Guzman y Gomez sued over US closures

Australian fast-casual dining giant Guzman y Gomez (ASX:GYG) is facing a class-action lawsuit in the United States, with a group of American workers alleging the company failed to give adequate notice before abruptly shutting down its US operations.

The lawsuit, filed on May 25 in an Illinois District Court, claims the Sydney-listed Mexican-themed restaurant chain breached labour laws by failing to provide staff with the mandatory 60-day notice prior to closing its doors.

The legal challenge comes just one week after GYG announced it was pulling out of the highly competitive US market altogether, citing sustained poor sales performance.

The sudden exit marks a dramatic strategic pivot for the company. GYG’s ambitious plans for global expansion were a major selling point during its blockbuster initial public offering on the Australian Securities Exchange in 2024.

While investors initially backed the brand's international aspirations, the financial realities of the American market ultimately forced a swift retreat, leaving local workers suddenly out of a job.

In response to the filings, GYG management maintained that the company had acted completely within the boundaries of the law during the redundancy process.

"GYG is aware of legal action filed in the United States, and we are confident we have met all of our legal obligations to our U.S. employees," a company spokesperson said. "We are not in a position to provide further comment on this matter."

Legal experts suggest the outcome will heavily depend on whether the closures triggered federal or state-level Worker Adjustment and Retraining Notification Acts, which dictate strict employee notification windows during mass layoffs.

At the time of reporting, Guzman y Gomez’s share price was $19.82.