Cynthia Alsman has been with Ford Motors since 1979. She knew that the company was facing serious economic and financial difficulties, but she did know that company’s problems would result in her being laid off without due compensation. Under the company’s severance plan, and as a white-collar worker who has spend long years with one company, she had to receive full year’s salary; instead, she was offered one month. The problem is that in 2000 Ford Motors was restructured, having spun off its parts assemblies to a new company Visteon.
Five years later Ford reabsorbed the majority of its employees who were later misclassified as “rehired”. Under this rule, Alsman was entitled to no more than $5,750 of severance compensation. Although attorneys who are familiar with similar cases state that Alsman “faces a high hurdle” to prove that her layoff had been illegal, the analysis of the case raises a number of serious legal concerns: 1. Severance benefits as the tool of manipulation: in the growing economic crisis, severance plans remain highly unregulated, and companies use them to manipulate the rights of their employees.
2. The lack of legal procedures aimed at protecting employees from illegal layoffs: the state fails to adopt legally justified procedures that would protect employees from being laid off without due cause. To develop such procedures, the state will need to pay special attention to acquisitions and mergers and their impact on employee status and severance compensations. 3. The absence of clear criteria for determining whether mergers and acquisitions may change severance benefits: companies tend to use mergers and as the reason to reduce severance packages.
As severance tensions in economy increase, the state must develop the set of criteria, which will determine whether companies have the right to use mergers and acquisitions as the basis for reducing severance compensations to particular employees. I think that the problem is that the state does not regulate severance packages. I do not think that severance plans should become obligatory; the majority of smaller and medium companies will hardly afford paying severance compensations to their employees.
However, as soon as severance agreement between the employee and the employer is signed, the state should monitor employer’s compliance with the severance plan’s provisions. Employers should be legally responsible for fulfilling their financial obligations when the need to lay off an employee arises. Conclusion Due to the fact that severance packages remain highly unregulated, Cynthia’s access to legal remedies is rather limited. Although lawyers assert that she faces a high hurdle to prove that severance reduction was illegal, Cynthia should be prepared to a long legal fight with Ford Motors.
Ford Motors has clearly breached the agreement with Cynthia, having deprived her of the right to be materially compensated. The small compensation paid by Ford seems to be a ridiculously easy means to avoid litigation. However, even if Cynthia succeeds to receive full financial compensation, publicity will work against Ford: potential employees will think twice before applying for a job in a company that does not care about its workers.
References Orey, M. (2008). Now severance is on the chopping block. BusinessWeek, November 3, pp. 77-78.