After a bitter, months-long battle, tens of thousands of former Toys R Us employees who were laid off over the summer without any severance or benefits have finally received some good news. Two of the private equity firms that used to own the defunct toy store have allocated $20 million to a severance fund that will be distributed in the coming months.
KKR and Bain Capital have each contributed $10 million to the “TRU Financial Assistance Fund.” The money is intended to “provide some monetary relief and appreciation to the employees of the U.S. business, many of whom worked for the company for more than a decade,” according to a statement emailed to Vox. (The statement did not say how much money individual employees would receive.)
Money for the Toys R Us severance fund is being supervised by Ken Feinberg and Camille Biros, two mediators who’ve worked on high-profile funds, including the 9/11 Fund and the BP Oil Spill Fund. Feinberg and Biros have set up a website that will start taking employee claims for severance December 15 through the end of April.
Not all Toys R Us employees will be eligible for severance. Workers will only be able to obtain money if they worked the company for more than a year, made at least $5,000 annually but not more than $110,000, and met Toys R Us termination and employment guidelines.
While $20 million is better than nothing, the severance bundle certainly doesn’t represent the type of cash flow private equity firms have access to. It also doesn’t necessarily cover what some claim Toys R Us workers are owed: Advocacy groups like Rise Up Retail claim that number is closer to $75 million. In an emailed statement, Sen. Bernie Sanders (I-VT), who was involved with the effort to get the workers severance, tells Vox that the TRU Fund is a victory worth celebrating but that “we will continue to fight the greed of Wall Street and private equity, and to expand the collective bargaining rights of all Americans.”
Toys R Us went out of business for good earlier this summer, shuttering 800 stores across the country. The company filed for bankruptcy in September 2017 with $7.9 billion worth of debt. More than 30,000 workers lost their jobs.
While an American retail company going out of business is pretty common these days, the Toys R Us saga made headlines for the discrepancy between the treatment of its retail workers and its executives. Toys R Us initially said it wasn’t planning to pay severance, but executives still walked away with millions of dollars in bonuses. Similarly, KKR and Bain Capital’s takeover of the company has been referred to as “pillaging by pirates.” Since the 2005 purchase of the toy company, its private equity owners have scored as much as $470 million, according to Bloomberg. Toys R Us was weighed down with years of investor debt that eventually caused the company to shutter for good.
Over the past few months, former Toys R Us employees and advocacy groups like Rise Up Retail banded together to fight for severance. Store associates staged mock funerals in the lobby of Bain’s corporate headquarters for the Toys R Us mascot, Geoffrey the Giraffe, and organized rallies in store parking lots. The fight made its way to Congress too, with former workers lobbying in Washington for oversight of private equity. Politicians like Sens. Cory Booker, Kirsten Gillibrand, and Sanders were involved in the backlash as well.
KKR and Bain Capital agreeing to hand out severance is a huge win for this movement. It’s worth noting, though, that the two private equity firms are still refusing to claim responsibility for the collapse of the American toy store chain. They blame its demise on Amazon, and on the five hedge funds that were their lenders, saying they were the ones who forced the private equity firms to pull the plug.
The long, tumultuous saga of Toys R Us isn’t over just yet. In October, Sen. Elizabeth Warren wrote a letter to the five hedge funds that lent KKR and Bain money, demanding an explanation for why they were pushing for liquidation when Toys R Us could have been saved. Her letter urges the companies to contribute to the severance, which means more money for Toys R Us workers could be on the way.