More Bad News For Groupon: Sales Team Files Class-Action Suit

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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.

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