Firm defends April layoff in state’s first WARN hearing

BrandPartners Inc. was a “troubled” but “viable” company several months before it shut down, and therefore should not have to pay some $1.3 million in fines and restitution as the first employer charged with violating New Hampshire’s WARN Act, the former Rochester-based company’s attorney said Tuesday at a state Labor Department hearing.
The company – which in April laid off some 80 employees — “took steps to avoid closure,” said attorney Shawn J. Sullivan, by actively seeking capital. He said the company didn’t warn employees, even after TD Bank shut down its line of credit on April 2, because “no bank will lend you money once you give notice that you are doing under.”

But Martin Jenkins, an attorney for the Labor Department, said that BrandPartners hadn’t “proved that they haven’t seen this coming … they just shut their doors and fired 80 people without warning. That’s exactly the harm this law was meant to prevent.”

Under the state’s WARN Act — or Worker Adjustment and Retraining Notification — a company with more than 75 employees must give workers a 60-day notice before instituting a mass layoff. The New Hampshire law, which went into effect last Jan. 1, is stricter than the federal law, which sets a 100-employee threshold before notification is mandatory.

The Labor Department is seeking penalties of $500,000 as well as some $800,000 in restitution, though it’s doubtful it ever will see that money. BrandPartners – which shut its doors on April 18 — claims that it has no assets. However, the company has never declared bankruptcy, is still able to retain a lawyer to defend its interests and its stock is still traded publicly on the Pink Sheets.

DOL opened the hearing by presenting Ken O’Shaughnessy, an inspector who was on the scene shortly before the company closed its doors. O’Shaughnessy, having obtained payroll records, mainly testified about how he based the fine and restitution based on those records. But he focused on a letter sent to the Labor Department on May 4 in which the company blamed TD Bank for shutting down BrandPartners’ line of credit. At that time, the letter said, the company had $300,000 on deposit and another $400,000 in receivables, and could have made payroll.

The company did work out a deal in order to make payroll, though the DOL also fined the company $139,000 for other labor violation, such as not giving the workers the vacation pay they were due.

TD Bank has declined comment on the matter, but in September it filed a suit in Strafford County Superior Court charging that BrandPartners and its top executives had violated the loan agreement by misleading the bank about the company’s financial condition. NHBR could not find out the latest status of that suit by deadline.

At the hearing, BrandPartners attorney Sullivan focused on a clause in the law that exempts troubled companies that are trying to raise capital. He asked O’Shaughnessy whether in January — 60 days before the layoff — there was any sense that the company wasn’t viable, and whether he tried to verify the May 4 letter’s claims that BrandPartners was trying to raise capital.

O’Shaughnessy said he couldn’t verify the claims of the letter and didn’t try, but he said that many of the workers told him that “there were a lot of signs that things were going bad.”

“BrandPartners should have known something was going to happen that would not allow them to continue,” O’Shaughnessy said.

“What is that something?” Sullivan pressed.

“I don’t know,” answered O’Shaughnessy.

The question, Sullivan raised in his closing argument, was whether the layoff was foreseeable. “I don’t see the bright-line test. There is nothing in January to let the company know, ‘You are gone.’ The responsible thing at that time is to tighten your belt and maintain the company, not just close the doors,” he said. — BOB SANDERS/NEW HAMPSHIRE BUSINESS REVIEW

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