Employee of bankrupt Bon-Ton department store feels cheated by severance offer

Posted at 5:14 PM, Jul 05, 2018

WISCONSIN — Corporate leaders of Bon-Ton, a soon-to-be-closed department store, are getting millions, while some former employees say they walked away empty-handed after decades with the company.

It may be unfair, but it's perfectly legal, but according to an investigation by Scripps station WTMJ in Milwaukee, it's perfectly legal.

According to the investigation, companies headed for bankruptcy will give big bonuses to keep higher-ups around — exactly like what happened at Bon-Ton.

After Bon-Ton shut down offices and eliminated jobs, giving employees pennies compared to what they'd put in, one anonymous former employee wondered what happened to the company's integrity.

"Had I been impacted by a layoff or something prior to the bankruptcy, I would have been a lot better off," she said.

She's back on the job hunt after learning her employer of more than 25 years filed for bankruptcy and she lost her job.

"I really felt like myself and the rest of our teams were cheated," she said.

For all her years, she got a severance notice.

The employee claims she would have received "close to $70,000" in severance. Instead, she will get about a fifth of what she's owed thanks to a federal law that limits employee payouts to $12,850 when a company files for bankruptcy.

"The trouble in a bankruptcy is there's never enough money to pay everyone because if there was, you wouldn't be in bankruptcy," bankruptcy attorney Jerry Kerkman said.

Kerkman said there's a slim chance Bon-Ton employees will see the rest of what they're owed.

"In many of these cases ... you're going to get pennies to the dollar," he said.

It's a tough pill to swallow for the 25-year employee at Bon-Ton, but not the toughest.

"It's worse when you find out those higher up are getting much more than any of us did," she said.

Bon-Ton's handed out millions of dollars to executives, even leading up to filing for bankruptcy.

According to bankruptcy court filings, the company gave out $2 million in retention bonuses to three major players just three months before filing for bankruptcy.

The chairman of the board resigned in May 2017 but still works for Bon-Ton making $450,000 a year with a $175,000 bonus.

The company's last president and CEO also resigned that month, leaving with a $500,000 bonus and an extra $100,000 in moving expenses. And, just over a month before the filing, a new executive vice president scored a $600,00 salary, a $600,000 bonus, up to $50,000 in commuting costs and the potential for $900,000 in bonuses.

That's more than $4.7 million paid out to Bon-Ton's top executives.

"There's a balancing: You want to keep people running the company, on the other hand, you don't want all the money going out the door," Kerkman said.

Kerkman said court-approved high dollar bonuses and salaries aren't unusual when a company's going through bankruptcy, especially when filing with courts in New York or Delaware, which Wisconsin-based Bon-Ton did.

"When you've got a court such as this one is in Delaware, that's kind of looking to attract the big cases, they're probably a lot more lenient on the dollar amounts," he said.

According to Kerkman, companies also have an advantage by filing far from where employees might be upset. 

"They don't want employees (and) retirees showing up," he said. 

"I'm sure we could have filled a bus of people that would have went there to make sure the employees were represented," the former employee said. 

The once-dedicated worker feels slighted and worried for those still trying to figure out what comes next. 

"I know there are employees who are having to put their house up for sale, you know, that are concerned about losing their home," she said.

Bon-Ton responded to the following questions via email.

Why did the company give out millions of dollars in bonuses to executives right before bankruptcy? There were retention incentives that were paid prior to the filing which is common practice in situations where the goal is to continue as a going concern. 

Why did Bon-Ton file for bankruptcy in Delaware? The Delaware courts are experienced at handling large retail reorganizations.  Bon-Ton viewed this as critical as we sought to continue as a going concern.

How does Bon-Ton respond to former employees who feel they weren't fairly represented in the bankruptcy? The bankruptcy courts provide guidelines and limitations on what can be provided to associates and other interested parties.  Associates have access to the claims agent approved by the bankruptcy court if they wish to file a claim.  We also still try to respond to individual associates’ questions and concerns when possible.  

Why were WARN and severance pay combined for employees who lost their jobs?  The majority of our associates are in our Stores and Distribution Centers and they received severance pay that was not tied to WARN pay.  The severance tied to WARN pay was only applicable to Corporate Associates and reflected the requirements of the bankruptcy court.

The company also said in the email "We are very proud of how our employees have handled all the uncertainties of the bankruptcy process.  We had, of course, hoped for a better ending during the process.  We are very grateful that our employees continue to provide the highest service possible for the Bon-Ton customer.

If you're worried about this happening to you, your best protection is to have a contract that explains what severance you're entitled to. An employee handbook also works to ensure that protection. But, when it comes to bankruptcy, there are laws that allow a company to get out of paying anything, even beyond the 12, 850 dollar cap.