Wis. Employer to Pay $1 Million to Settle Case

Wisconsin Attorney General Peg Lautenschlager announced that Color Arts will pay $1,000,000 to the State of Wisconsin to settle wage claims filed by workers after the plant closed in June of 2004.

“Following approval by the court, Color Arts workers will be entitled to collect wages owed to them, in accordance with Wisconsin law,” Lautenschlager said. “The rights of workers must be upheld in Wisconsin, and the Department of Justice will continue to enforce the laws that protect these precious rights.”

The Color Arts Inc., plant, located in Racine, was in the business of printing signs and decals, such as decals for motorcycles. On June 11, 2004, the plant closed its doors. With the closing, 225 full-time employees found themselves out of work. State court receivership was commenced on the same day the plant closed to liquidate assets. That case is pending in Racine County Circuit Court, before the Honorable Charles Constantine. The Receiver is Michael Polsky.

The state Department of Workforce Development (DWD) received wage complaints from several Color Arts employees and opened its investigation on June 16, 2004. The matter was referred to DOJ, which perfected statutory wage liens against Color Arts assets.

An auction sale of substantially all assets was held on July 9, 2004. Auction results allowed the Receiver to pay the pre-filing lenders in full. DWD’s liens were entitled to next priority. The buyer subsequently re-opened the business, on a more limited basis. It has reportedly re-hired approximately 35 of the former employees.

All pre-filing wages were paid, except for unused vacation pay, which amounted to approximately $525,000. The wage complaints filed with DWD sought the vacation pay and also alleged the company failed to provide the 60-day plant closing notice provided for under section 109.07 of the Wisconsin statutes. The Receiver reportedly concedes the vacation pay is owed, but has denied any liability under the plant closing statute, urging the defenses provided for by the statute. DWD had commenced its investigation into the claims when the Receiver approached DOJ about settlement.

After extensive negotiations, the state has agreed to accept $1,000,000 to settle all pre-petition wage claims, including potential plant closing liability.

There were approximately 12 employees who continued to work for the Receiver after June 11 and then were hired by the buyer. They reportedly do not qualify as claimants under the plant closing statute.

After making all of the adjustments related to the settlement, DOJ estimates the vacation pay liability will be about $400,000, which will be paid in full under the settlement. That will leave about $600,000 for distribution to settle the plant closing claims, or about 45%, based upon what eligible employees would have earned during the statutory notice period.

The agreement is subject to court approval. A hearing is set for Nov. 30, 2004. If approved, the $1,000,000 will be paid immediately and DWD will send out notices to eligible employees. Employees are not required to accept the agreement, but if they do not, DWD representation in the matter will end. Non-participating workers can reportedly pursue any claims they have in the receivership, if they do not accept the settlement.