Sears workers demand hardship fund after Toys 'R' Us success

As Sears Holdings Corp teeters on the brink of liquidation, its employees are pushing for a hardship fund they hope can replicate the success of bankrupt retailer Toys ‘R’ Us, whose workers collected $20 million in severance pay from its former owners.

Sears on Tuesday agreed to consider a revised takeover bid from Chairman Edward Lampert, temporarily staving off a liquidation that would have spelled the end of the company.

The latest attempt by Lampert follows a decade of revenue declines, hundreds of store closures, and years of deals in an attempt to turn around the company he put together in 2005 in an $11 billion deal.
Now, the retailer’s approximately 68,000 workers are pushing Lampert to set up a financial fund giving laid-off workers a week of pay for every year of service.

“If he (Eddie Lampert) can drum up the money for another takeover bid, he can find the resources to come up with a hardship fund,” said Onie Patrick, a laid-off Kmart employee who is part of the organizing effort.

A Sears spokesman declined to comment.

The fight for a hardship fund has become the new normal in U.S. retail, signaling a growing push for severance pay and benefits in an industry that has witnessed a raft of store closures and bankruptcies.

Sears is among the dozens of retailers like Gymboree, Claire’s, Nine West, Payless Shoe Source and True Religion that have filed for bankruptcy in the past two years. Others like Bon-Ton Department Stores and Toys ‘R’ Us have gone out of business.

In the case of Sears, if liquidation is announced, employees will have to file claims with the court for both lost wages and severance that was promised to them, said Jerry Glass, president of labor relations at consultancy F&H Solutions Group.

Sears employees will be competing for the limited funds available, with other creditors, investors, and management employees who will be retained to assist in the liquidation, he said.

Last year, private equity firms Bain Capital and KKR & Co Inc — which bought Toys ‘R’ Us in a 2005 leveraged buyout and loaded it with billions of dollars in debt before liquidating the chain in June 2018 — set aside $20 million for retail workers, who had demanded $75 million.

The fund was an unusual move for private-equity owners, who are not required under bankruptcy law to provide such assistance for ex-employees.

Rise Up Retail, a campaign from labor group Organization United for Respect which assisted Toys R Us employees, does not think that will be a barrier.

The group has sent a letter to Lampert and other creditors demanding financial assistance for workers. It is also pushing for state and federal legislation that would require bankrupt companies to make severance payments.

“Eddie Lampert has picked apart this company and this is about him taking financial responsibility for his actions and the impact that is going to have on thousands of families,” said Lily Wang, deputy director for Organization United for Respect’s Rise Up Retail campaign.

Sears workers are hoping a combination of public shaming and political support will move the needle, as it did on Toy ‘R’ Us.

“When I saw that Toys ‘R’ Us employees were able to get so much public support and win some financial assistance for their families through that fund, I knew we needed to fight back,” said Gabe Maguire, a Kmart worker whose store is closing in March.