Union: University of the Arts lacks cash to pay employees money it owes them under federal law

The University of the Arts, which shut down suddenly earlier this month, does not appear to have enough money to pay its employees the minimum it owes them under federal law.

The news came out of the first impact negotiating session that Kristine Grady Derewicz, an attorney for UArts, and UArts human resources executive Caroline Tate held with the school’s staff and faculty unions Thursday — a session representatives for the workers said was “insulting and insubstantial.”

During the nearly two-hour session, Derewicz made no proposals on health insurance, severance or other benefits and offered no details on the school’s finances, telling the union that such information “does not exist” currently, according to labor leaders.

» READ MORE: The latest UArts hearing discusses red flags before closure, a failed move to save the school, and an accusation of ‘cowards’ on the board

The university “lacks the cash flow to comply with laws requiring 60 days of advance notice and pay before mass layoffs,” union officials said in a statement.

UArts laid off 613 employees the day the school closed June 7. It’s unclear when and how much they will be paid.

“The University of the Arts representatives communicated their hope to maybe, if members are lucky, adhere to the university’s legal obligations,” said Daniel Pieczkolon, president of United Academics of Philadelphia, a labor union that represents University of Arts faculty and staff. “Our members have been left to guess as to whether the university’s board and their hired guns from [global management firm] Alvarez & Marsal will develop any sense of their own finances and ongoing operations.”

University officials informed the Middle States Commission on Higher Education, the school’s accreditor, on May 29 that they intended to close on June 7. They did not inform staff and students of the closure until May 31, after The Inquirer reported the news.

President Kerry Walk, who has since resigned, said the school was in the midst of a financial crisis that forced the abrupt closure. She did not detail what triggered it or how much was needed, but a trustee later said the school would have needed about $40 million to handle the crisis.

Several of the university’s deans banded together to try to get UArts to stave off the closure, one told state officials this week; the deans had hoped to run the school themselves, or bridge the gap until a new administration could be found.

The school’s board of trustees has hired Alvarez & Marsal to manage its closure; representatives from the global management firm told union representatives that digging into what caused the school’s closure “was not a priority ... and that any such analysis would fall on government officials or other investigators.”

Union officials are gathering signatures for a petition to ask Pennsylvania Attorney General Michelle Henry to investigate the school’s sudden collapse. Separately, members of the state House of Representatives signaled Monday at a hearing on the university’s closure that they, too, had asked for an investigation and that news was likely forthcoming.

No new bargaining sessions have been scheduled.

Separately, there was movement Thursday on the university’s financial front.

The school’s bondholders have moved to a different trustee for its $45 million in bond debt, the first public sign of financial maneuvering since the institution closed. A bond trustee is a manager that oversees the bonds and acts as an intermediary between the borrower and investors. The new trustee, UMB Bank N.A., is known for dealing with financially troubled borrowers.

Staff writer Harold Brubaker contributed to this article.