Amid negotiations over the fate of Sears, thousands of jobs are hanging in the balance. According to Business Insider, the fate of the company is still unknown. In the meantime, the question of whether or not Sears and Kmart employees will get their severance checks is now front and center. However, the answer depends on the timing of their layoff.
Sears is not necessarily out of business yet. Last week Chairman Eddie Lampert placed an initial $4.4 billion bid to takeover the company, but was rejected. On Wednesday Mr. Lampert placed a down payment and submitted a revised bid for $5 billion. The negotiations have created an uneasy situation for the 68,000 employees still working for Sears Holdings. Laid off employees have reported that they stopped receiving severance checks in October, when Sears’ parent company Sears Holdings went bankrupt. Sears holdings includes Sears, Kmart, and several other retail chains such as Macy’s.
Sears, however, doesn’t have much of a choice when it comes to severance payments. The company is not legally permitted to continue paying severance checks to employees who were laid off before the filing of the bankruptcy. The US Bankruptcy Code lays out a hierarchy of creditors to be paid off in the case of a bankruptcy. Higher on the hierarchy you can find secured creditors, such as financial institutions that have issued loans. Employees who are laid off and are claiming severance pay are considered unsecured creditors, and as such they have to wait longer.
