A “Going Out Of Business” sign hangs ondisplay outside a Toys “R” Us retail store in Frederick, Maryland.(Photo: Andrew Harrer/Bloomberg)

A group of Toys “R” Us workers who lost their jobs as thecompany went bankrupt will get some of the estate's remaining cashto make up for severance pay that they were denied during the courtcase, according to representatives for the group.

Judge Keith L. Philips of the Eastern District of Virginiaawarded $2 million to the workers, who were promised severance atthe outset of the bankruptcy as part of a benefits plan that waslater canceled as the restructuring unraveled.

The retailer's bankruptcy is in its final stages, and the focusis on distributing cash that was set aside for administrativeclaims. Those expenses typically include fees for advisers, lawyersand other parties that assist in winding down a company, andthey're given high priority by the court for repayment in full.

Former workers led by Ann Marie Reinhart Smith, a 30-year Toys“R” Us employee, filed a class action claim in2018 to the bankruptcy court to ask that their severance claims getthe same priority as administrative claims, seeking a bigger sumthan the court ultimately approved.

“It's a shame they aren't getting more, but this settlementsends a message that employees deserve a place in the front of theline of creditors when businesses fail,” Jack Raisner, a lawyer whorepresented Reinhart, said in a statement.

Prior accord

Some of the workers also raised the issue outside of court,rallying support from pension funds and elected officials to demandcompensation from the private equity firms that owned Toys “R” Usduring its demise. KKR & Co. and Bain Capital, two of thoseowners, created a $20 million hardship fund in November for clerks,cashiers and warehouse staff hurt by the retailer'sliquidation.

Unpaid worker benefits often are treated as unsecured, puttingthem in a group with almost the lowest priority in bankruptcy.Shareholders are generally the last to be paid, and only aftercreditors above them in the pecking order are paid in full.

United for Respect, a non-profit group dedicated to improvingworking conditions in the retail industry, organized the workerswho brought the class action suit and the campaign for a hardshipfund.

The settlement comes after Kirkland & Ellis LLP, whichrepresented Toys “R” Us in the bankruptcy, was awarded $56 millionin fees.

“It is an important milestone for working families like mine whoare so vulnerable to Wall Street's greed,” Reinhart said about thesettlement in the statement. “While it recognizes the importance ofhonoring severance, it points to holes in the laws and bankruptcyprocess that prevent us from getting paid in full. The system isrigged against us. That has to change.”

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