Essendant Faces Layoffs and Legal Scrutiny Amid Closure Plans

Essendant, a long-standing wholesale office supply company, is laying off around 1,300 employees across six states as it moves to shut down operations. Allegations have surfaced that the company might be breaking Illinois employment laws by dismissing workers without the full 60-day notice required under the state’s WARN Act. The Illinois Department of Labor has initiated an investigation into the layoffs that occurred earlier than initially planned.

The company, formerly known as United Stationers, evolved over decades from a small Chicago family business into the largest U.S. independent office product wholesaler. Renamed Essendant in 2015, it has faced difficulties in recent years under private equity ownership, impacted by the shift to remote and hybrid work models.

After unsuccessful efforts to pivot from office products to cleaning supplies, Essendant announced on August 3 its plans to close its Lincolnshire headquarters and a distribution center in Carol Stream, issuing a WARN notice for the termination of 510 and 134 employees respectively. The termination was expected to occur on or after October 3. However, on August 27, the company proceeded with abrupt layoffs via a mass video call, impacting mostly Lincolnshire employees.

A letter sent on August 28, signed by Marcela Sztainberg, senior VP of human resources at Essendant, stipulated that employment would end by August 31 without any severance. Essendant did not comment on multiple inquiries.

According to the WARN Act, companies with over 75 employees must provide a 60-day notice for major layoffs or closures. If Essendant is found guilty of this violation, it could face penalties and might need to compensate affected employees with back pay and benefits.

The company may also incur a civil penalty of $500 per notice violation day, as stipulated by state regulations.

Strauss Borrelli, a class-action law firm in Chicago, is probing if the layoffs violated state WARN laws, seeking input from former Essendant employees without notice or benefits for legal remedies. They declined to comment on the investigation.

WARN notices were also issued on August 3 for facilities in Atlanta, Dallas, Phoenix, Philadelphia, Sacramento, and Los Angeles, totaling 1,278 layoffs. The notices highlighted the company’s attempts to explore strategic alternatives, including asset sales and additional capital acquisition to stave off liquidation.

Essendant’s history dates back to 1906 with Utility Supply Co. in Chicago. It eventually grew into United Stationers, shifting from retail to wholesale and expanding significantly over decades. This transformation included public trading in 1981 and various acquisitions.

The firm rebranded to Essendant in 2015 and was purchased by Sycamore Partners in 2019 for $487.2 million, which framed the acquisition as complementary to its earlier purchase of Staples. Essendant, once boasting $5 billion in sales, began a downturn influenced by pandemic-era shifts.

Last autumn, the company stated it was leaving the office product market for janitorial and foodservice supplies, promoting this shift as a ‘new way forward.’ Its website claimed the changes would foster long-term growth. In March, Essendant moved its headquarters to Lincolnshire, only to face closures within six months.

Meanwhile, Sycamore Partners continued investing, acquiring Walgreens for $10 billion in August, while Essendant’s operations are nearing their end after more than a century. The company’s abrupt closure marks an unforeseen early finish for numerous employees.