By John Clark
The current housing slump has had varied effects on people in various parts of the real estate market. Many homeowners are facing foreclosure, lenders are looking at serious financial losses, and builders and other workers in the real estate industry are seeing a serious slowing of business.
For workers in some businesses, the effects of a bankruptcy or foreclosure can be as unexpected as they are devastating.
Consider the case of Hoboken Wood Flooring, LLC, of New Jersey. In business since 1923, the company was the nation's largest provider of wooden flooring, selling to chains like Home Depot and Lowe's, employing 1,000 people, and raking in $550 million in sales as recently as 2005.
While the subprime boom was in full swing, companies that sold home accessories were in high demand: the rash of homebuilding demanded a large supply of homebuilding materials, including, of course, flooring. In 2005, Hoboken was reportedly bought by a large Chicago investment firm.
Later that year, the flooring company acquired a smaller flooring company in Maryland. In an effort to expand and reap the greater profits available to a larger company, Hoboken built debt, with plans to expand greatly and pull in serious profits, according to reports from the Baltimore Sun.
The rest of the story is all too familiar: the housing slump hit the company suddenly and the demand for wood flooring plummeted as the building of new homes slowed.
Late this year, Hoboken Wood Flooring reportedly closed its doors-without warning Maryland workers at all. Sources indicate that New Jersey workers received a few days' warning, but not the 60 days required by the Worker Adjustment and Retraining Notification Act (WARN Act) of 1988.
According to that legislation, which is meant to lessen the blow to workers caused by mass layoffs, companies are required to provide their employees with 60 days' notice before taking serious layoff action.
But the workers, now looking for compensation, are facing serious roadblocks.
Hoboken Wood Flooring's Chapter 7 filing was reportedly rejected by a Maryland bankruptcy judge who ruled that the company didn't have sufficient funds to pay for the administration of the case. And because of the rejection of that case, the workers were unable to file suit in bankruptcy court.
Now, a class action lawsuit has been filed by 900 workers seeking 60 days' pay and benefits, according to sources. But, the lawyer representing the 900 workers has noted, the case is in no way a guaranteed success.
Apparently, the WARN Act does not apply to companies that fall under the category of one of the many exemptions to the act. One of those exemptions is for a "struggling company."
And, statistically speaking, the odds do not favor the workers who showed up one day to find themselves without jobs: in 2001, only a quarter of all mass layoffs in the United States fell under the umbrella of the WARN Act, according to reports from the Baltimore Sun, and of those layoffs, only 36% actually adhered to the act's guidelines.
An attorney involved in the case has also pointed out that workers often have difficulty getting paid in cases like this one because companies in financial trouble rarely have the resources to make large payouts. And if the companies do have significant assets, those assets are often owed to secured creditors in a bankruptcy case.
In short, the odds aren't good that the Hoboken Wood Flooring workers will win pay and benefits. They may just be the latest of the casualties in the national foreclosure crisis.