Bankruptcy Law

Ex-Employees File WARN Claims Against MF Global, Hope for Priority in Bankruptcy Court

Fired on Friday along with more than 1,000 other workers at MF Global, at least four former employees today filed three separate claims in federal bankruptcy court lawsuit seeking two months of severance pay and benefits from the bankrupt brokerage.

They want class action status and some $25 million in damages, according to Bloomberg and CNN. Under the Worker Adjustment and Retraining Notification Act, employees of large companies are supposed to be given 60 days’ notice of pending large-scale layoffs.

They argue that MF Global must have known that it was standing on shaky ground financially and could and should have provided the required advance notice of likely employee layoffs. However, a spokesman for the company said it did nothing wrong.

Because MF Global is in bankruptcy, the amount that the ex-employees would recover if their suits are successful is uncertain, since workers do not have priority over other creditors, Sam Giordano tells CNN. He serves as executive director of the American Bankruptcy Institute.

“It’s a claim piled on top of what are going to be many, many claims against the bankrupt entity,” said Giordano. “There’s nothing magical about the WARN act claim—it doesn’t jump the line.”

But a bankruptcy lawyer tells Reuters that the plaintiffs’ wage claims could take precedence over the debt owed to general creditors.

“They have a chance of being deemed to be a priority claim and being paid 100 cents on the dollar, assuming there is enough to go around,” said attorney Chip Bowles of Greenebaum Doll & McDonald in Louisville, Ky. “The judge might tell them to go and file claims instead of suing the company.”

Workers were fired on Friday, effective immediately, and will be paid through Nov. 15, according to a plan approved by the bankruptcy trustee. Their health coverage will continue through the end of the month.

Related coverage:

Associated Press: “Ex-CEO’s fortune could invite more lawsuits”

NY Post: “MF Global clients cry foul over JPMorgan tactics in bankruptcy recovery”

Palm Beach Post (opinion): “Going long on arrogance”

Reuters: “MF Global’s Corzine sued by investor over collapse”

USA Today: “Corzine exits bankrupt MF Global, won’t seek severance pay”

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