August 20, 2019

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Toys R’ Us Employees Fight for Much-Deserved Severance Package

Toys R Us Photo Credit: Phillip Pessar, Creative Commons 2.0

Just before Toys R’ Us went bankrupt, executives at the company were given checks measuring in the millions. Despite the fact that higher-ups made it out with money in their accounts, nearly 30,000 workers were left to fend for themselves with no severance of any kind. In response, former employees have called for legislation that would prevent companies from leaving employees high-and-dry in bankruptcy filings.

Senators Speak Out

“This is the story of a company — one of the most iconic in America — that was saddled with so much debt that it could not succeed,” said Senator Cory Booker, of New Jersey, where Toys R’ U is based. He continued, “And now the big guys are walking away and the workers are left with nothing.”

Senator Robert Menendez, also of New Jersey, echoed Booker: “Something is seriously wrong with this type of economy,” he said, continuing, “How many employees at Bain are now worrying about how they’ll pay for day care? How many employees over at KKR don’t have the cash to fill up their gas tank to go out looking for jobs?”

What Workers Want

Workers have banded together to push for stricter regulations on leveraged buyouts, seeking to prevent private-equity firms from bleeding companies dry and leaving nothing for employees. In short, workers want to be compensated when bankrupt employers backed by private-equity firms go under.

The Firms

In 2005, Toys R’ Us was bought by two firms — Kohlberg Kravis Roberts and Vornado Realty Trust – which pushed the retailer into major debt — $5 billion to be exact. Last year, they filed for bankruptcy, having more debt than assets.

In a letter to the two firms, Senators Booker and Menendez spoke about the crippling effects of the debt and management fees imposed by Kohlberg Kravis Roberts and Vornado Realty Trust. According to the Senators, the private-equity firms charged at least $470 million in fees – that’s in addition to the $5 billion of debt. With such handicaps, the toy retailer “was simply unable to make the investments in operations and technology needed to adapt and compete in the ever-changing retail sector.” In the end, Booker and Menendez urged the firms to support the 33,000 employees, many of which were “anchors of their communities.”

The Fight

Madelyn Garcia, a former employee, was left destitute by unconcerned Wall Street tycoons. She worked for the retailer for nearly 30 years and had aspirations to rise through the ranks. Now, in the wake of the bankruptcy filings, she must find a new job for the first time in decades. “We were counting on our severance pay. Severance was always given to employees when they closed a store,” she told CNN. “I think we should be compensated for all the years we put in.”

After Toys ‘R Us announced it would supply no severance, Garcia and her compatriots seethed. “I’m angry,” she said. “I don’t blame Toys ‘R’ Us. It’s a wonderful company. We love it. That’s why we stayed on so long. I blame the private equity owners and the bankruptcy laws.”

Nonetheless, former employees took the fight to the NYC apartment complex where David Brandon – a former CEO who received a significant retention bonus – resides. From there, they went to the stores themselves, protesting in the parking lots and demanding restitution. It was at one of those parking lots that Senators Booker and Menendez offered their support. Workers also took the fight to the headquarters of the private-equity firms responsible for the collapse.

Executives Make Out Like Bandits

And while employees struggle to obtain a severance package, 17 former executives can rest assured that they will – if they haven’t already – receive a total of $16 million in bonuses. In arguing for the bonuses before the bankruptcy court, the company claimed they needed the money to ensure that executives would continue to work hard during the proceedings. Toys R’ Us put it this way in court filings: “It is the [company’s] employees – and more particularly the senior management team – that must execute at this critical juncture and provide the foundation for a successful turnaround.”

Trudy Robbins, an attorney representing the creditors, disagreed: “It defies logic and wisdom, not to mention the Bankruptcy Code, that a bankrupt company would now propose further multi-million dollar bonuses for the senior leadership of a company that began the year with employee layoffs and concludes it in the midst of the holiday season in bankruptcy.” She continued in the filing, “Apparently, this Christmas, Toys “R” Us intends to deliver not only ‘children their biggest smiles of the year’ but the insiders, too.”

About Sean Lally

Sean Lally holds a BA in Philosophy from Temple University where he also studied theatre for several years. Between 2007 and 2017, he worked as a professional actor for several regional theater companies in Philadelphia, including the Arden Theatre Co., EgoPo Productions, Lantern Theater and the Bearded Ladies. In 2010, Sean co-founded Found Theater Company, an avant-garde artist collective with whom he first started to cultivate an identity as a writer.

Over the past few years, Sean has been working as a content writer, focusing primarily on the ways in which unequal power distribution can negatively affect consumers, workers and “everyday people,” more broadly. He writes for a number of websites including AccidentAttorneys.org, PersonalInjury.com, AmericanLegalNews.com and others.