Zirtual ends its whirlwind week with a class-action lawsuit

It’s been a whirlwind week for Zirtual, the on-demand virtual assistant firm that went belly up, then was bought and is now being sued. And it may signal more trouble for other on-demand economy firms.

The latest: Some employees have joined a class-action lawsuit, writes the Las Vegas Sun. The workers claim the company violated federal law requiring large employers to give 60 days notice of an impending mass layoff.

Zirtual’s troubles became public early Monday morning when its chief executive, Maren Kate Donovan, sent an email out to employees announcing she was shutting the company. Zirtual’s employees have been estimated as high as 400.

In a post on Medium, Donovan blamed the firm’s woes on its switch from using freelancers to real employees, as we wrote earlier this week. In interviews, she also blamed bad accounting from “an outsourced CFO” who miscalculated pay periods. The upshot was that Zirtual wasn’t able to secure its next round of financing.

The company was saved by an acquisition by Startups.co., an Ohio startup platform. Service is expected to resume next week. But Startups.co will use freelancers, reports Business Insider.

The company’s acting CFO said that the company’s insistence on hiring college educated “zirtuals,” the name of the assistants, and paying them benefits, led to a lower hourly wage, which then resulted in extreme employee churn, Fortune reported:

In hindsight it was a much bigger change financially than was originally anticipated. Maren had all the right intentions, but it really cut into margins and the benefits meant that we could only pay the ZAs $11 or $12 per hour. That created a huge amount of turnover among a U.S.-based, college-educated employee base, with lots of people dropping out even during the training program. And what that meant was that Zirtual had to project hiring 20-30% more people than it actually needed, so that it wouldn’t be caught short-staffed.

Above: At top: Screengrab from Zirtual.com


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