Robson, Schooff
Comment on Beloit Corporation Settlement
This information
was
copied from Senator Judy Robson's Internet website of March 21, 2004
without editing. Her comments are important to the history of the Beloit
Corporation
bankruptcy. It memorializes the issue of severance settlement
by Harnischfeger Corporation, later to become Joy Global Inc. This
information is presented in this manner to insure it's preservation in the
context of the Beloit
Corporation History Page
Judy Robson was a Wisconsin
State Senator and Senate Democratic Leader during the Harnischfeger/Beloit bankruptcy
period and an active advocate of justice in this matter.
Text as copied:
A proposed settlement for
Beloit Corporation workers’ severance pay is a small victory in the sad story
of the company’s demise, Sen. Judy Robson and Rep. Dan Schooff said today.
“This initial settlement
is a small but significant victory in the sorry saga of the decline and fall of
the Beloit Corporation,” Robson said. “Many Beloit
Corporation families had given up hope. Now at long last,
there will be some closure on the first of two parts of the litigation.”
“No amount of settlement
will make up for the way the hardworking men and women, and our community were
treated by Harnischfeger,” Schooff said.
Under the proposed
settlement, 378 former Beloit Corporation employees will receive a share of a
$490,525 settlement. Each employee’s share will be based on
their salary and years of service. The proposed settlement
must be approved by the bankruptcy court in Delaware.
The settlement is much less
than the severance pay that the Department of Workforce Development determined
was owed to non-union workers.
“If this company kept its
promises, all of the workers would receive the compensation they have coming to
them,” Robson said. “But the way the cards were stacked
against the workers in bankruptcy court, the likelihood of getting any
compensation at all was very slim.”
Beloit Corporation workers
were considered unsecured creditors and thus their claims would be satisfied
after the claims of secured creditors were satisfied. It was
doubtful there would be any assets left after claims of secured creditors were
satisfied. But Wisconsin Department of Justice attorneys
argued successfully that the workers’ claims should fall under the category of
administrative expenses, which have priority over unsecured claims.
“DWD and DOJ really went
to bat for these workers,” Robson said. “They were up
against a stable of high-priced attorneys in Wisconsin and in Delaware.
It has been a four-year-long fight to get this far. I’m
pleased that the State of Wisconsin has fought so vigorously on behalf of
these Beloit Corporation employees.”
The legislators noted that
the settlement is with the Beloit Liquidating Trust, which consists of the
remaining assets of Beloit Corporation. Litigation continues
against Harnischfeger Industries, Beloit Corporation’s parent company.
The state is suing Harnischfeger for $10 million for interfering with a
contract when the company re-wrote the Beloit Corporation severance pay policy
to provide only two weeks of severance pay for employees who lost their jobs.
Previously, the policy provided one week of severance pay for each year
of service, up to 26 years. State attorneys argue that this
constitutes an unlawful interference with the contract between Beloit
Corporation and its employees.
Harnischfeger was
reorganized in bankruptcy court and emerged as Joy Global Inc. Although
the state’s case is against the now-defunct Harnischfeger, that company has
settled some of its claims in bankruptcy court by giving the creditors stock in
Joy Global.
“I commend the
Wisconsin Department of Justice and the Department of Workforce Development for
continuing this fight, even when it was clear Harnischfeger would rather
continue to pay bankruptcy lawyers and Jeffrey Grade, rather than pay the
workers what they were owed,” Schooff said, referring to the former
Harnischfeger chairman.
Robson and Schooff
noted that only non-union employees whose benefit package included severance pay
have valid claims. Severance pay was never promised to the union
employees.
“What is sometimes
overlooked is that the Beloit Corporation employees whose severance claims are a
part of this action represent only a fraction of the Beloit Corporation workers
who lost their livelihoods as a result of this plant closing,” Robson said.
“The severance pay policy applied to non-union employees only.
Thousands of union employees never had a severance pay agreement to begin
with.”
Under Wisconsin law, when
companies file for bankruptcy, workers claims for wages, severance pay, and
other compensation (called “wage claim liens”) have priority only behind
liens of financial institutions and liens of the Department of Natural Resources
for environmental clean-up. Robson has twice introduced
legislation to put worker wage claims ahead of those of financial institutions.
Robson and Schooff noted
that even though that legislation has not passed, Wisconsin has one of the
strongest laws in the nation with respect to giving priority to worker wage
claims in bankruptcy court.
Beloit Corporation and
Harnischfeger attorneys have argued that the federal Employee Retirement Income
Security Act (ERISA) should apply, not state law, in determining the priority of
claims in bankruptcy court.
However, DOJ attorneys
argued that Wisconsin wage claim law should apply because Beloit Corporation did
not take all the steps needed to be covered by ERISA. The
company had no written retirement plan, no separate administrator, and did not
file required forms with the federal government, according to DOJ attorneys.
Those issues are still being litigated between the State of Wisconsin and
Harnischfeger.
“Wisconsin has a proud
tradition of protecting workers,” Robson said. “Unfortunately,
worker protection is weaker under federal law and in federal bankruptcy
court.”
Until its decline, Beloit
Corporation was the largest employer in the Beloit area, employing around 3,000
workers in Beloit and Rockton, Ill. Here is a timeline of
events leading up to the settlement in bankruptcy court:
Timeline of Events
June
7, 1999 Beloit Corporation’s parent company, Harnischfeger, declares
bankruptcy
November
11, 1999, Beloit Corporation re-writes the employee benefit policy to eliminate
severance pay for hundreds of employees who were served lay-off notices. At the same time it eliminated severance pay for the laid-off employees,
the company enticed hundreds of other employees to remain on the job with a
promise that they would receive severance pay and unused vacation pay.
December
1999-January 2000, Beloit Corporation operations are sold or liquidated. 306 non-union employees at the Beloit plant are terminated.
February
2002, remaining employees learn they will receive no severance pay and no unused
vacation pay after all. Robson and Schooff encourage
employees to file claims with the Wisconsin Department of Workforce Development.
September
2000, the Department of Workforce Development announced its determination that
306 former Beloit Corporation employees are owed severance pay totaling $4.24
million. The 306 employees include those whose severance pay
was eliminated due to the November 11, 1999 policy change. The
$4.24 million represented one week of severance pay for each year of service for
each of the 306 employees.
November
10, 2000, Wisconsin Attorney General files proof of claim in bankruptcy court on
for $8.4 million, double the amount of unpaid severance pay.
December
2000, DWD determines an additional 29 non-union employees were eligible for a
total of $100,920 in severance pay.
On
April 17, 2001, the bankruptcy court classifies $490,525 of the workers’
claims as priority claims that the Beloit Liquidating Trust must pay to other
workers ahead of claims from other creditors.
March,
2004, DWD and the Beloit Liquidating Trust file a proposed settlement in
bankruptcy court.
End of text as copied.
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