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Can University of the Arts continue to pay 700 employees’ health care and salary? Maybe, maybe not.

A spokesperson for Pa. Attorney General Michelle A. Henry said the office is “investigating the circumstances of the closure and potential transfer of assets."

Ryan Hancock and Eric Lechtzin, lawyers for former employees of University of the Arts, speak outside federal court in Philadelphia.
Ryan Hancock and Eric Lechtzin, lawyers for former employees of University of the Arts, speak outside federal court in Philadelphia.Read moreKristen A. Graham / Staff

University of the Arts, which stunned the city and its arts community by abruptly closing last month, might continue to provide employees health-care benefits, as they are federally required to do, through August, an official told a judge Wednesday.

But it might not.

In a case that the attorney general confirmed Wednesday it was investigating, school officials said they also hope to pay 700 of what are now mostly former employees the 60 days’ salary they are obligated to under federal law, but whether they have enough money to do so is also up in the air.

“It’s an expectation, not a promise” that workers will receive their August health benefits and salary, said Kristine Grady Derewicz, the lawyer representing the school. “There are processes and multiple conversations occurring right now for opportunities to create revenue. Those conversations will be playing out over the course of the next few weeks. And everyone’s hope and expectation here is that there will be sufficient assets and cash to make these payments.”

Derewicz stressed that the university’s finances and the terms of its closure were “very much in flux.”

The information came during proceedings in federal court, where Derewicz and lawyers for a group of former University of the Arts faculty and staff who have filed a lawsuit against the school appeared before Judge Chad F. Kenney.

Citing an unspecified financial crisis, the 150-year-old arts institution shut down with a week’s notice. More than 600 employees were sent layoff notices June 7, the school’s final day of formal operations. About 100, known as the “wind-down team,” were asked to stay to oversee the school’s final days, but most of that group has now also been let go. Derewicz said that only about 30 employees are still working.

Brett Hambright, a spokesperson for Attorney General Michelle A. Henry, said the office is “investigating the circumstances of the closure and potential transfer of assets. Specifically, our focus is on preserving the assets so they can be repurposed consistent with their charitable mission. Additionally, our office is investigating to determine the causes of the failure that resulted in abrupt closure of the university.”

The judge called a status conference — a rare move in a case in which the defendant has not yet even submitted a formal response to the lawsuit — because of the urgency of getting workers paid, he said. But even with Derewicz’s willingness to work with the employees’ lawyers and both sides’ eagerness to expedite the process, any court case would proceed slowly, Kenney warned.

The judge and Derewicz both signaled reluctance to enter into the “discovery” phase of the suit, which would compel University of the Arts to produce evidence about the circumstances around the collapse and slow down the process of any payout to employees.

Alvarez & Marsal — the consulting firm brought in after president Kerry Walk resigned days after the closure was announced — “is not focused on what happened to lead us here and it is instead focused very much on moving forward, securing financing, securing opportunities to realize cash to hopefully pay employees,” said Derewicz.

Representatives for United Academics of Philadelphia, the union representing University of the Arts faculty, expressed frustration about efforts to delay the discovery process.

“What is the UArts Board of Trustees continuing to hide from the public?” union officials said in a statement. “Today’s hearing furthers UArts leadership’s disregard for faculty, staff, and students whose personal and professional lives have been derailed by catastrophic decision-making by Jud Aaron and the rest of the UArts Board of Trustees. UArts Trustees cannot continue to offer merely their hopes and wishes when it comes to paying former employees for work already completed — or for meeting their basic compliance with labor law.”

The union referred to Judson Aaron, who chairs the school’s board.

Derewicz said it was her understanding that all employees have been paid for hours worked to date, but lawyers for the employees said some workers who were asked to be part of the wind-down team were told they would receive no compensation for the extra time they worked after June 7.

Payroll is due next week, Derewicz said, and “it is our expectation that payroll is funded. I apologize because I have information that is still tentative and I very much do not want to create expectations that are inappropriate, particularly for the folks who are here today.”

Kenney made no ruling; the two sides will meet in court again on Aug. 12 for another status conference hearing.

Ryan Hancock, one of the lawyers representing the employees, said that while Derewicz has stressed the university hopes to pay employees what it owes them, “we have no proof of that until ... our clients have been paid,” so “we’re going to keep moving forward” with the case.

‘I’m actually seriously considering leaving the arts’

About 20 former University of the Arts workers and students attended Wednesday’s hearing, many sporting university T-shirts and buttons. Student Brittney Mallon, who was supposed to be a senior illustration major, drew court scenes in a yellow sketchbook she carried.

“It’s really unfortunate that it has to come to lawsuits for the teachers to get paid,” Mallon said. She was able to transfer to the School of Visual Arts in New York; she didn’t want to leave Philadelphia, but neither Temple University nor Moore College of Art and Design were a good fit for her, she said.

Mallon mostly attended in support of the staff who lost their jobs, but she was out of a job, too — she was supposed to be a teaching assistant in summer courses at the school, and had hoped to parlay that into possible teaching jobs herself.

“I was really looking forward to getting that experience,” Mallon said.

Some faculty and staff attended hoping for more information.

Diane Pepe, a former associate professor in the university’s School of Art, had one pressing question:

“Do I have health insurance next month?” Pepe asked. “I still don’t know.”

Charis Duke, who was a coach and accompanist in the university’s musical theater department for eight years, said it was nerve-racking to hear nothing new at the hearing.

Duke has had interviews for jobs in New Jersey and New York, but because she’s unable to relocate, she’s looking at either a very long commute or something that felt unthinkable in the past.

“I’m actually seriously considering leaving the arts,” said Duke. “What else can I do? I need a job. They basically dumped over 600 arts professionals onto the job market on the same day. Philadelphia can’t absorb us.”