Essendant, a rebranded century-old wholesale office supply company, is laying off nearly 1,300 employees across six states, winding down operations and preparing to close its doors for good.
It may also be breaking Illinois employment law in the process, by allegedly terminating hundreds of workers without the full 60-day notice required under the state’s WARN Act. The state has already launched an investigation into Essendant’s abrupt layoffs last month, which took place five weeks earlier than planned.
“The Illinois Department of Labor received a complaint and the department is investigating,” agency spokesperson Paul Cicchini said Friday.
Formerly known as United Stationers, the business grew over decades from a small family-owned Chicago store into the nation’s largest independent wholesaler of office products. But the company, which changed its name to Essendant in 2015, has struggled in recent years under private equity ownership, amid a postpandemic shift toward remote and hybrid work.
After a failed effort last year to transform the business model from office products to cleaning supplies, Essendant issued a WARN notice on Aug. 3 that it was closing its Lincolnshire headquarters and a Carol Stream distribution center, laying off 510 and 134 employees, respectively.
The notice said it expected to terminate employment on or after Oct. 3. But on Aug. 27, the company summarily dismissed hundreds of employees, mostly from the Lincolnshire headquarters, in a mass video call layoff, according to sources familiar with the situation.
A follow-up Aug. 28 letter obtained by the Tribune set the last day of employment as Aug. 31 for those terminated early, with no severance pay or other benefits. The letter was signed by Marcela Sztainberg, senior vice president of human resources at Essendant.
Sztainberg and Essendant did not respond to multiple requests for comment.
The Illinois Worker Adjustment and Retraining Notification Act requires businesses with 75 or more employees to give workers and the state 60 days advance notice of plant closures or mass layoffs.
If the Department of Labor investigation finds that Essendant violated the WARN Act, it could seek to recover back pay and benefits for employees terminated before the required 60-day notice period. The company could also be subject to a civil penalty of up to $500 for each day of the notice violation, according to the state.
Meanwhile, Strauss Borrelli, a Chicago-based class-action law firm, posted on its website that it is investigating whether the mass layoffs at Essendant locations in Illinois and beyond violated state WARN laws. It is soliciting former Essendant employees who didn’t receive 60 days’ notice or severance benefits to discuss “potential legal remedies.”
Reached by phone, a Strauss Borrelli partner declined to comment on the Essendant investigation.
In addition to Illinois, Essendant issued WARN notices on Aug. 3 for closing facilities in Atlanta, Dallas, Phoenix, Philadelphia, Sacramento and Los Angeles totaling 1,278 layoffs.
The WARN notices, which were also signed by Sztainberg, said the company has been “exploring various strategic alternatives, including potential sale transactions involving certain of the Company’s assets and operations, and securing additional capital to avoid liquidation of the Company.
“At this time, the Company does not know if these efforts will succeed and the Company currently expects that it will cease its operations and close its business,” the WARN notice said.
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The company also said that “certain employees” may be informed by their managers they are not expected to perform their jobs “for all or a portion of the period” prior to the Oct. 3 termination date. Whether that obviates Essendant’s responsibility to give employees the full 60 days’ notice may end up a matter for the courts to decide.
The roots of Essendant date back to 1906, when the Utility Supply Co. started selling office supplies out of an industrial loft in downtown Chicago. In 1921, Morris Wolf and Harry Hecktman bought the Utility Stationery store in the Loop, launching what would become a robust family business for decades.
The company shifted away from retail and changed its name to United Stationers in 1960, becoming the largest independent wholesale office supply firm in the nation. United Stationers went public in 1981 and relocated to Des Plaines several years later.
In 1995, United Stationers was acquired by Dallas private equity firm Wingate Partners for $258 million and merged with a smaller rival, Itasca-based Associated Stationers, creating a wholesale office supplies giant with $2 billion in annual sales.
The company moved to Deerfield in 2005 and rebranded as Essendant in 2015.
In January 2019, New York-based private equity firm Sycamore Partners acquired Essendant for $487.2 million and the assumption of debt, in a deal valued at nearly $1 billion. It was framed as a synergistic merger of sorts with retail office supply chain Staples, which was acquired by Sycamore for $6.9 billion in 2017.
At the time, Essendant was generating $5 billion in annual sales.
Then the pandemic hit, remote and hybrid work became the norm and Essendant’s fortunes under private equity ownership went into sharp decline, with its core business essentially dismantled.
Last fall, Essendant notified customers it was exiting the office products business to focus on janitorial and foodservice supplies. On its website, the company called it a “new way forward,” touting its six distribution centers and change in direction as a blueprint for success.
“At Essendant, we are building for our next century in business by investing in expanded capabilities, strengthening our partnership, and focusing on what matters most, your success,” the company posted. “Our transformation is designed to position us, and you, our customers, for long-term growth and reliability. Together, we’re not just keeping up with change, we’re leading it.”
In March, Essendant relocated its headquarters from Deerfield to Lincolnshire. Six months later, the new office and six distribution centers are set to close, and the venerable office supply company may soon be relegated to business history.
A spokesperson for Sycamore Partners did not respond to requests for comment.
As Essendant was unsuccessfully shifting its business model from copy paper and pens to toilet paper and brooms, Sycamore Partners was staking new turf in Chicago. In August, Sycamore acquired Deerfield-based Walgreens for about $10 billion, taking the drugstore chain private.
Meanwhile, time is running out for Essendant after more than a century in business. For some employees, the clock ran out five weeks earlier than planned.
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