Suit: Value City Failed to Warn Workers of Mass Layoff

The Value City department store chain failed to give 450 workers the required notice before laying them off in preparation for its Chapter 11 bankruptcy filing, according to a federal class-action lawsuit.

The Columbus, Ohio-based discount retailer laid off the workers Oct. 24 without giving them 60 days' advance notice as required by the Worker Adjustment and Retraining Notification Act, the suit alleges.

Parent company Value City Holdings Inc and its subsidiaries filed for Chapter 11 protection Oct. 26 in the U.S. Bankruptcy Court for the Southern District of New York.

In its bankruptcy petition the chain blames its demise on declining sales, slumping consumer spending and the tightening credit markets.

Value City officials say they intend to close the chain's 66 remaining stores and liquidate its assets with going-out-of-business sales.

Ross McCoy, a former Value City employee, filed an adversary lawsuit against the company in the Bankruptcy Court Oct. 29.

He alleges the chain laid him off along with about 450 other workers without any prior notice just days before the bankruptcy filing.

McCoy seeks to represent a class of the terminated employees.

He says the mass layoff violates the WARN Act, which requires certain employers to give 60 days' written notice before laying off at least 50 workers. The law allows employees to recover back pay and lost benefits for a period equal to the number of deficient days of notice.

The lawsuit seeks to recover the workers' lost wages and benefits, including accrued vacation pay, 401(k) contributions and health insurance coverage, for the entire 60 days, since Value City allegedly gave no notice of the layoffs.

McCoy further claims that the workers' recovery should be accorded priority over other claims.

"Since the plaintiffs seek back pay attributable to a period of time after the filing of [Value City's] bankruptcy petitions and which arose as the result of the debtor's violation of a federal law, the plaintiffs' claim against the debtors is entitled to administrative priority status" under federal bankruptcy law, McCoy says.

The case has been assigned to U.S. Bankruptcy Judge James Peck.

At press time Value City had not responded to the complaint.

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James E. Huggett of Margolis Edelstein in Wilmington, Del.; Stuart J. Miller of Lankenau & Miller in New York; and Mary E. Olsen, M. Vance McCrary and J. Cecil Gardner of the Gardner Firm in Mobile, Ala., represent the plaintiffs.