Bay Area Gaming Company Hit With Class-Action Suit Following Mass Layoffs

A screenshot from the studio's popular 'Walking Dead' game. (Telltale Games)

Updated Wednesday, Oct. 3, 12:30 p.m.

A San Rafael-based video game company that laid off nearly its entire staff in September is now facing a class-action lawsuit brought by a former employee.

If successful, the suit could have broader implications for employers and workers in the tech industry, where boom-and-bust cycles can be accompanied by mass layoffs.

Filed last week in U.S. District Court in San Francisco, the suit alleges that Telltale Games violated federal and state labor laws when it laid off about 250 employees, roughly 90 percent of its entire staff, without providing adequate notice or compensation.

Employees were called to a last-minute meeting on the morning of Sept. 21 and told the studio was closing, said Eric Ingerson, an animator. “No one seemed to know. No one did know. It seemed like they were on the right track," he said.

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The company, known for its episodic adventure games including “The Walking Dead” series, announced the companywide layoffs following a year marked by “insurmountable challenges,” according to a statement on Twitter. In the tweet, the company announced it had dismissed the majority of its employees, keeping on a small team of 25 to “fulfill the company's obligations to its board and partners.”

Employees were reportedly offered neither severance nor health benefits past the end of the month.

The class-action suit was filed last week by former Telltale employee Vernie Roberts Jr., who accused the company of violating the Worker Adjustment and Retraining Notification Act (WARN Act), a little-known piece of federal legislation that requires companies with 100 or more employees to provide notice at least 60 days in advance of mass layoffs. California’s version of the law is more stringent, applying to companies with 75 or more employees.

The suit asks the court to require Telltale Games to compensate terminated employees with unpaid wages and benefits for 60 days from the date of the layoffs.

“Not a lot of these lawsuits happen, in part because the damages are really low and not a lot of plaintiff attorneys are motivated” to get involved, said Veena Dubal, a professor at UC Hastings Law School. However, Dubal noted that this suit could have greater significance for tech workers, who often lack strong labor protections.

“The point of law, and certainly this lawsuit, is to send a message that as a company, you owe something greater to your community and your employees when you close,” Dubal added. “It’s economically devastating for the workers and the surrounding community. There are rippling repercussions.”

Those consequences can be particularly severe for foreign tech workers with H-1B visas, whose residency in the U.S. is wholly dependent on employment. They are given just 60 days to find new work before having to leave the country. There were 19 Telltale employees with H-1B visas, according to one source.

Dubal notes that the law, enacted in 1988, was largely intended to protect workers in struggling manufacturing industries where mass layoffs were becoming increasingly common.

“It’s such an easy law to follow. All you have to do is send an email, literally,” she said. “The fact that they didn’t do it sort of shows the brazenness of Silicon Valley.”

Companies accused of violating the WARN Act most commonly invoke the “unforeseen business circumstances” exception as their defense, said Dubal. It’s a move that Telltale is likely to try to make, she said, even though California law doesn’t recognize the exception.

Telltale Games has 21 days to respond to the complaint, according to court records. The company did not respond to requests for comment.

In a statement on Sept. 21 , CEO Pete Hawley wrote, “We released some of our best content this year and received a tremendous amount of positive feedback, but ultimately, that did not translate to sales.”

Telltale had already laid off 90 employees last November, amid reportedly sluggish sales. The company was finally forced to shut down after a key funder pulled out, Telltale co-founder Dan Connors told Variety in September.

The Verge also reported recent allegations that the studio was "mired in toxic management that included employees being subjected to constant overwork.”

The day he was laid off, former Telltale employee Brandon Cebenka posted on Twitter:

“Re: I got laid off at Telltale. None of my sleepless nights or long hours on weekends trying to ship a game on time got me severance today. Don’t work overtime unless you’re paid for it, y’all. Protect your health. Companies don’t care about you.”

But Ingerson, the animator, noted that the work environment at Telltale had markedly improved in recent years.

Although he hadn’t been offered any severance or benefits, Ingerson thought the company was fairly humane in their handling of a tough situation. It’s a volatile industry, he noted, and this isn’t the first game studio he’s worked for that has abruptly closed its doors.

Compared to some past workplace experiences, he said, “they treated us like people rather than security risks." Employees were allowed to return the following week to clear out their desks and export some of their digital work. The company also hosted an industry job fair the following week for its laid-off workers.

“They should get some credit for how they handled it,” Ingerson added. “It’s just kind of sad, though. There was all kinds of potential.”

Kadet Kuhne, who was a sound designer at Telltale, agreed, noting that the tone was somber yet "amicable."

But, she added:

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"Offering no severance and having one week left of the current health care plan was terrible, and the unexpected nature of this layoff was shocking. It raises a lot of questions about the games and entertainment industry, in general."

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