 6 months or a year. over 5 years? delay 2 years. Over 10 years? delay 3 to 5 years and allow them to self direct using low cost – non highly speculative funds The Dow or the SP500 or Spyders and require start shifting into money market funds 3 to 5 years before retirement. Include a support for those that “don’t have enough” for retirement. If you were covered this way since you started working you would have at least $1,000,000 for your retirement.

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  7. Ouch! Each day that goes by makes Google’s $6 billion offer look better and better.

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  8. Seems like a pretty weak business model. I get offers for a lot of things I dont need and a lot of restaurant offers that are not deals ( 2 hamburgers for 15 bucks was a recent one). Local paper is also replicating their idea. Billion dollar company, I dont think so.

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  9. “The new class-action suit, originally filed last month, doesn’t contain
    detailed allegations, but does include a bimonthly pay stub that shows
    Dailey worked 106 hours at a base rate of $15.62 an hour. During this
    time, she received 19.75 hours of overtime pay and $478 in commission.”

    365 days in a year less 104 weekend days = 261 paid days / 24 (bimonthly periods) = 10.875 paid days per bimonthly check * 8 hr days = 87 hrs a pay period (assuming all months are roughly equal)

    106 hours – 87 hours = 19 overtime hours (vs. 19.75 paid per the story)… looks pretty darn close to me?!

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    1. No kidding, and the pay isn’t bad for someone in sales with no experience, who has to be on the phone or hitting the pavement all day — a lot of people would LOVE to have her job, even without overtime. What the hell is she complaining about?

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    2. I think the paragraph is badly written. It gives us some of the facts, but not all of the facts. We have no idea what the total paycheck equaled.  They are using a lot of “loaded” words: bi-monthly, base rate, commission.
      Let’s take best case scenario: If the base rate is $15.62, then overtime rate at time and 1/2 should be $23.43 per hour. So we would have 86.25 hours at $15.62 = $1347.22, plus 19.75 hours at $23.43 = $462.74, plus $478 commission. Grand total for the Bi-monthly period = $2287.96. (Again, we don’t know what the gross check amount actually equaled.)

      Or was the article’s author trying to say: Dailey worked 106 hours and her base rate was $15.62; HOWEVER, what Dailey received was overtime pay equaling $462.74 and commission of $478 for a total of $940.74?

      My whole point is this: the article does not give us enough facts. Labor law is a sticky and tricky. It varies from state to state for some rules and there are Federal Fair Labor Standards. This law suit was filed in Chicago, but can we assume Dailey worked in Illinois? Who knows? We don’t even know what kind of position Dailey held and whether or not that position was covered by overtime laws.

      Much bigger companies than Groupon have faced Labor Law Class Action suits. They are interesting to follow and you learn how clever some companies are in interpreting Labor Law.

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    3. Tony,
      Here is a link to a story that covers more of the DETAILS:  Groupon sued over unpaid overtime | Consumer | Crain’s Chicago Business http://www.chicagobusiness.com/article/20110909/NEWS07/110909881/groupon-sued-over-unpaid-overtime

      Judy

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  10. This CEO will go down as the biggest dumbass in history of the solar system. Should have taken that google deal, paid  himself hundreds of millions, leave the 9-8 hassle of everyday life, go travel the world, buy an island, help out or setup charities, etc, etc

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    1. ” the company’s valuation was between $15 billion and $20 billion. Investors have recently questioned if those figures are realistic”

      CEO not only will go down as the biggest dumbass in history of the solar system, also the greediest. When you believe your own hype…bad things happen.

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