Wisconsin AG Sues SEMCO on Behalf of Employees

February 9th, 2021 by Drew Vass

Wisconsin’s attorney general announced yesterday that the state will proceed with a case against Semling-Menke Company Inc. (SEMCO), a now defunct window manufacturer, alleging that the company failed to provide required notice to employees before abruptly closing in December 2019. The sudden closure displaced 141 workers, according to a Worker Adjustment and Retraining Notification (WARN) notice. SEMCO president Patrick L. Semling sent a letter dated December 30, 2019, to all employees announcing that the company would be permanently closed the following day and would not reopen on January 6, 2020, as planned. That abrupt notice was far less than the 60 days required under Wis. Stat. § 109.07(1m), Attorney General Josh Kaul said.

The closure resulted from a lack of orders, Semling said, along with an inability to obtain further financing and “the inability to sell the company as a going concern,” his letter stated. Those conditions left the company, “unable to provide any notice until now,” he suggested, the day before closing. The required WARN notice was sent the same day as Semling’s companywide letter, leaving one former employee to allege that SEMCO violated the WARN Act and Wisconsin’s Business Closing and Mass Layoff Law. In a complaint signed January 31, 2020, and filed with Wisconsin’s Department of Workforce Development (DWD), “employment must give 60-day advance notice of layoff or plant closing and backpay,” wrote former employee Patrick Woller.

Following an investigation by DWD, an initial determination showed that SEMCO violated Wis. Stat. § 109.07(1m)(a) and therefore owes its workers the wages and benefits that would have accrued over the required 60-day period for notice, totaling $682,864.90. In a complaint filed February 1, 2021, with State of Wisconsin Circuit Court Lincoln County, DWD seeks to recover the sum by enforcing a lien against all property owned by the company.

“DWD recognizes the significant burden placed on workers and their families when an employer fails to give employees proper notice of a business closing,” DWD secretary-designee Amy Pechacek said. “DWD believes in enforcing the law and is pleased to move forward in holding SEMCO accountable to its workers.”

Fellow Wisconsin-based manufacturer Sierra Pacific Windows announced in February 2020 that it reached an agreement to acquire the assets of SEMCO, including the company’s 275,000-square-foot manufacturing facility and all production equipment.

“While the closure of Semco is very unfortunate, we are grateful for the opportunity to expand and stay ahead of the incredible growth of the Sierra Pacific Windows brand and all our product lines,” said president, Tom Takach. As jobs became available, candidates with prior window manufacturing experience at SEMCO would be given “strong consideration,” a company representative said.

According to DWD’s initial determination, officials for SEMCO claim that when the deal closed March 3, 2020, “the transaction included a provision for SEMCO’s former employees to be hired by the new owner, contingent on the employees’ qualification and the availability of positions.”

DWD reported that the agreement between the two companies, “stated that SEMCO shall provide [Sierra Pacific Industries (SPI), parent company to Sierra Pacific Windows] with the names and job duties of each SEMCO employee whose employment was terminated as a result of the cessation of business operations and, to the extent SPI has job openings, and subject to SPI’s normal and historical screening and hiring practices, SPI will use commercially reasonable efforts for a commercially reasonable period of time to offer employment to as many former SEMCO employees as are qualified for available job openings.”

At the same time, the business closing wasn’t the result of SEMCO’s sale of part or all of its business, as the sale of assets to SPI took place after the business closing, DWD determined.

Further, the agreement reached with SPI to hire former employees did not preclude SEMCO’s responsibility for requiring 60 day’s notice, officials for DWD concluded.

On the road to closure, “SEMCO was financially struggling for more than a decade,” DWD’s court filings said. “It experienced sales and revenue decline starting in 2008 that caused it to begin reducing operations … experienced additional and substantial revenue decline in late 2018 and early 2019.” In early 2019, the company also notified its lender, which “informed SEMCO that it was not able to provide substantial additional funding,” DWD’s determination said. As a result, in October 2019 the company began seeking a buyer, while borrowing additional funds in order to attempt a sell, eventually closing December 31.

“It does not appear that the business closing was unforeseeable, and the respondent could have notified employees prior to November 1, 2019,” said Jeff Rayford, investigations section chief for DWD’s Equal Rights Division. SEMCO also suggested that its circumstances meet an exception identified in Wis. Stat. § 109.07(1m)(a), Rayford said, adding, “but this argument is unpersuasive as well. The sale of the business occurred after the business closing and the buyer did not agree to hire substantially all affected employees with not more than a six-month break in employment. Instead, the buyer agreed to hire former employees ‘to the extent positions are available.’”

A representative for Sierra Pacific Windows suggests that some media outlets have mischaracterized the company’s involvement in the case, telling [DWM], “News media reports suggesting that Sierra Pacific Industries (SPI) is involved in the case filed by Wisconsin Department of Workforce Development against Semco Windows are incorrect. SPI is not named as a defendant in the case, and SPI has had no other involvement in this matter. In March 2020, SPI purchased certain assets from Semco Windows. Prior to that transaction, SPI had no involvement with Semco Windows, and SPI has no ongoing involvement with Semco Windows.”

On May 1, 2020, DWD made its initial determination, deeming that SEMCO violated Wis. Stat. § 109.07(1m)(a), later affirming that opinion through a final determination issued July 29. In the legal complaint that followed, DWD requests a money judgment against SEMCO in the total amount of $1,257,729.80, including $682,864.90 toward wages and benefits liability. On June 3, 2020, DWD filed and perfected a wage lien against the personal property of SEMCO with the Wisconsin Department of Financial Institutions. On August 6, 2020, DWD then filed and perfected a lien against all real property and fixtures owned or thereafter acquired by the company in Wisconsin.

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