KKR Wants Raises for Workers as Busted Chain Shuts Stores
(Bloomberg) -- Toys “R” Us is gone but not forgotten in the newly filed bankruptcy of Things Remembered, where private equity owner KKR & Co. has pushed to include extra pay and severance for everybody.
The retail chain is closing most of its 400 stores and selling the rest, but unlike Toys “R” Us, it’s offering hourly workers a raise and severance if they stick around to the end. That’s at the behest of KKR, according to a representative for the giant private equity firm, which controls a stake of about 30 percent.
The publicity prompted lawmakers including Senator Elizabeth Warren to call for the company’s lenders to chip in, and elevated the treatment of workers to a national issue. Advocates for the workers pointed out that the liquidation sales generating millions of dollars for lenders and advisers couldn’t happen if the hourly workers didn’t stay to help.
“Companies know that the public’s watching what they do and that people are concerned about how employees are being impacted, and so it’s smart business for these companies to make sure that employees being laid off have some kind of severance to make the transition,” said Carrie Gleason, policy director at Organization United for Respect, the group that organized workers to demand compensation.
Things Remembered adopted a similar view in court documents filed Wednesday. “The store employees, along with their skills, knowledge, and hard work, are more critical now than ever,” wrote Chief Restructuring Officer Robert Duffy. “Through their commitment and performance, they can ensure that the debtors continue to maximize stakeholder value.”
The plan includes an unspecified increase in hourly wages for employees, bonuses for individual store managers and their assistants, and severance ranging from four weeks to six months pay. The staff includes 2,700 people and 1,650 temporary workers.
The cost could be relatively modest because the company aims to complete the wind-down of its stores by March 30. In the past, it spent about $9.2 million a month in wages and other compensation, court documents show. The plan also budgeted as much as $1.1 million in severance, plus outplacement services for workers, a KKR representative said.
Jobs and severance pay have been central themes in the two highest-profile cases of the past year, the liquidation of Toys “R” Us and the ongoing saga of Sears Holdings Corp. The latter got court approval Thursday for Chairman Eddie Lampert’s $5.2 billion rescue bid, which he says will preserve 45,000 jobs at Sears and Kmart. In both cases, workers and politicians including 2020 presidential hopefuls have weighed in on the need to protect workers.
New Jersey, the home state of Toys, may become the first state to mandate a week of severance for every year worked at companies dismissing more than 50 people if a bill that passed out of committee on Thursday becomes law. Former Toys and Sears workers showed up in Trenton to urge lawmakers to support the measure.
The success and visibility of the earlier Toys campaign encouraged employees to call on Lampert to guarantee severance and pensions as the retailer’s fate was being resolved, and a severance provision was part of Lampert’s sweetened offer to keep Sears alive.
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