Dive Brief:
- Nearly 20,000 former Toys R Us employees received letters that allow them to apply for severance pay from a $20 million hardship fund created late last year by private equity owners KKR and Bain Capital to support workers affected by the retailer's liquidation, according to information from the fund's website and provided by Carrie Gleason, policy director and campaign manager for Organization United for Respect and its Rise Up Retail campaign.
- Eligible employees will receive a proportional amount of money based on their former salary, position and years spent at the retailer, with amounts ranging from $200 to over $12,000. Former employees began receiving checks this week.
- Workers rights activists like Gleason are notching this as a "historic" win, although they argue that former Toys R Us employees were owed $75 million in severance pay altogether. They continue to urge creditors including Solus, Angelo Gordon, Vornado and others to contribute to the fund, which is being administered by Kenneth Feinberg and Camille Biros. Angelo Gordon declined to comment to Retail Dive, and the other creditors did not immediately respond to requests for comment.
Dive Insight:
After spending seven years working her way up to a supervisor role at a Babies R Us in Harleysville, Pennsylvania, Sarah Woodhams lost her job in June of 2018. She found out on Facebook, as did many of her colleagues, that her store would be closing, she told Retail Dive in an interview.
"It hit us hard and to have all of that taken away — the last little hope that we had to help tide us over until I could find another job — was just a slap in the face," she said, adding that in the months since she has struggled to pay her rent and other bills. When things started to turn for the worse at Toys R Us, Woodhams, who made $12.65 an hour as a full-time employee, said she was told by the company that she would receive a severance package of about $4,000. This week, she received a check for $735 from the hardship fund.
"I was thankful to get anything, especially the situation we are currently in financially, but it's a little disheartening," she said. "I know that we deserve more. We were promised more." Woodhams is still out of a job and isn't eager to look within the retail market, but many of her former coworkers found work at a nearby dollar store chain. For now, Woodhams has free time to work with Gleason's organization and others to meet with policymakers to push for regulations that would grant greater protections for workers affected by bankruptcies.
In a joint statement released when the hardship fund was announced in November, KKR and Bain said they advocated for a "very different outcome than what occurred" and noted that the circumstances around the Toys R Us bankruptcy sparked the fund's creation. "The confluence of the disruption in retail, the push by the company's secured creditors to liquidate the company's U.S. operations, and the fact that we have never experienced something like this in the history of either firm, led us to try and find a way to provide some financial relief for former employees," the two firms said.
The organization United for Respect has been a supporter of a severance pay bill in New Jersey which will go to a committee hearing on Feb. 7, Gleason told Retail Dive in an interview. At the state and federal level, she's pushing for severance pay, but that's ultimately just a Band-Aid on a larger issue, she said.
"We want to do something that has more protections that address high-risk investments that play out with the financialization of retailers — more rights given to not just employees but small business vendors in the bankruptcy process," she said. "I think there needs to be a higher cost to shutting down these businesses. Right now in Toys R Us, it didn't matter that the creditors keep the store running or shut it down... Their question was 'How do we get paid?'"
Gleason and her organization are also working to help provide protections to workers affected by Sears' bankruptcy. Today, Sears' board will determine what qualifying bids it will consider, including several alternatives from Chairman and former CEO Eddie Lampert via his hedge fund ESL Investments. That company's preferred $4.4 billion bid includes a plan to operate roughly 425 stores, keep about 50,000 jobs and provide severance protections. Gleason, however, isn't optimistic any of that will happen.
"The problem is, he owes a lot of people money in the bankruptcy process," she said. "And he already didn't protect severance pay for these families."
