iPhone 14 Pro vs. 13 Pro Cameras Tesla Optimus Robot Best Free VPNs Apple Watch 8 Deals AT&T Hidden Fee Settlement Google Pixel 7 Pro Preview Heating Older Homes National Taco Day
Want CNET to notify you of price drops and the latest stories?
No, thank you

Workers bitter, bittersweet as Webvan folds

Webvan attracted a more pedestrian lot than most start-ups: Meat packers, grocery store distribution clerks, truckers, delivery agents and florists wound up jobless.

OAKLAND, Calif.--Monday was glum for a couple dozen stunned Webvan employees, who gathered in a movie theater parking lot near one of the online grocer's distribution centers.

Most of them learned they would be laid off on the way to work, as they listened to news reports on the car radio. Those who didn't tune in figured out their fate when they tried to enter the distribution center, only to find the parking lot gates closed and locked.

"I can't believe it's all come to this," said Traylynn Wilson, 19, a freezer associate for the past year and a half. "We all had stock options, lots of them. But what's that all worth now? Nothing. Hell, I can't even get my stuff out of my locker and I'm wondering when or if I'm even going to get my final paycheck. They didn't even have the decency to send someone out here to talk to us."

Perhaps more than the failures of dozens of other technology start-ups, Webvan's demise marks the end of an era for dot-com workers. Many start-ups attracted Old Economy executives and Wall Street titans, lured by the prospect of stock options and instant millionaire status. But Webvan attracted a more pedestrian lot: meat packers, grocery store distribution clerks, truckers, delivery agents and florists. Many hoped stock options would fund their children's college education, put down a payment on a new home or car, or pay off credit card debts.

The Foster City, Calif.-based company was one of the best-funded home-delivery companies, and recruiters promised employees that working at Webvan would entitle them to some of the same riches that Silicon Valley's techno-elite had been collecting. In the late 1990s, many grocery store workers thought they could forgo decades of work and a stable pension for a few years of soaring stock prices and early retirement.

"We had so many calls from past union members who had left their jobs--jobs with good wages and pensions--on the promise of stock options," said Rich Hedges, spokesman for United Food and Commercial Workers Locals 120 and 870 and Teamsters Local 70. The unions tried to organize Webvan workers but couldn't get 50 percent of the hourly workers to sign petitions to have an election.

"They had recruiters calling every meat packer in the area," Hedges said. "We didn't think the company was going to make it. There might have been some hope, and we wished them the best--and we made a promise that we'd help them. But we didn't get into a position where we could force the employer into a contract."

Difficulty organizing
Hedges said that the unionization effort failed for a number of reasons, chiefly the scattered distribution of workers. The Oakland distribution center, for example, attracted workers from as far north as Novato and as far south as Tracy. Others worked in the Foster City headquarters or other distribution centers in the Bay Area.

"After work, they'd go home, so there was no real after-work get-together," Hedges said. "It was tough to get a sense of community."

The three unions also accused the online grocer of illegally trying to block attempts by employees to unionize. In a letter to the National Labor Relations Board in February, they charged that Webvan was restricting workers' rights to free speech and the right to associate. Executives denied the allegations, noting that several attempts to organize Webvan drivers and warehouse workers failed.

Hedges said the layoffs--though harsh--may teach other workers the value of unionization. Workers from the online grocery division of Albertson's have already unionized, as have some hourly workers from Skokie, Ill.-based online grocer Peapod.

"The lesson is that if you don't have a signed contract by the employer, with your signature or that of your representative, you don't have anything that will hold up in court," Hedges said. "You're going to wind up in the back of the line with all the other unsecured creditors when the company goes bankrupt."

Although many workers left the comfortable pensions and job security of the unionized grocery and delivery industries, it's unlikely that unionization would have improved their lot in light of Webvan's complete demise. The struggling company announced Monday that it ceased operations and plans to file for Chapter 11 bankruptcy protection. It has no plans to resume in any of its markets and intends to conduct an "orderly" winding down of its operations and sale of its assets and business.

Webvan employees Given the total shutdown, experts doubted that a union could wring any other benefits out of the company for employees. They also said that the paltry severance package offered to Webvan employees will not likely sway other dot-com workers into voting for a union.

"I don't think it makes any difference in the world," said Edward E. Lawler III, a professor and director of the Center for Effective Organizations at the Los Angeles-based University of Southern California Marshall School of Business. "When companies go bankrupt, it's not as if the union has the ability to do something, anything, for the workers. When you're bankrupt, you're bankrupt. The union can protect the union-managed pension fund, but that's pretty distant from what most people worried about when they vote for a union."

The larger lesson for workers, Lawler said, is that the vast majority of American hourly workers are unlikely to get rich from stock options. Although Webvan workers may have been employed by an online company, hourly workers were functioning the same as their counterparts at traditional grocery stores.

"It wasn't really a dot-com company--it was delivery. It was UPS," Lawler said. "I hope this has made people question the value of the dot-com employment contract, the value of stock options and the risk involved in a start-up of any kind. A lot of people forgot about those risks in favor of winning the lottery. I think a lot more of them now realize that the odds in winning the lottery are against them."

Instead of hitting the lottery, Webvan's 2,000 workers received checks Monday for all their work up until then. Those who had less than three weeks of vacation due to them also received checks for that. Some salaried workers who were promised bonuses received additional checks.

Each of Webvan's 1,700 hourly workers received a check for $900--a gift from an "anonymous third-party person who is a very gracious and giving person," said Webvan spokeswoman Amy Nobile. No one received a traditional severance package, extension of health care benefits or advance pension payments.

Paper millionaires
It was quite the opposite of the halcyon days of November 1999, when Webvan burst onto the scene with a stock price of $26 per share. By the end of the month, it hit $30.13. The company was pouring millions of dollars into its marketing and advertising campaigns, and it was largely unconcerned with financial benchmarks and profitability. The goal was to gain customers and transform the way people shop, and many rank-and-file workers were millionaires--if only on paper.

"I thought I was getting hired on at Microsoft or something," said Gary Burch, a 34-year-old inbound associate for the past two years. "They were giving away free lunches and handing out promotions all the time and the stock was at like $28. We definitely thought we were going to be like all the other dot-com guys even though we weren't writing software or whatever. We were wrong."

The stock option dream for many employees ended long ago, when the company's stock began to decline shortly after it debuted on the public markets. Then Webvan began closing operations in other cities and laying off workers. By the time it stopped trading, it was about 5 cents per share.

Still, several employees said their layoffs--though not totally a shock--were made more difficult because of recent promises from executives. Chief Executive Robert Swan stopped by the Oakland distribution center recently to assure the employees who had survived recent layoffs that their efforts were not in vain.

"Just two weeks ago the CEO was telling us we were making progress and had enough cash to make it through at least the end of the year," said Levi Edges, a research associate who first started working for Webvan in December 1999. "Now all the sudden they're out of money and we're out of a job. It's pretty low but it's not surprising. That's capitalism."

Colleen Beck, 39, said she cried when she heard the news on the television. She said she showed up to get her final paycheck, her personal belongings and say goodbye to the people who helped build Webvan from an interesting idea to a full-scale business in less than two years.

"I'm really going to miss this place," she said. "It was and is a great concept. But by the time they started to do the things they should have been doing all along, it was too late."

Beck said it was only in the past two months that management began setting performance standards requiring employees to fill a certain number of orders each hour to keep their jobs.

"Before then, it was a joke," she said. "Some people were motivated and did a good job while others did just enough to get by. Finally, they started holding people accountable and things were improving. But it doesn't matter now."