Employees’ Overtime Suit Forces Daily Voice to Seek Bankruptcy Protection

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daily_voiceDaily Voice, the recently scaled-down regional network of 41 community news sites, filed for and won Chapter 11 bankruptcy protection this week. The move gives the company relief from an expensive class-action suit by two former reporters who said they and other Daily Voice staff worked overtime consistently but were never paid for the extra hours.

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Approval of the petition, on Monday, April 7, in U.S. Bankruptcy Court in White Plains, N.Y., frees up Daily Voice finances so the company can continue to publish its digital sites, which are clustered in metro New York City suburbs in New York State and Connecticut.

The court action came two months after Daily Voice escaped potential closure by instituting major cost cutting that closed the network’s 11 community sites in Central Massachusetts, brought resignation of the corporate management team, closed corporate offices in New York City and consolidated some of its suburban newsrooms.

Daily Voice CEO Carll Tucker said removal of the overtime suit’s “liability overhang” means the company has the financial resources, from advertising revenues and investor commitments, to continue operations. “Everyone can come to the site today, tomorrow, next week, next month and next year,” he said.

Tucker, who founded Daily Voice as Main Street Connect in 2009 and was the company’s first CEO before stepping aside in 2011, owns 16% of the company and is one of its major investors. His wife, finance journalist Jane Bryant Quinn, owns 5.9%.

Tucker tied the suit to his company not establishing that reporters were classified as “exempt” from state and federal overtime laws. “That the law should treat them like factory workers punching a clock never occurred to me,” he said. The issue could have been avoided, he said, if Daily Voice had instituted bookkeeping showing that the reporters were paid for working 40 hours weekly.

Tucker said up until the Chapter 11 petition was filed, he had been hopeful the suit, filed in September 2012, would be settled through mediation. But, he added, “they [the two former reporters who filed suit on behalf of themselves and others] wouldn’t accept anything we could offer or that was fair.” Meanwhile, Daily Voice was incurring six-figure legal fees to defend itself.  “The fees were killing us,” he said.

If the two sides reach an agreement that’s approved by the court, Daily Voice presumably would emerge from Chapter 11. The reporters’ law firm, Hayber, in Hartford, Conn., did not immediately return an email seeking response.

The bankruptcy filing put on record many details about Daily Voice’s finances, including these numbers:

  • Investors, including Tucker, have put a total of $18,028,875.47 in the company.
  • Revenues were $1,542,354 in 2012, an increase of more than 50% from $1,049,000 in 2011.
  • Secured creditors are owed $550,000, of which $250,000 is owed to Tucker.
  • The company’s accounts receivable — from advertising bills that aren’t yet due or are overdue total $216,772.91.

Tom Grubisich authors The New News column for Street Fight. He is editorial director of LocalAmerica, which is partnering with InstantAtlas to develop sites that will present how communities rate in livability. Local America is featured on the Reynolds Journalism Institute’s Pivot Point site.