Once a promising player in the Nearshore IT services game, AgileThought spent a good portion of 2023 entangled in a battle with former employees in Mexico who publicly accused the company of neglecting its obligations as an employer.
The accusations launched against AgileThought, headquartered in the US but which sources most of its staff from Mexico, are damning. From owed wages and severance payments, to irregular tax filings and even attempts at intimidation, the claims are likely causing reputational damage. AgileThought counts a number of high-profile clients in its portfolio, including banking giants Santander, BBVA and Citibank, consulting firm PwC and gaming studio Riot Games.
AgileThought effectively faces battles on at least three fronts. Aside from its labor disputes, the company is going through Chapter 11 bankruptcy to renegotiate its debt, this while dealing with the probing eyes of Mexican tax authorities.
As 2024 kicks-off, AgileThought faces a difficult path.
Fighting tooth and nail
Like many other tech firms, AgileThought struggled with macroeconomic headwinds and mounting costs throughout 2023. Its fortunes darkened once a host of labor disputes with former employees –many of them affected by waves of layoffs within the organization– came to light.
A group of nine former AgileThought workers interviewed for this article – all of whom asked to remain anonymous– told NSAM that they spent a good portion of 2023 fighting over owed wages, unpaid severance and missing profit share payments. They are a sub-set of a group of former workers airing similar grievances. AgileThought employs most of its people in remote or hybrid environments.
While many of the laid-off employees appeared to have received severance in full and on time, AgileThought reached out to some of them to negotiate a deferred payment scheme over a period of several months. The practice is not uncommon for companies dealing with financial strain.
“It was until we began making noise in social media that they started calling us on the phone, telling us those things [to pull down our social media posts] in a very aggressive tone; as if we were at fault for the company’s financial troubles”
The company, say sources, managed to make partial severance payments during the initiation phases of the agreements. Nevertheless, the money eventually stopped arriving as scheduled, prompting concern among several of the former workers. Many tried to contact AgileThought’s financial team, to no avail.
“They cut communication with us from the moment there were delays in [severance] payments,” a former AgileThought employee told NSAM. “We sent loads of emails asking for answers. They would not take our messages, nor our calls.”
Faced with the possibility of not getting their due, a group of former employees began exerting pressure on the company through social media. They posted comments about AgileThought’s neglect of its obligations as an employer, tagging some of the firm’s most prominent clients. A LinkedIn group for disgruntled AgileThought ex-employees was opened with the purpose of venting frustrations publicly and pressuring the company to respond.
The company eventually agreed, in some cases, to meet its severance obligations. At the same time, it contacted the administrators of the LinkedIn group, asking them to shut it down. Former employees told NSAM that they received phone calls from alleged AgileThought representatives who pressured them to stop posting criticism on social media, arguing that the posts were damaging the company’s ability to secure projects and generate revenue.
“It was not until we began making noise in social media that they started calling us on the phone, telling us those things [to pull down our social media posts] in a very aggressive tone; as if we were at fault for the company’s financial troubles,” one of the interviewees said.
Another major gripe former employees had was allegedly unpaid profit shares. Mexican labor law establishes that, every year, workers should receive a share of company profits whenever these are equivalent to or exceed 300,000 Mexican pesos (around US$18,000).
“Even when we saw we were receiving projects, they paid no profit shares. How was that possible? They would always argue that the company was not generating profit, that it was in the red”
According to former workers of AgileThought, the company refused to pay profit shares, citing its struggling financial situation. A couple of the ex-employees said they saw no profit share payments for a period of three years.
“They never paid profit shares, arguing that potential profits were being absorbed by debt payments,” said one of the workers interviewed.
“Even when we saw we were receiving projects, they paid no profit shares. How was that possible? They would always argue that the company was not generating profit, that it was in the red,” said another one. “Finance would not tell us anything else. As workers, we demanded receipts, to verify if that was true; it was our right. But we got nothing. They kept us spinning.”
A second LinkedIn group of disgruntled AgileThought ex-employees posted in September 2023 that the company had paid all the money it owed to laid-off workers. NSAM spoke with the nine ex-employees months after that post was made. Most of them assured that the company still owed severance to a handful of its former workers.
NSAM contacted AgileThought several times for comment on the allegations made by former workers. The company failed to respond.
Here comes the taxman
Several of the former AgileThought employees interviewed for this article mentioned what they characterized as “strange” and “unexplained” debt appearing in their most recent yearly tax filings.
In Mexico, employers are responsible for filing and paying their employees’ taxes every month, including income tax and social security contributions, which are taken directly from workers’ salaries. All citizens who generate income –whether as employees or through entrepreneurial activity– file a yearly tax report in April, which is sent to Mexico’s Tax Administration Service (SAT).
In April 2023, several AgileThought employees and former workers found exorbitant tax debts registered in SAT’s online filing system. According to the accounting made by the system – based on the tax payments and income reports sent, in this case, by AgileThought – some of them owed hundreds or even thousands of dollars in unpaid taxes. Software developers were particularly hard hit.
“It was in April when it became clear to us that something was wrong. Many of us supposedly owed taxes to Hacienda [Mexico’s Treasury], and we didn’t know why,” one of the affected ex-employees said. “According to Hacienda’s system, some software devs owed over 100,000 Mexican pesos [US$5,900] in taxes, which should not have been possible assuming that AgileThought was filing and paying taxes properly.”
“According to Hacienda’s system, some software devs owed over 100,000 Mexican pesos [US$5,900] in taxes, which should not have been possible assuming that AgileThought was filing and paying taxes properly”
AgileThought filed for Chapter 11 bankruptcy in late August of 2023. It was reported that the company “partially blamed” its financial strains on a US$203 million tax dispute with Mexico’s Tax Administration Service.
NSAM was unable to independently ascertain the aforementioned report. Nevertheless, the company stated in its Q1 2023 financials that it was “currently being audited by Mexican tax authorities with possible tax assessments including income tax, value added taxes, penalties and interest ranging from [US]$1.5 million to [US]$3.0 million.”
It goes by many names
AgileThought has been identified here as a single organization, but the company has a long history of mergers and acquisitions which has led to the accumulation of names and subsidiaries spread mostly throughout the Americas.
AgileThought has at least 29 subsidiaries, according to a court filing related to the company’s bankruptcy proceedings in the US, which was obtained by NSAM. The names listed include AgileThought Inc.; 4th Source Holding Corp.; 4th Source Mexico LLC; AgileThought Costa Rica S.A.; AgileThought Brasil Servicos de Consultoria Em Software; Cuarto Origen, S. de R.L. de C.V.; AN Global LLC; and Entrepids Technology Inc.
Most of these subsidiaries are officially headquartered either in Irving (Texas) or in the Mexican city of San Luis Potosi. Some have listed addresses in Mexico City, the State of Mexico, São Paulo (Brazil), Madrid (Spain) and San Jose (Costa Rica).
Not all of the former employees interviewed were officially hired by AgileThought. Some told NASM that, on paper, they were employed by one of the subsidiaries, including Cuarto Origen, AgileThought Digital Solutions and 4th Source.
A contract obtained by NSAM from one of AgileThought’s ex-employees listed Team X Project & App S.A. de C.V. as the employer. Another former employee said his contract named Teckel Technology as his employer. Neither organization is listed as an official subsidiary of AgileThought. Both are mentioned in a court filing as parties potentially interested in the company’s bankruptcy proceedings, classified as “landlords/payees on real estate lease.”
NSAM reached out to both Team X and Teckel for comment. Neither has responded.
“A new hire asked during an onboarding session about these different company names in the contract. They told him not to worry about it”
Several of the ex-employees interviewed stated that it was common for AgileThought to use a wide array of names in its employment contracts. Whenever the topic was brought up with recruiters, they said, it was waved off as unimportant.
“A new hire asked during an onboarding session about these different company names in the contracts,” an interviewee commented. “They told him not to worry about it; that the organization used several company names but they were all part of AgileThought.”
A couple of the former employees interviewed, who had tenures of more than five years in AgileThought, explained that the company had gone through several mergers and acquisitions in its history and that, lately, it had tried to “homologize” contracts across the organization. Some of the names used in employment contracts correspond to those of acquired companies, but not all; Teckel and Team X Project being the most glaring examples of the contrary.
NSAM consulted with an expert in Mexican tax filings and a local labor lawyer. Both mentioned that, before 2021, the practice of using multiple company names for employment contracts used to be common among Mexican businesses as a form of outsourcing, which allowed companies to reduce tax burdens and avoid paying profit shares to employees.
Outsourcing is heavily limited in Mexico thanks to an infamous law introduced in 2021. Companies are permitted to outsource personnel in very specific cases, and only by hiring other companies listed as “providers of specialized services” by Mexico’s Labor Secretariat. Otherwise, the practice is illegal.
The same provisions apply to insourcing, a practice in which a company hires personnel from another company under the same corporate umbrella.
AgileThought Digital Solutions S.A.P.I. de C.V., AgileThought Mexico S.A. de C.V. and AgileThought S.A.P.I. de CV are registered as specialized services providers.
A complicated history
The origins of AgileThought’s current incarnation can be traced back mainly to two organizations: AN Global and AgileThought.
AgileThought was originally a Tampa-based provider of software services, regarded as a very promising player in that space. It was listed at #38 in Inc.’s top businesses list for 2018. Founded in 2004 by Ryan Dorrell, the company registered US$56 million in revenue in 2017, achieving a triple-digit growth rate in three years, with an average growth rate of 44% since its foundation.
AN Global was a provider of software services founded back in 2000 as NA Soft by Mexican entrepreneurs Manuel Senderos and Mauricio Garduno. Between 2000 and 2020, AN Global acquired at least 10 smaller software companies, including 4thSource, Faktos, Anzen, Extend Solutions and eProcure. It bought AgileThought in 2019. The new, combined entity began operating under the AgileThought brand and moved its HQ to Irving, Texas. Sendero and Garduno are AgileThought’s current CEO and VP of Business Development, respectively. After the merger, Dorrell remained in the company as Managing Director, leaving a year later.
In August 2021, AgileThought merged with LIV Capital, a special purpose acquisition company (SPAC) headquartered in Mexico City. The move allowed AgileThought to begin trading on Nasdaq. Two years later, the company filed for Chapter 11 Bankruptcy.
AgileThought spent the latter half of 2023 managing its bankruptcy proceedings. In late December, the US Bankruptcy Court for the District of Delaware approved the sale of AgileThought’s assets to Blue Torch Capital, one of the firm’s creditors.
Crumbling morale and reputation
Both 2022 and 2023 were difficult years for IT companies and their workforces, mired by financial headwinds, which in many cases translated into significant layoffs. AgileThought was one of many companies impacted.
Between June 30 of 2022 and 2023, the company’s global headcount –most of it located in Latin America, with a high concentration in Mexico– shrank from 2,608 to 2,186; a reduction of 16%, according to AgileThought’s latest quarterly report, published in August 2023. Staff cuts were an attempt to “reduce operating costs and improve operating efficiency,” as explained by company leadership.
“Our headcount has been a little impacted recently because of the exit of non-core [projects]. But overall, the steps that the company is taking is in the direction of more quality, more higher revenue per billable employee moving forward,” stated then CFO Amit Singh during an investors call for Q1 2023.
“My boss pressured me so much. When I spoke with my direct superior, I told him my mental health was deteriorating fast. I even thought about suicide”
AgileThought’s layoffs in Latin America amounted to 307 people, or 13% of regional headcount and 11% of global staff. Over 90% of AgileThought’s workforce resides in Latin America, with around 80% being located in Mexico, according to the company’s own numbers.
NSAM was unable to ascertain how many people were laid-off in Mexico specifically. Several of the interviewed ex-employees put the number between 100 and 160 people for the period covering late 2022 and mid 2023.
While AgileThought was dealing with labor disputes behind the scenes, company leadership told investors that morale was relatively unaffected among employees.
“We think that the morale is actually good,” CEO Manuel Senderos said during the Q1 2023 investors call. “The morale is holding up even as we go through these difficult times in refinancing and all of that. But people are generally excited about the type of work that we’re doing, the clients that we’re capturing.”
“I quit early because I felt insecure about the company’s financial situation,” stated an ex-employee of AgileThought who worked with the company for less than three months. “It was a good experience working with them, but seeing those publications by former employees in LinkedIn made me afraid of falling in the same situation.”
“AgileThought was ruined by company leadership,” commented another one. “They ran into trouble with everyone, smearing their own reputation as a trustworthy company and a stable place of employment.”