December 16, 2008

Republic Windows & Doors Files for Bankruptcy

The Chicago company that was the site of a six-day worker sit-in has filed for bankruptcy. Though this appears to have been expected, it seems that many aspects of this story went under-reported or unreported.

The Chicago Sun Times story written by Francine Knowles and Sandra Guy makes it appear that Bank of America, the lender whose refusal to extend a credit line allegedly caused the company’s failure, ended up “lending” over $1 million to fired workers (bolds are mine):

Republic Windows and Doors filed for Chapter 7 bankruptcy Monday, the company said.

The bankruptcy filing for liquidation was a requirement of Bank of America in the negotiated settlement with the United Electrical, Radio and Machine Workers of America, Republic said.

….. Republic made headlines last week after the plant closed when Bank of America, concerned about the company’s financial viability, refused to extend it additional credit. That left 240 workers without a job — workers who were not given the legally required 60 days’ notice of a layoff.

The workers successfully staged a protest against Bank of America to demand severance and vacation pay and challenge the lack of proper notice. Politicians and union leaders blasted Bank of America’s action, given that it took $15 billion in the federal bank bailout package. Bank of America ultimately agreed to provide $1.35 million in lending for Republic’s layoff package.

(Bank of America spokesperson Julie) Westermann said Monday that while the bank recognized it wasn’t its responsibility to pay Republic’s workers, it provided the loan to enable Gillman “to do what was right.”

….. Westermann said all of Gillman’s proposals “involved a second line of credit, which we could not responsibly give him considering the state of his company.”

Gillman has no plans to reopen the Goose Island plant, he said last week. But his family does plan to focus on its nonunion, Iowa-based Echo Windows.

This Associated Press item from December 11 notes that JPMorgan Chase paid in another $400,000, and that the total of $1.75 million “will go into an escrow account for the workers,” from which payments averaging about $7,000 per worker will be made.

Though the agreements involved “loans,” it is clear that Chase and B of A aren’t going to be receiving any repayments. Thus, it seems that the following words or terms might be better fits for accurately describing the funds disbursed: gifts, blackmail, shakedown payments.

I’m no labor lawyer, but this Worker Adjustement and Retraining Notification (WARN) Act exception found on Page 11 of the Department of Labor’s “Worker’s Guide to Advance Notice of Closings and Layoffs” seems to indicate that the two Sun-Times writers’ blithe, automatic assumption that Republic acted illegally is suspect:

A “faltering company” is not required to give notice of a layoff or plant closing when, before the plant closing, it is actively seeking capital or business, which if obtained would avoid or postpone the layoff or closure, and if it reasonably believes that advance notice would hurt its ability to find the capital or business it needs to continue operating.

The material on Page 21 of the same guide relating to companies filing for bankruptcy does not seem to make any exception to the excerpted paragraph.

This makes sense. But if the results at Republic somehow serve as a precedent, it would appear that any failing company could absurdly but “successfully” threaten its lender into coughing up funds by saying, “We haven’t given our workers the required legal notice. If you don’t lend us the money we’ve requested, you’re just going to have to pay their accrued wages and benefits. So if you know what’s good for you, you’ll cut the check.”

The union plant has closed, with fired workers talking nobly about reopening it. The non-union plant remains active. Yet somehow all of this is being seen as a worker “victory.” The only “victory” I see is in Iowa. The results in Chicago represent yet another in a long line of reasons not to start up a business, especially in Illinois.

Cross-posted at


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