Municipal Government

Union for Fired FEGS Workers Asks Bankruptcy Court to Force Shuttered Social Service Giant…

October 5, 2015
By Tara Jessup

Union for Fired FEGS Workers Asks Bankruptcy Court to Force Shuttered Social Service Giant to Honor Its Contractual and Statutory Obligations

1,400 Laid Off Workers Who Cared for Most Vulnerable in City Owed Millions in Severance, Other Obligations

FEGS BELIEVED TO HAVE $30 MILLION IN REAL ESTATE AND OTHER ASSETS REMAINING ON ITS BOOKS

The union representing 1,400 workers suddenly laid off early this year when the Federation of Employment Guidance Service, a social service giant service 120,000 needy New Yorkers, shut its doors s is asking a bankruptcy court to set aside almost $7 million from FEGS’ remaining assets to meet contractual and statutory obligations on which they stiffed those workers.

In addition, the National Labor Relations Board this week filed its own complaint with the U.S. Bankruptcy Court charging that FEGS engaged in unfair labor practices in its dealing with its unionized workforce when the agency was shutting down.  The Labor Board is seeking $1.7 million from FEGS on behalf of employees. 

More than 2,000 employees, including 1,400 represented by Local 215 of District Council 1707 of AFSCME, were suddenly laid off earlier this year when FEGS announced it was shutting down a wide range of government-funded social services including home health care, care for the developmentally disabled and job training..

“FEGS gave its workers the old heave ho when it closed earlier this year,” said Victoria Mitchell the Executive Director of District Council 1707.  The union filed proof of claims in the bankruptcy court October 1, 2015, seeking severance pay, unpaid accrued vacation pay, notice pay and various amounts owed workers under arbitration settlements.  When FEGS filed for bankruptcy its financial statements showed it had considerable real estate assets which should be sold to satisfy the workers’ claims.  The unionized employees collectively have $6.6 million in claims, making the union the largest creditor in the bankruptcy.

The NLRB is also accusing FEGS of engaging in unfair labor practices by misleading the union and failing to provide necessary information about the shutdown. According to Larry Cary, the attorney for District Council 1707, FEGS told the union that the City and State had ordered the immediate transfer of FEGS’s programs to new sponsors as its financial situation deteriorated. When asked, City and State officials said that it was FEGS and not them which pressed the fast transfer of programs. The NLRB is seeking a $1.8 million penalty against FEGS in its complaint.

The NLRB acted in response to the union’s charge accusing FEGS of not bargaining in good faith with the union. Because of an October 5th deadline for interested parties to file claims before the Bankruptcy Court in the case, both the union and the NLRB acted this week by filing filed their proofs of claims. The NLRB has scheduled a hearing on its complaint in December.

At the same time, the union is suing FEGS in Bankruptcy Court claiming that FEGS violated the Federal and State WARN (Worker Adjustment and Retraining Notification) Acts, by providing less than the legally required notice for laying off the 1,400 union members.

The union was able to only safe about 600 of the unionized employees who found positions in transferred programs.  Many of the new agencies taking over FEGS programs failed or refused to hire FEGS employees.  “It’s ironic,” said Mitchell, ”for an agency that began with a mission to help working people get jobs ended up stiffing its workers and throwing them into the street.”

According to Mitchell, by refusing to provide the union with timely information about the identity of the agencies taking over FEGS’s programs, FEGS frustrated union efforts to keep the unionized workforce employed after the move.  “We went to the City and State officials asking them for help, but were told by them that they did not have the authority to require the new sponsoring agencies to take the work force,” said Mitchell.   FEGS employees had not had a wage increase in five years, but they were still usually earning more than what the new agencies wanted to pay.

Mitchell said she is looking to the City Council to pass legislation mandating that new social service agencies take the works when they take the programs.  “Everyone – the City, the State, FEGS and the new agencies – talked about the importance of preserving the continuity of care for the clients,” said Mitchel, “but that didn’t mean keeping the workers who did the work employed with the new agency.”

FEGS’ budget totaled an estimated $300 million annually, and it faced an estimated $20 million cash flow problem when new management announced its sudden closure. Financial records filed with the bankruptcy court show that in the years before going under, FEGS poured over $70 million into a “for-profit” subsidiarity that is said to not have produced much of value for the agency.  The former executive vice-president, who according to published reports pushed FEGS into creating this for-profit subsidiary, received $92,000 in severance payment last December, just a month before FEGS announced it was closing its doors.

 The case is “In Re Federation Employment and Guidance Services, Inc., dba FEGS,” case number 15-71074, in US District Bankruptcy Court, Eastern District, in Islip, LI   

October 5, 2015

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