If my employer goes bankrupt, what happens to my Workers Comp case?

A photo of Doug Landau’s grandfather and mentor, Attorney William L. Abrams, from the 1920s, when Saks 5th Avenue, Neiman Marcus & Bergdorf Goodman, and other stores dominated the market.

With the headline “major retailers filing for bankruptcy,” and the potential closure of Saks Fifth Avenue, Neiman Marcus, Bergdorf Goodman, and other well known American stores, injured and disabled employees receiving workers compensation benefits may wonder what will happen to their cases.

Since the COVID pandemic, shoppers became less inclined to see furnishings, clothing, and other big ticket items in store displays. Rather, they became accustomed to seeing goods for purchase on their computer screens, or even their mobile phones. The reduction in foot traffic at the retail stores has led to closure, bankruptcy, and reorganization of shopping malls, in-person purchasing and American shopping activity.

Saks 5th Avenue is over 100 years old, with its very famous flagship store opening in 1924, which is also when the ABRAMS LANDAU law firm’s namesake, William L. Abrams, first started practicing law after his graduation from Columbia University law school and the Harvard College. However, the Saks company started with its first doors opening in Washington DC in 1867, making it almost 159 years old. Bergdorf Goodman which has been in its current 5th Avenue location in New York City since 1928, is also known as a landmark in American luxury retail. The shift away from “brick & mortar” stores to online shopping has contributed to the demise of these behemoths of the retail industry.

But what does this mean for those retail brand salespeople, deliverymen, accounting department employees and maintenance crew members who are out on workers comp? Herndon Lawyer Doug Landau, who has had a number of retail store injury cases, notes that even if an injured employee’s company goes out of business, if they are under the protection of AWARD, the insurance company should still be able to pay the medical, wage loss, and other benefits under an AWARD from the Virginia Workers Compensation Commission. Landau goes on to state that, “even if the employer STORE, their insurance company, and even their third-party administrator go broke, Virginia has a Uninsured Employers Fund (the UEF”) that is quite solvent. The UEF has paid significant benefits where either there was no insurance, a failure of insurance, or even, in a death case due to a fall at the Interstate 395 & 495 mixing bowl project that we won, it was not valid outside of Texas.”

While some shoppers, like Melissa Landau, still like to “kick the tires “and actually test, sit in, try out, or get the feel of major purchases before giving their credit card or check to a retail store sales person, with same-day delivery, free returns, and other incentives by online sellers, she is becoming a rare retail purchaser.

The good news is that employers, like ABRAMS LANDAU, Ltd., pay an extra several cents on the dollar in workers’ compensation insurance premiums into this Uninsured Employers Fund to protect injured citizens whose:

A. company may have tried to avoid paying workers’ comp,

B. company failed to have the correct workers’ compensation insurance in place, or

C. workers’ compensation insurer has become insolvent.

 

While the Uninsured Employers Fund generally does not settle cases in excess of $25,000 and will usually not agree or stipulate to AWARDS, permanency, or other significant indemnity benefits, at least we know that benefits can be paid, as the money is there. Very often, after the Uninsured Employers Fund pays benefits for a valid workers’ compensation claim, or on behalf of an employer that should have planned better, it then pursues the company that failed to provide the required insurance to recover the money through a subrogation claim.

With its personal shoppers, Doug Landau was surprised to see Neiman Marcus in financial trouble. The expertise of personal shoppers was a “value quote that didn’t appear to be something that could be matched by online websites. Custom, personalized and human interaction would have been thought to be impervious to the move towards online sales model. However, the recent filings by these major retail stores suggests that more and more malls may become empty relics of their former grandeaur.

The key takeaways for the uninsured Employers fund are:

1. Its purpose is to pay benefits for medical care, lost wages, disability, pregnancy-related claims, medications, and durable medical equipment to injured workers when their employer does not have the required workers’ compensation insurance. In Virginia, workers’ compensation insurance is required for every employer with three or more full-time regular workers. This means that if you have a nanny, two farmhands, or operate a small “mom-and-pop shop,” you likely do not need coverage.

2. It is funded by employers who do maintain proper workers’ compensation coverage. A small tax on workers’ compensation insurance premiums is assessed against all employers throughout the Commonwealth, including ABRAMS LANDAU, Ltd. This assessment was set at 0.05% for 2024.

Doug Landau remembers fondly being brought on shopping expeditions by his grandfather, William Abrams. At stores like Bergdorf Goodman, Saks Fifth Avenue, and Neiman Marcus, you could get high-quality goods, test them, try them on, and receive input from knowledgeable salespeople. Plus, you could have clothing tailored by in-house experts, and these stores were often located near each other in major shopping malls or on main thoroughfares, such as Fifth Avenue in New York City.

3. There remains responsibility on the part of the employer, even if uninsured. In other words, the uninsured employer must reimburse the Uninsured Employers Fund for payments made and may face penalties. Doug Landau has been involved in cases where an employer was penalized for not having workers’ compensation insurance even before the Hearing on the merits of his client’s workplace injury. In other cases, an employer was able to show that it had purchased workers’ compensation insurance, but due to a technicality or fine print in the contract, the insurance company did not provide benefits. In those situations, lawsuits filed after Landau secured workers’ compensation benefits for his client enabled the employer to recover its losses.

Cases involving employers that go bankrupt, insurance companies that go out of business, or corporations that merge or disappear can be quite complicated. Doug Landau has successfully helped injured workers who have been involved in all of these situations. If you, or someone you care about, has been injured on the job and their employer, insurance company, or any corporation involved in their benefits is considering bankruptcy, merging, going out of business, or changing its name, and you have questions about the laws involved, please contact ABRAMS LANDAU, Ltd. at 703-796-9555.