Last year, Midwest retailer Art Van Furniture was abruptly dissolved by private equity firm Thomas H. Lee Partners, leaving 3,100 workers jobless and without health care coverage amid the COVID-19 pandemic.
New legislation introduced last month by Michigan state Rep. Abdullah Hammoud (D-Dearborn) would prevent that from happening again.
Bill HB 5251, the Greater Severance Pay bill, would mandate companies that employ more than 100 people to provide 90 days’ advance notice of closures and relocations when 50 or more employees are laid off, as well as payout of any benefits that employees had accrued during the 12-month period before the layoff, such as overtime, holidays, and sick time.
The legislation would also guarantee severance pay for former employees in correlation with years of service; for every year of employment, the worker would be compensated with a week’s worth of wages.
If the bill is passed, Michigan would become the second state to enact such protections, following New Jersey.
“Former Art Van associates and our community saw firsthand the suffering that occurred when a Wall Street private equity firm destroyed jobs, leaving thousands of workers uninsured and lacking financial support in the middle of a global pandemic,” Hammoud said in a statement. “That’s why 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.”
Initially, T.H. Lee had promised to provide work and health insurance coverage to employees until May; however, employees’ healthcare was rescinded without warning in April. T.H. Lee then closed all 97 of its branches located in Michigan, disregarding the provisions of the federal WARN Act, which requires businesses to grant a minimum of 60 days’ notice to employees prior to a mass layoff.
Sheena Simmons — a former Art Van selling manager in Comstock Park, Michigan, who worked at the company for five years — describes the mass layoff as “crushing,” especially for elderly former employees who found it difficult to attain new employment.
“I don’t want this to happen to anyone else. We need consequences. This should be illegal,” she tells Metro Times.
With the help of the nonprofit organization United for Respect, former Art Van workers fought back against the conditions of their layoff by campaigning for months to ensure the private equity firm establish a severance fund for the laid-off employees. On April 20, 2020, the employees sent a letter to T.H. Lee demanding the establishment of a severance fund, and subsequently met with the private equity firm several times before T.H. Lee agreed to a $1 million payout in June 2020.
However, feeling this amount was inadequate, Art Van employees continued to demand greater severance pay, and in March 2021, a year after filing for bankruptcy, T.H. Lee eventually raised their original sum to a $2 million payout, allowing eligible employees to each receive approximately $1,200.
“[T.H. Lee] did show up finally, but it took some time,” Simmons says. “It definitely was a hard fight.”
Simmons calls the work of United for Respect “a blessing.” The nonprofit organization describes itself as being dedicated to improving retail workers’ standard of living and “advancing a movement for an economy where corporations respect working people and support a democracy that allows Americans to live and work in dignity.”
The success of the Art Van employees’ campaign isn’t the first time United for Respect has won a severance payout for laid-off workers. Following Toys R Us’s bankruptcy in 2018, United for Respect organized the toy chain’s former employees to win a $20 million financial assistance fund paid by the company's private equity owners, KKR and Bain Capital.
However, Art Van employees and Rep. Hammoud believe legislation must be passed to prevent future unethical mass layoffs.
“Our friends, family, and neighbors need to know that the State of Michigan is on their side — and while Wall Street executives protect their bottom line, it is our job to protect our working constituents from senseless greed and exploitation,” Hammoud said in a statement.
Simmons doesn’t believe employers and hedge private equity firms will do the right thing if left to their own devices, “Not at all. There’s not a bone in my body that tells me that anyone's being held accountable,” she says. “This is why we need to build a path [through legislation].”
She adds, “[The bill is] so crucial because we just want to make sure that [what happened to us] doesn’t happen to someone else. … [Rep. Hammoud] wrote the bill with the purpose of keeping Michigan strong.”
Simmons is hopeful that the legislation will pass and become law. “[Having severance pay] would have changed my life tremendously,” she says. “It would have changed my son’s life tremendously. I wouldn't have had to go directly back to work, worrying about where our next paycheck is going to come from.”
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