Local Toys R Us workers fume about no severance pay as stores close

Bright yellow signs on Congress Avenue in Boynton Beach blare the message to drivers that ‘Everything Must Go.’

Inside Toys R Us, bare shelves are all that’s left in the back half of a store that used to be the premier stop for children’s toys. Shoppers looking for deals are getting them — 70 to 90 percent off before the store closes its doors Thursday.

The deals are great, but for workers, the cost of shutting down comes with a high price.

And they aren’t happy.

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Toys R Us isn’t paying severance to its 30,000 workers at its 800 nationwide stores, including Boynton and Palm Beach Gardens. But what really has workers fuming are the bonuses it paid executives last year before the company filed for bankruptcy.

“After so many years of work from so many dedicated team members, this is a family,” said Madelyn Garcia, who has been with the company for 30 years and began as manager at the Boynton Beach store in September. “We gave up time with our families on holidays, we’ve been here and we’re the foundation of the company and we deserve something.”

Garcia is among the many workers who are protesting the disparity.

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“It’s hard to go out and find a job because you’re still in the building closing it down,” Garcia said. “It’s not just me, there are 30,000 team members that are losing their jobs, and some of us have been with the company for decades.”

Garcia says workers not getting severance pay is “disgusting” and vows to fight for financial security even after the store closes for good Thursday. The Gardens store closes Friday.

This month, Toys R Us workers protested outside the offices of firms that owned the company along with the New York apartment building of former CEO David Brandon, who ran the company when it filed for bankruptcy.

RELATED: Palm Beach Gardens store looks like ghost town

Bankruptcy laws, however, prevent companies that are in the liquidation process from giving employees severance checks. Toys R Us filed for bankruptcy in 2017, citing $7.9 billion in debt against $6.6 billion in assets.

In paying retention bonuses to executives but not giving severance to employees, Toys R Us is following a well-worn playbook for companies in bankruptcy.

“Non-unionized employees have no real ability to achieve any sort of retention bonus in a bankruptcy case, because of the difficulty of getting organized and the costs of going it alone,” said Stephen Lubben, a bankruptcy expert at the Seton Hall University School of Law. “On the other hand, when the CEO is thinking about who should get such bonuses, their colleagues in the C-suite naturally come to mind.”

RELATED: Why does it cost so much to go bankrupt?

In another bit of common practice, Toys R Us is paying hefty fees to the attorneys, auditors and other consultants shepherding it through bankruptcy. Law firm Kirkland & Ellis charged $14.2 million for legal services for January through March, according to a court filing. The firm’s attorneys charge as much as $1,273 an hour.

In another example of lucrative fees, turnaround firm Alvarez & Marsal billed $2.3 million for its services and expenses in May, according to a court filing. Hourly fees for its employees range from $200 to $975.

Auditing firm KPMG billed $578,431 for its services in the Toys R Us bankruptcy in May, at hourly rates of $45 to $800.

According to The Washington Post, Toys R Us awarded executives $8 million in bonuses a week before it filed for bankruptcy. Brandon earned $11.25 million last year.

RELATED: Sports Authority bankruptcy attorney fees top $1,000 an hour

The company gave 60 days notice to employees, as required by federal law.

“We shouldn’t walk away with nothing after so many years of service,” Garcia said.

Along with toys, the stores are selling everything it can — including shelving, credit card readers and cash registers. Whatever isn’t sold will be taken care of by liquidators.

Some shoppers at the Boynton store believe that online shopping is at least partially, responsible for the closure of retailers like Toys R Us.

“It’s been a go-to for people with school-aged children, but I think that a lot of these brick-and-mortar stores are having a difficult time competing with online avenues,” said Patrick James, who was shopping on Tuesday with his daughters. “To this generation it seems to be a more efficient way to shop.”

Follow South County reporter Ryan DiPentima on Twitter at @Ryan_DiPentima

Palm Beach Post Staff Writers Jeff Ostrowski and Sarah Elsesser contributed to this report.

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