A state agency is investigating whether PennySaver violated labor law by laying off 678 employees without notice when it abruptly closed down its operations Friday, the office of California’s Labor Commissioner said Tuesday afternoon.
At about the same time, company executives gathered about 200 of their erstwhile employees in a printing press room of the now-shuttered coupon magazine’s Brea headquarters to tell them they would not be receiving their final paychecks or accrued vacation pay.
At first, the executives said they would receive their final pay. But moments later, they said they’d been informed that the company’s lender, Capital One, would no longer be funding payroll, according to people who attended the meeting.
The executive who led the meeting was Ronald Myers, PennySaver’s chief executive. He was joined via teleconference by Barry Kasoff, president of Realization Services, a consulting firm specializing in corporate turnarounds that has helped manage the company through its recent difficult times, according to the same former workers.
“Once he said they didn’t have the funding, everyone snapped,” said Diana Gonzalez, who worked for the company for 11 years, most recently in sales. “I just got a house three months ago. I haven’t even had my first mortgage yet.”
The employees said they were told PennySaver was looking for a new owner but not banking on it. Myers told them, “‘I’m not getting your hopes up. Your last day was Friday,’” Gonzalez said.
She, co-worker Rebecca Glidden and others left the meeting early out of frustration – uncertain why they had showed up in the first place.
Another employee, Lori Mendoza, said she had consulted with an attorney and the local labor department office about whether the company violated her rights when it suddenly closed its doors.
“Are they supposed to pay us when we walk out the door?” asked Mendoza, who worked at the company for 13 years. “Would they really want to break the law?”
The laid-off workers have some recourse under the law. For one thing, they can file a wage claim with the Labor Commissioner’s office, said Peter Melton, a spokesman for the Department of Industrial Relations.
Moreover, a federal labor law known as the WARN Act protects workers by requiring companies with 100 or more employees to provide 60 days’ notice of plant closings or mass layoffs, which PennySaver did not do.
“The Labor Commissioner’s Office will also examine the circumstances of PennySaver’s closure to see if the WARN Act is applicable,” Melton said.
PennySaver said that “due to circumstances beyond the company’s control,” it was “not able to achieve its full potential,” according to a statement issued by Sitrick and Co., a crisis management firm representing PennySaver’s owner, OpenGate Capital. “We remain hopeful for a positive outcome that is acceptable for all parties involved.”
OpenGate bought the publication in 2013 for $22.5 million.
Myers said over the weekend that “PennySaver did everything possible to try to stay in business and was in the process of pursuing a number of alternatives when our lender unexpectedly ceased our funding late Friday evening.”
PennySaver, founded in Huntington Beach in 1962, has appeared in mailboxes across California for more than 50 years. Earlier this year, it filed a layoff notice saying it was closing its Vista plant, about 40 miles north of San Diego, and permanently laying off 131 employees.
Gonzalez said the new owners had told employees they needed to pay more attention to the website and other revenue sources. But long-time employees thought they should improve the quality of their signature product.
“They wouldn’t listen to us,” she said. “This is a company that’s been around 50 years. It’s hard to believe it would go down like that.”
