Former Steve & Barry's employees file federal lawsuit: What the WARN Act is and how it works

Nov 20, 2008 (Newsday - McClatchy-Tribune Information Services via COMTEX) -- LEH | Quote | Chart | News | PowerRating -- A group of Steve & Barry's employees who were laid off Monday is suing the owners of the Port Washington retailer because they should have been given advance notice as required by federal law, the employees said.

Under the federal Worker Adjustment and Retraining Notification Act, a company planning a mass layoff or plant closing must let its workers know at least 60 days in advance.

The class-action suit was filed Tuesday by former employee Michael Guippone of Manhattan against BH S&B Holdings and the two investment firms behind it, Bay Harbour Management and York Capital Management, in U.S. District Court in Manhattan.

His attorney, Jack Raisner of Manhattan, said, "The employees were terminated without advance prior notice, which is required under the WARN Act." The former workers are "entitled to 60 days of wages and benefits, and that's what the class claim is seeking."

The company, which was bought out of bankruptcy in August by Bay Harbour and York Capital, is expected to file for bankruptcy protection and announce that it is going out of business this week, according to a source with knowledge of the situation.

The corporate layoffs included newly appointed chief executive Harold Kahn, sources said. A skeleton crew of about 30 remains.

Guippone worked at the company's Port Washington headquarters. The suit claims that at least 250 employees from throughout the company were terminated Monday.

It was unclear whether the new owners of Steve & Barry's would claim the exemption of "unforeseeable business circumstances," but many companies seek to take advantage of it, Raisner said. His firm, Outten & Golden, has filed similar suits against Lehman Bros. Holding Co. and American Home Mortgage.

Neither Bay Harbour nor York Capital, both based in Manhattan, immediately returned calls for comment yesterday.

Steve Shore and Barry Prevor, who remained minority investors in the new company after it was purchased in August, had founded it in 1985. The national chain has four Long Island locations and more than 5,000 employees. It gained popularity selling celebrity-endorsed clothing lines, including Sarah Jessica Parker's Bitten and Knicks point guard Stephon Marbury's sneakers, with many items less than $20.

THE WARN ACT

WHAT IT IS

The Worker Adjustment and Retraining Notification Act is a federal law aimed at giving workers notice that their company plans a mass layoff or plant closing. The employer must give employees, unions, state and local governments a 60-day notice. Otherwise, the employer can face fines and other penalties.

WHO'S COVERED

The law applies to private companies, nonprofit employers and some public and quasi-public entities with at least 100 full-time employees.

A plant closing triggers the act if at least 50 workers lose their jobs.

A personnel cutback qualifies as a mass layoff if at least 500 employees at a company are laid off or 50 to 499 employees, if they make up at least 33 percent of a workforce. There are exemptions: If a faltering company is seeking new capital or business to stay open, even as it is planning a mass layoff; unforeseeable business circumstances; or a natural disaster.

HOW IT HAS WORKED

Workers have received money in some cases. For instance, in August 2005, 1,900 employees of USF Red Star Inc. won $7 million in a settlement. But an investigation by the Toledo Blade newspaper in Ohio found in July 2007 that judges threw out more than half of 226 WARN Act lawsuits across the country. In dozens of cases that were settled or decided in favor of the displaced workers, workers received only pennies on the dollar of what they believed they were owed, the newspaper found.

- EMI ENDO

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