Toys 'R' Us Employees Set to Receive $2 Million Severance Payment Year After Massive Closeout

A year after Toys 'R' Us closed for good, a group of workers are set to receive a $2 million severance package. A Virginia judge approved a settlement for 33,000 employees who were laid off after the nationwide toy chain filed for bankruptcy and shuttered its doors. The class action lawsuit was filed by a 30-year veteran of the company.

“After being so loyal to the company, to be let go without our promised severance is disrespectful," Ann Marie Reinhart Smith, who filed the lawsuit last year, said in a statement to the North Jersey Record Thursday.

Reinhart Smith, a North Carolina grandmother who attracted media attention and even met with Vermont Sen. Bernie Sanders last year, called the settlement "bittersweet." Although the settlement meant that Toys 'R' Us workers would see their severance, she pointed out that the whole ordeal made it clear how employees are not guaranteed full payment during the bankruptcy process.

“After nearly a year, employees laid off by Toys ‘R’ Us are finally getting something to show for their steadfast service," Jack Raisner, whose law firm represented the workers, said in a statement. “It’s a shame they aren’t getting more, but this settlement sends a message that employees deserve a place in the front of the line of creditors when businesses fail, and that is important to people who work in retail and their families."

The workers claimed Toys 'R' Us first promised them severance when liquidation was announced, but were later told no one would be paid.

Toys 'R' Us filed for Chapter 11 bankruptcy protection in September 2017 and hoped to restructure its debt and become a smaller company. However, Christmas 2017 missed expectations and all stores were closed by June 2018. In March 2018, CEO Dave Brandon told workers at the company's headquarters that their lenders and creditors would not let them distribute severance paid.

KKR and Bain Captial, two private equity owners in the chain, did launch a $20 million hardship fund last fall to help thousands of workers in November 2018. At the time, Reinhart called it an "amazing first step," as it still fell short of the $55 million workers believed they are owed.

The two firms launched the fund in response to the "extraordinary set of circumstances" behind Toys 'R' Us' closing, the Associated Press reported.

"The confluence of the disruption in retail, the push by the company’s secured creditors to liquidate the company’s U.S. operations, and the fact that we have never experienced something like this in the history of either firm, led us to try and find a way to provide some financial relief for former employees," the firms said.

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Earlier this month, it was reported that TRU Kids, the company that launched after Toys 'R' Us collapsed, is planning to open fewer than 10 stores in the U.S. later this year. The stores will be much smaller than typical Toys 'R' Us locations and will operate an online store.

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