Michigan Democrat Seeks Labor Law Inspired by Art Van Demise

The collapse of a local furniture chain helped prompt an effort by a lawmaker to make Michigan only the second state to guarantee severance to workers who lose their jobs when their employer scales down or closes its doors altogether.

State Representative Adbdullah Hammoud (D-Dearborn) is introducing a revamped version of a 2019 bill Wednesday requiring that employees targeted in mass layoffs, including bankruptcies, receive one week of severance for each year worked.

The measure follows the demise of Art Van Furniture, the Warren-based chain that shuttered last year. A related package of bills introduced last week aimed at supporting workers includes a $15 minimum wage and mandated meal breaks and childcare assistance.

Second Try

Hammoud’s initial severance effort didn’t proceed. Two years later, while the pandemic has increased the visibility of front-line workers, the bill will still face steep challenges as a partisan piece of legislation in a Republican-controlled statehouse.

After Art Van’s bankruptcy filing swiftly spiraled into a rushed liquidation in March 2020, more than 3,000 employees were discharged without notice, severance pay, or benefit coverage -- all at the onset of a global health crisis.

“I was proud to work with this team to introduce a strong Guaranteed Severance Pay bill, to ensure the devastation at Art Van never happens in our state again,” Hammoud said in an emailed statement to Bloomberg. “While Wall Street executives protect their bottom line, it is our job to protect our working constituents from senseless greed and exploitation.”

Several groups of retail workers have organized since the shutdown of Toys “R” Us Inc. inspired New Jersey’s first-in-the-nation mandatory severance legislation in 2020. They include employees of Sun Capital Partners-owned Shopko Stores Inc. after its liquidation, and employees of ESL Investments-owned Sears Holdings Corp. when mass layoffs occured in its 2018 bankruptcy.

Those let go from Art Van last year lobbied with the participation of advocacy group United for Respect to request that Art Van’s private equity owner, Thomas H. Lee, reach into its own pocket to compensate them. Boston-based T. H. Lee ultimately created a $2 million hardship fund.

That qualified victory came after a campaign by former Toys “R” Us employees in 2018 convinced that company’s owners, KKR & Co. and Bain Capital, to create a $20 million fund to compensate the 30,000 former workers when the toy chain ran aground.

Julie Ford is one of the former workers involved in the efforts to create the Art Van fund and pass the Michigan bill. She is part of a group that meets every couple of weeks to strategize. Ford, 51, started as a part-time worker in 1991, and in time moved into Art Van’s human resources department. She found herself and her husband without insurance after the company shuttered. Eventually she obtained an Affordable Care Act plan with monthly premiums about $300 higher than she’d paid through Art Van.

Had the severance law been in place then, “it would have given me more time to look for medical, it would have been a cushion for severance pay and it would have been a heck of a lot more money than we got,” Ford said in an interview.

WARN Notices

Federal laws require that companies give 60 days’ notice of mass layoffs, or continue to pay wages for that period.

Yet if the layoffs come as part of a Chapter 11, the rules of federal bankruptcy court take over. Financial creditors take priority, and once they are repaid -- with cash from a sale of assets, new stakes in a reorganized company, or otherwise -- there’s often nothing left for workers, as was the case in Toys “R” Us.

The Michigan severance bill would affect employers with at least 100 workers that cut at least 50 people and apply to those who’ve been at the job at least a year -- all lower thresholds than the previous version. It would also extend the employee-notice period for layoffs to 90 days from 60 days and would include employees left jobless if a company relocates.

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