Steve Pasierb, president and CEO of The Toy Association, has stated that the fund is simply “not enough”.
As reported by CNN Business, Bain Capital and KKR, private equity firms that owned part of the toy retailer, have set up a severance fund to pay former workers who lost their jobs when the company closed its stores.
The third owner, real estate firm Vornado, did not join the fund.
Some top executives received bonuses as part of the Toys R Us bankruptcy process. The nation’s bankruptcy laws place limits on the severance payments that can be made to laid-off employees, and they give priority to repaying creditors of the bankrupt companies. Had the employees been laid off before the bankruptcy, they would have been entitled to severance pay of up to one week of pay for every year of service.
The $20 million severance fund does not come from Toys R Us. The fund was set up following negotiations between the private equity firms and various public interest groups that organised the employees, including Organization United for Respect, Private Equity Stakeholder Project and Center for Popular Democracy.
The groups are seeking additional contributions to the fund from Vornado as well as two Toys R Us lenders, Solus and Angelo Gordon, which they blame for pushing the company to shutdown operations rather than stay in business. Angelo Gordon declined to comment.
The fund has hired attorney Kenneth Feinberg to come up with a formula to determine who gets how much money. He has proposed that payments go to workers who had been with the company at least a year and who made between $5,000 and $110,000 in annual income.
“In order to maximise the impact of available funds, key eligibility requirements and payment parameters had to be instituted,” said Kenneth. Payments are expected to start soon after 15th December and be completed by April.
The $20m fund will not cover a full severance plan for the workers. The employee groups estimate that would take $75m.
While the severance fund is a step in the right direction, the figure made available has drawn criticism, with several leading toy industry figures stating that the $20m package is not big enough.