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Article: Companies Sever Severance Packages

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Companies Sever Severance Packages

When Aris Georgiadis got fired from APBnews.com, he left his copyediting job without a penny in severance, unused vacation pay, or any other monetary concession.

He could have used the money: In the six months since he lost his job at the crime-news web site, he's been laid off from another dot-com and watched his third dot-com job dissolve into a tar pit of late paychecks, dubious funding plans, and abandoned Silicon Alley offices.

"It would be nice to get the money I'm owed, so I can pay my bills," Georgiadis said.  "But in terms of severance, I'm not holding my breath."

As hundreds of dismissed dot-comers discovered in 2001, severance pay is far from standard in the dot-com world. In fact, many have found to their chagrin that severance packages - paid to ease the blow of a layoff and make a job search possible without starvation - comes at the discretion of the company doing the severing.

"Generally, it's a matter of state law.  There is no federal statute that governs benefits or severance," said Paula Brantner, a senior staff attorney with the National Employment Lawyers Association in San Francisco.  "My experience with most state laws is that there's no obligation for anything other than time actually worked."

In most cases, severed employees can't expect their desperate companies to save money for severance.  For more than one distressed Internet company, money that might have gone into severance packages instead paid for last-gasp operations while executives tried to secure more funding.

"It depends on the company, how cash-strapped their situation is," said Allison Hemming, the founder of thehiredguns.com, a consulting firm that specializes in finding short-term jobs for laid-off dot-comers.  Hemming also hosts New York City's weekly "Pink Slip Parties," happy-hour gatherings of fired dot-com workers and recruiters.  "You had a lot of young-gun entrepreneurs who just went flying into a brick wall and didn't think about the consequences, about how to wind down, because it was all about build, build, build."

At APBnews, money that might have paid severance for the 140 fired employees (including Georgiadis and this writer) instead kept the company going while the company's founders begged funding from Rupert Murdoch and others.  After their cash ran out, APBnews.com even asked the employees it had fired to work without pay for a week while last-minute talks wound down.

~ Georgiadis volunteered, too, until he found a better paying job editing content for MTVi, the online division of the music television network.  But never confident about the stability of his MTVi job, Georgiadis remained in contact with his former bosses at APBnews.  When APBnews emerged from bankruptcy in September, it offered Georgiadis a new job with a higher salary and more prestigious job title.  He decided to rejoin.  But when he went to tell his MTVi boss about his decision, he received a shock.

"I went to tell him that I quit," Georgiadis said.  "And he said, 'No, no don't quit, we're going to fire you.'"

The same day Georgiadis planned to resign his from MTVi, he was told he was one of 105 employees MTVi was laying off as a 25 percent payroll shrinkage.  MTVi paid him a week's pay in severance.

"I wasn't there long enough to get a real severance package, or a golden parachute," Georgiadis said.  "It was really a way of saying, 'Sorry for hiring you.'"

But while relatively younger employees like Georgiadis graduated into a job market that doesn't know a recession from Reaganomics, some older employees, informed by experience, have managed to leave their dot-coms with a pocket full of money, experts say. A few have been savvy enough to win severance packages that lasted longer than their jobs.

"With more senior people, they've been smart enough to negotiate that going in," said Susan Gould, the president of Gould & Associates, a human resources consulting firm in Palo Alto, CA.

"Clearly, some people have negotiated a package for themselves, so if they are laid off, they are getting three or six months," Gould said.  "That's all a function of having negotiated a good deal going in."

~ Whether or not they get severance, all laid-off employees should demand back pay and unpaid vacation days, no matter how broke their bosses seem, said Brantner, the labor attorney. Stiffed employees should call their state departments of labor, which can pursue back pay on their behalf.  Some workers have even taken their bosses to small claims court.  And workers owed back pay from companies that later declare bankruptcy should file claims with the federal court administering the bankruptcy proceedings, since their claims will take precedence over most other creditors'.  (For a peek at the struggle waged by one group of laid-off employees to win severance and vacation pay they say they're owed, check out the OneSoft message board.)

"Bankruptcy in most cases doesn't mean the company doesn't have any assets, so you can get a portion of what's owed you," Brantner said.  "But that's of little consolation if you're broke and the money is weeks or months down the line."

The economic troubles at Priceline.com, the company that lets consumers name their own price for tickets, may have opened another legal avenue to laid-off dot-commers.  On Jan. 11, Connecticut Attorney General Richard Blumenthal sued Priceline's parent company, Walker Digital, for failing to give laid-off workers 60 days notice, as required by a 1988 federal law, the Worker Adjustment and Retraining Notification, or WARN Act.) Blumenthal said he was acting on behalf of 106 Priceline employees in Connecticut laid off in November with just a day's notice.

In response, Jay Walker, Priceline's founder, has sought refuge in the WARN Act's "Faltering Company" loophole, which exempts notification if "a company has sought new capital or business in order to stay open and where giving notice would ruin the opportunity to get the new capital or business."

But Blumenthal said notification wouldn't have affected the chances for new capital, since Walker was considering using funds from another of his own businesses to stave off layoffs at Priceline.  Blumenthal's lawsuit, if successful, may be the first time the WARN Act, traditionally reserved for manufacturers or other large employers, has been used against a dot-com company.

"The spirit of the law is to protect workers and communities from layoffs that may harm them and to enable people who lose jobs to seek other opportunities while they are still working," Blumenthal said. "Everybody knows it's easier to find new employment if you're still working that when you're out on the street. That applies equally to dot-com companies as to does to manufacturing or service companies."

For anyone considering a dot-com job in 2001, questions about a severance package may be as important now as inquiries about stock options were in 1999.

"When the capital markets open up again, and I don't know if that's three, six months, or two years -- there's a lot of money out there to be invested, but people don't know where to invest it so it's not going anywhere -- when they do open up, the workforce is going to a be a whole heck of a lot smarter," Hemming said.

But until that happy day when all dot-coms live in peace, harmony, and positive cash flow, Hemming urged anyone considering an Internet job to make severance a part of their recruiting negotiations.

"If they're not asking, I guarantee, the person who goes in after them for that job will ask for severance," Hemming said.  "You're taking risk and believing in that company. Don't underestimate that."

Georgiadis returned to APBnews as its Assistant Managing Editor for Production in late September.  But since then, conditions have worsened.  The new owner has been late on every paycheck since Thanksgiving.  Just after New Year's Day, the site's two top editors resigned, citing a lack of support from the new owner.  Georgiadis still remains, technically, on payroll, even though no one's showed up for work in more than a week. Georgiadis figures APBnews is dying its second death, but he isn't expecting a severance check this time, either. "I'm just waiting for someone to call me and tell me what's going on," Georgiadis said.