Art Van Workers Demand Owner Pay Back Benefit Accounts Lost in Bankruptcy
Art Van Workers Demand Owner Pay Back Benefit Accounts Lost in Bankruptcy
(Bloomberg) -- Workers dismissed by bankrupt Art Van Furniture Inc. are demanding that private equity owner Thomas H. Lee Partners pay back money they contributed to their own flexible spending benefits accounts that was lost in the chain’s liquidation.
The workers forfeited as much $525 each when they lost access to cash in their flexible savings accounts and health care savings accounts as part of the retailer’s liquidation, according to a copy of a letter to T.H. Lee reviewed by Bloomberg News. It’s the latest instance of workers pushing for better treatment in retail bankruptcies, which has been forcing lenders and private equity owners to rethink their assumptions about the costs of dismantling a company.
Art Van went bankrupt in March, putting about 4,500 people out of work. T. H. Lee created a $1 million hardship fund following worker protests over the earnings and benefits they lost, but the workers group said the payment amounts to about $400 per person and is “woefully inadequate.”
More Compensation
The employees asked for $1,500 each to cover three months of out-of-pocket health insurance coverage so they could weather the coronavirus pandemic, plus the return of any unused funds in their flexible spending accounts and the removal of a cap that excludes anyone who earned more than $99,000 a year.
A representative for Boston-based T.H. Lee and lawyers for the Chapter 7 Trustee winding down Art Van’s liquidation did not respond to requests for comment.
“Former employees are facing astronomical hospital bills, unable to afford prescriptions, surviving a pandemic as immune-compromised, and recovering from contracting Covid, among many other circumstances,” they said in the latest letter, which was signed by a committee of workers organized through the labor advocacy group United for Respect.
Retail Wipeouts
T.H. Lee bought Art Van in 2017 from Art Van Elslander, who founded the chain in 1959 and operated it for the next several decades. This year it became another in a string of private equity-owned retailers felled by debt burdens. They included category killers such as Toys “R” Us and Sports Authority along with mall mainstays like Gymboree.
The workers group said T.H. Lee sent a letter this month detailing the establishment of the Art Van Employee Covid-19 Short-Term Disaster Relief Fund. In addition to the hardship payment, it would also match an additional $1 million of donations from other parties and said it has raised $50,000 so far, pushing the total to be distributed to $1.1 million.
The workers said T.H. Lee bears responsibility for their fate, writing that “in three short years, Thomas H. Lee drove a healthy, 60-year-old company into bankruptcy.”
Workers at bankrupt retailers are increasingly demanding payment for lost severance and other benefits, and some politicians are taking note. The Art Van employees’ campaign drew backing from Rep. Rashida Tlaib, who represents a congressional district not far from Art Van’s Warren, Michigan headquarters.
New Jersey in January became the first state to require severance payouts for workers at bankrupt companies. The Stop Wall Street Looting Act introduced by Sen. Elizabeth Warren last year would also elevate severance claims in bankruptcy and make private-equity owners responsible for debt their portfolio companies incur.
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