Art Van Workers Claim Victory After T.H. Lee Boosts Payouts

Thomas H. Lee Partners is nearly doubling a fund to assist former workers at its bankrupt Art Van Furniture chain, after months of pressure from employees who said a payment of around $400 each was “grossly inadequate.”

The private equity firm is adding $950,000 to a $1.1 million fund it established last year, according to United for Respect, the group that worked with former employees to demand health coverage or cash assistance after Art Van filed for bankruptcy last year.

A representative for Boston-based T.H. Lee, which manages $11.6 billion, declined to comment on the decision. The firm had previously said it couldn’t increase the size of the fund because it lost its own investment in Art Van.

“Art Van workers getting additional hardship funds to help cover health care was the right thing to do,” said Representative Rashida Tlaib, whose district is near Art Van’s former headquarters in Warren, Michigan. “However, let’s be clear – Art Van closed a year ago and workers should not have had to wait this long to get help to cover costs due to losing their jobs.” She last year called for T.H. Lee to cover health insurance for the workers.

Growing Power

The boost to the relief fund -- as well as its very creation, just weeks after Art Van’s demise -- point to the growing power retail workers are wielding in political and business negotiations. Labor campaigns have received support not only from top leaders including President Biden and Massachusetts Senator Elizabeth Warren, but also from a public increasingly sympathetic amid the hardships of the pandemic.

Joseph McCartin, a history professor who directs the Kalmanovitz Initiative for Labor and the Working Poor at Georgetown University, called the move “damage control.”

“With groups like United for Respect growing and now finding allies in the White House and as chairs of key congressional committees, job-destroying private equity firms like THL are waking up to their growing political vulnerability,” he said in an email.

The workers successfully pushed to extend the deadline for registering for the fund to late February. But because not all eligible employees signed up, those enrolled will receive around $1,200, an amount approaching the original $1,500 per person requested, said Shirley Smith, a former worker who’s been involved in the effort.

After series of virtual meetings with some workers, T.H. Lee sent a letter in September detailing the establishment of the fund. Workers continued to lobby for more, and seven participated in a January meeting after a months-long communication hiatus and T.H. Lee’s insistence that the offer was final.

“They got the impression we weren’t going away,” Smith said in an interview. “On our last conference call with them, we just kept pressing -- no, this is not enough, this is not acceptable.”

Family Business

Art Van was a family-run chain founded by Art Van Elslander in Detroit in 1959. By 2015, Art Van had 100 stores and $725 million in annual sales. The family sold in 2017, with T.H. Lee paying $215 million to take over the retail operations. A separate group of funds purchased its real estate.

The furniture business soon began to deteriorate, and Art Van filed for bankruptcy early last year, just as the impact of the coronavirus pandemic was starting to hit the U.S.

Workers held several virtual meetings with T.H. Lee after the bankruptcy to demand the weeks of promised health coverage they lost when the stores abruptly liquidated. Many also lost accrued vacation and flexible spending account money. T.H. Lee agreed to create a $1 million fund and to match any outside donations of up to $1 million.

The workers group had estimated the financial need at around $7 million, reflecting the cost of the health insurance coverage employees lost, and insisted on a fund of at least $5 million.

Smith said the group will stand down with T.H. Lee now but will continue to lobby for broader changes, including the passage of a severance law expected to be reintroduced in Michigan this spring and Warren’s Stop Wall Street Looting Act of 2019 that would elevate worker claims for severance in bankruptcy and boost regulations on private equity. Tlaib is a co-sponsor of the Wall Street bill.

Her group had spoken with former workers from Toys “R” Us, who won a $20 million hardship fund after that retailer’s collapse. “It gave us some perspective on how to hang in there and keep pushing,” Smith said. Now, the former Art Van employees hope to help workers in similar situations.

“We’re going to call it a win,” she said. “But we’re just going to shift gears and keep fighting in this fight.”

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