Bed Bath & Beyond stiffed thousands of workers on severance pay

(CNN) — In early February, Diane Zaccagna learned that the Bed Bath & Beyond store in New Jersey where she had been working for 18 and a half years was closing and she would be laid off.

"We knew Bed Bath was in trouble, but we thought we would have at least a couple more years," said Zaccagna, 50, who started out as a part-time employee and climbed her way to a merchandise supervisor.

Zaccagna loved working for Bed Bath & Beyond and said the company treated her well. Even during the depths of the Covid-19 pandemic in 2020, when the deadly virus was spreading and Bed Bath & Beyond temporarily closed stores to customers, she showed up to help ship out online delivery orders.

Managers initially told Zaccagna and around 25 employees at the store that they would receive severance pay. Bed Bath & Beyond has been on bankruptcy watch and has been closing hundreds of stores since late 2022.

Laid-off workers at previously shuttered stores received severance packages, and so Zaccagna assumed it would be the same for her store. The severance plan for full-time workers laid off in earlier rounds of Bed Bath & Beyond closures was one week of regular pay for each year of service, with a maximum of 10 weeks severance. For supervisors, the maximum was 12 weeks of severance pay.

But Bed Bath & Beyond never paid severance to Zaccagna and her co-workers. The company also told employees it would not match annual contributions to their 401(k) retirement savings plans they paid into for all of 2022.

"In the end, I’m heartbroken. I’m very disappointed in how they handled it," she told CNN. "It was a punch in the gut."

She feels the company abandoned her and co-workers and that their years of loyalty meant nothing at the end.

But the timing of the layoffs angered her most.

Gaps in severance protections

Bed Bath & Beyond, based in Union, New Jersey, laid off 1,295 workers in its home state, including at Harmon Face Value stores, just days before a new law kicked in that mandates severance pay — equal to one week of pay for each year of employment — for workers who lose their job in mass layoffs at large employers in New Jersey.

The law also requires that large employers, defined as businesses with more than 100 workers, must give workers at least 90 days notice for mass layoffs, up from 60 days. Prior to the law’s enactment, employers in the state were only required to pay workers severance if they failed to notify employees they were being let go within 60 days. The law also expands severance benefits for part-time workers and includes other worker protections.

"Knowing the law took effect a week after — it’s even worse," said Zaccagna, who is job hunting and plans to start a new career outside of retail. "Every single person in New Jersey knows it’s wrong."

Bed Bath & Beyond said in a statement that, as a practice, it does not comment on specific employee matters.

"Every decision over the past several months has been the product of diligent analysis, advisement, and consideration," the company said. "The difficult but necessary decision to reduce our workforce impacted valued colleagues and is one of many crucial actions taken to enable Bed Bath & Beyond to improve our financial position and serve our customers well into the future."

The company did not specifically address not paying severance.

New Jersey is the first state in the country to implement guaranteed severance pay protections for workers at large chains. The law was inspired by Toys "R" Us, Sears and Forever 21 and other chains that filed for bankruptcy and attempted to avoid paying workers severance, said New Jersey State Sen. Joseph Cryan, who introduced the legislation.

Bed Bath & Beyond’s timing was deliberate and designed to get around the new legislation, Cryan charged. "It is intentional, it is calculated, and it is disgraceful," he said.

Business Insider first reported the layoffs in the state.

There is no federal requirement for severance pay, although some collective bargaining agreements with unions cover severance agreements. Senior executives often have multimillion-dollar severance plans with employers and receive lucrative retention bonuses to stay with companies if they file for bankruptcy.

At Bed Bath & Beyond, CEO Sue Gove is eligible for $7.1 million in severance pay and former Bed Bath & Beyond CEO Mark Tritton is suing the company for $6.8 million in unpaid severance.

The absence of severance pay requirements for frontline workers in the United States is "one of the many holes in our protective workplace legislation," said David Weil, a professor at Brandeis University and administrator of the Labor Department’s Wage and Hour Division under former President Barack Obama.

It can also be difficult for rank-and-file workers to claw back unpaid severance once a company files for bankruptcy.

"It’s all about the bankruptcy court’s jurisdiction," Weil said. "The Labor Department has little authority to demand severance."

Policy approaches for laid-off workers have tended to focus on unemployment insurance programs, he said, but severance protections help soften the economic hit for displaced workers as they search for a new job.

‘This was our reward’

Some Bed Bath & Beyond employees recently laid off in other states did not receive severance pay either, as first reported by Bloomberg.

A former Harmon store manager has filed a proposed class action lawsuit alleging the company did not give him and others required notice of mass layoffs and denied severance pay.

In late January, Bed Bath & Beyond store manager Norman Frisch, 65, got a call from a regional vice president notifying him that his St. Louis store would close in 10 to 12 weeks and the store’s roughly 20 employees would be laid off.

Frisch, who had been with Bed Bath & Beyond for 12 years and ran a top-performing store that company leaders used as a model for other stores in the area, was told that there would be severance pay and was given talking points to inform employees of the closing.

He sat down with each of his employees individually and explained to them that they should stick around to help close out the store. He assured them a severance package was coming.

Frisch reached out to human resources three times over the next month to ask for more details on the severance plan. Each time, he was told they were on the way.

But in late February, he got a call from a supervisor saying there would be no severance. He was stunned and felt the company lied.

"My store was the only perfect 5 store in the region, meaning our rating was the best of the best," he said. "And this was our reward."

Frisch had been planning to pay his credit card and car bills using his severance, but will instead dip into his retirement savings.

Bigger than the financial hit, though, was his guilt. He felt he personally misled his loyal employees.

"I’m the guy who sat down face to face with each one of these people, and now I had to tell them they weren’t going to get anything," he said. "I still feel that I betrayed them. They deserved so much more."

Additionally, the store closing date was moved up, so workers had less time to find new work than they had been led to believe. And they found out the company was not matching 401(k) contributions.

During his final weeks at the company, he made it his job to help his employees find other work. All but two found work by the time the store closed for good in March.

Before Frisch’s email was shut down, he reached out to Gove, the CEO. The way the company handled the layoffs was wrong and workers deserved better, he told her.

"When people invest their life in something, they should be treated right," he said.

He never heard back.

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