HR Issues Labor Law Wage & Hour
Jan 12, 2012
No Comments
Print This Post

How NOT to Go Out of Business

So, apparently it’s not a great time to be in the baked goods industry.

Twinkie

Hostess has filed for Chapter 11 for a second time in 10 years.1 And last month the locally-renowned bakery Rolf’s Patisserie shuttered its doors permanently.

It’s obviously not fair to compare a multinational food product manufacturer with a micro-regional fancy-cake-maker, but I’m going to do it anyway, because it’s an easy way to make a point.

Both of the news stories surrounding these companies center on employment issues. Almost immediately after it filed for bankruptcy, Hostess cited its pension liability and rigid work rules as the principal issue in restructuring the company; it needs to get out of its current collective bargaining agreements and start over, it says. The Teamsters disagreed, of course, but the correlation was there. Even though the unions are going to take it on the chin, the message turned out all collaborative and warm. The company that brought us Twinkies and other delicacies was fighting for its life, and it just needs the union’s help to stay afloat. The union obviously held a press conference of its own, but the tone was already set. Hostess, for PR purposes, at least, was playing nice.

Rolf's Logo

Contrast that with Rolf’s. First of all, for you non-Chicago readers, Rolf’s Patisserie made some really really good cakes. The fancy kind that they make reality shows about. They were a north shore staple. In mid-December, though, the company abruptly closed its doors. Abrupt to its regulars, its upcoming wedding orders, and, most unsettling, abrupt to its employees.

The workforce was told the company would be closed on December 11 for cleaning. Not unusual – the same thing had happened the year before – except this time, instead of reopening, the company altered its website to tell the world (including the part of the world employed by Rolf’s) that it was permanently closed.

That’s bad. It makes the company look bad, obviously. But the employees all got final checks in the mail. No one’s getting sued over it, right?

Well…

The news reported this week that Rolf’s former employees were protesting outside its facility, on the day their class action filing hit the Northern District Clerk’s Office. Apparently, those final checks… wait for it… bounced. Plus, the state and federal governments have this requirement – called the WARN Act2 – that requires businesses to give their employees advance notice of a mass layoff or closure. When you don’t, you get sued. Even if you go under. You still get sued.

Am I saying that Rolf’s could’ve avoided being sued if they had notified their employees of their financial troubles? No.3 What I’m saying is that when you’re facing financial peril, no matter what size company you are, no matter what your chances of survival are or aren’t, how you manage employee expectations will dictate everything, from legal liability to public perception. It is absolutely imperative.

There is a point at which you must be honest with your employees. Not only because it’s the right thing to do, but because it’s the law. It’s okay if you don’t know what that point is – it’s going to be different for everybody. But you have to find out. Hostess looks like a smart corporation telling it’s employees to eat their peas, to borrow a Presidential phrase. Rolf’s, on the other hand, looks like a company that kept everyone in the dark, and now is going to have to pay for it. In both treasure and goodwill.

  1. The BK people call that Chapter 22, btw. Those bankruptcy lawyers are hilarious! [↩]
  2. And the Illinois WARN Act [↩]
  3. Okay, maybe. [↩]

Leave a comment

Switch to our mobile site