WorldCom Workers Get the Shaft

WorldCom Inc. (OTC: WCOEQ) filed for bankruptcy on July 21st (see WorldCom Files for Bankruptcy). And now it looks as if the 17,000 workers who've been laid off will get little if any severance benefits.

Some of the WorldCom employees that are being laid off have received payments, but the majority have not received anything, and the situation is looking grim, according to sources representing WorldCom employees.

Earlier this week, a bankruptcy court authorized WorldCom’s petition to pay 5,100 workers up to $4,650 in severance benefits, the maximum amount allowable under current bankruptcy code. As for the remaining 11,900 employees that will be laid off this summer, it's unclear if they will receive any benefits from the company. The bankruptcy court said that the people laid off before the bankruptcy was filed will get the $4,650, because they had already been promised a severance package. WorldCom doesn't have to give anyone laid off after the bankruptcy was filed anything.

"We can't speculate on future severance," says Tim Guillen, a spokesperson for WorldCom. "It's really in the hands of the bankruptcy court and the creditors' committee."

That leaves many employees in the lurch during the dark days of the telecom depression.

Kate Lee, former senior manager of communications, says she spent 16 years working for WorldCom and MCI (Nasdaq: MCIT) before being laid off this June.

“I knew that I was probably going to be let go,” she says. “But I continued to do my job just like I always did. I felt I owed that to the company.”

According to the standard severance formula, Lee was entitled to a minimum of eight weeks pay plus a week’s worth of salary for each year she had worked for the company. In total, she was expecting a package worth over $40,000. In addition, the company was also supposed to continue paying her medical insurance for at least 18 weeks. So far, she hasn't received any money.

“Some people who were laid off actually cheered when they found out,” she says. "Things had gotten so bad at the company in those last few months. People were just happy to get out.”

The AFL-CIO is working with Lee and other former WorldCom employees to get them more money. The union group launched a class action lawsuit against Enron last February, and succeeded in getting former workers up to $13,500 in severance.

Babette Ceccotti, a partner with Cohen Weiss & Simon, the law firm representing the AFL-CIO, says there are differences between the WorldCom and Enron cases, and it's still too early to know what will happen in the present case. So far, lawyers are still gathering information, and no lawsuits have been filed on behalf of WorldCom employees.

For workers like Lee, who had been promised far more than the current bankruptcy code allows, even the $13,500 seems like a small figure. But she isn’t complaining.

“It’s better than the $4,650 and that’s better than nothing,” says Lee.

But workers might be lucky to get any severance at all. Under current federal law, companies are not required to provide severance to employees. According to the Worker Adjustment and Retraining Notification Act (WARN), companies employing 100 or more workers are only obligated to give workers involved in a plant closing or major layoff 60 days notice (see Got Severance? Count Your Blessings).

While companies aren’t required to provide severance, those that do are expected to follow through with their promises. The Employee Retirement Income Security Act or ERISA, a federal statute passed in 1974, protects workers who work for a company with pension and nonpension benefits like health coverage and severance. This law, which was originally enacted to protect the Teamsters pension fund, ensures that companies pay out benefits promised to employees.

Because WorldCom had a severance plan in place before the bankruptcy, it could be subject to ERISA. The company actually made workers sign releases stating that they would not sue WorldCom in exchange for their severance packages. But Ceccotti warns that bankruptcy proceedings may void some of the company’s responsibility even if it is supposed to adhere to the ERISA requirements.

“Even if a company is using an ERISA plan, the workers’ severance is not absolutely safe,” she says. “The bankruptcy code gives companies a lot of room to determine what they can and cannot afford to pay former employees.”

While these issues are debated, thousands of workers remain in limbo with no idea if their health benefits are continued or if their severance will ever come.

Some employees with illnesses are unsure of what will happen with their disability and health insurance. Cindy Evans, a 46-year-old single mother in Baton Rouge, La., had worked for WorldCom and MCI for 12 years. Evans is now undergoing chemotherapy for breast cancer, and she went on medical leave back in April.

Since being laid off at the end of June, Evans says she has tried to contact WorldCom on several occasions and has left numerous messages, but she has yet to hear back from any company officials. In the meantime, she is worried about what will happen to her short-term disability, her medical insurance, and her severance, which she expects to be much larger than the $4,650 allowed by the courts.

Evans’s short-term disability insurance runs out at the end of August. Her illness makes it impossible for her to look for a job. At the end of the month, she will have no income. And if she isn’t offered COBRA for her insurance, she will likely be unable to get any affordable coverage for herself and her 12 year-old son.

On the other extreme is Bernie Ebbers, the former chief executive officer of WorldCom who was granted a $10 million, two-year retention bonus back in September of 2000. Ebbers was forced to resign from the company in April, six months shy of his two year deadline, but he is keeping the bonus (see Sidgmore Takes Control at WorldCom). Former chief financial officer, Scott Sullivan who was taken into custody last week and charged with securities fraud, conspiracy, and making false statements to the Securities and Exchange Commission (SEC), has also been able to keep his $10 million retention bonus (see Ex-WorldCom Execs Charged With Fraud).

“I saw Scott Sullivan on the TV last night," says Evans. “It just disgusts me that he is off building a $15 million home and I’m sitting here with zero. I have no job, no money, no hair. And I’m fighting for my life. I can’t even get WorldCom to return my calls.”

A WorldCom spokesperson said that he was unaware of employees not being able to reach officials. He also said that he was unable to discuss details of the company's severance plan.

— Marguerite Reardon, Senior Editor, Light Reading
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papabear 12/4/2012 | 9:59:41 PM
re: WorldCom Workers Get the Shaft Take away the $10M each got from Worldcom and pay the insurance for the layed off workers. They won't need it where they are going.

But of course we know they will get off on a technicality, the workers will suffer and the executives will live the life of luxury.

All of the layed off workers should immediately file for bankruptcy before the Congress changes the laws and they end up paying off their debts for the rest of their lives.

The credit card companies are greasing the hands of Congress to change the laws so even if you file bankruptcy you still have to pay off your debts. After losing everything you have worked for all of your life you still have to pay the credit card companies.

I guess they can't get blood from a turnip.
Nomoredemo 12/4/2012 | 9:59:38 PM
re: WorldCom Workers Get the Shaft I can imagine all the executives in all the rafts telling to the employees thru speakephone "dont worry , keep pumping while we go get some help" .
bitdropper 12/4/2012 | 9:59:35 PM
re: WorldCom Workers Get the Shaft "...The AFL-CIO is working with Lee and other former WorldCom employees to get them more money. The union group launched a class action lawsuit against Enron last February, and succeeded in getting former workers up to $13,500 in severance. ..."


So, technology executive management and investors have finally been so stupid, that they've created an "in" for the unions to go to bat for another group of exploited workers.

It appears they've forgotten [or been too greedy to pay attention to] the age-old formula for keeping unions out of their industry.

"If you treat the employees as you *really* feel about them, it won't be long before you have to manage your business through a union."

The unions have been waiting for generations to get into white-collar workforces. They may have just found their calling. If you think it was difficult managing telecom before, wait until you get a taste of this!
MP_UK 12/4/2012 | 9:59:35 PM
re: WorldCom Workers Get the Shaft Take away the $10M each got from Worldcom and pay the insurance for the layed off workers.


Add to that the $400M Ebbers should be paying back, and things might look a lot better.

Don't see that happening either though :-(
photonfred 12/4/2012 | 9:59:28 PM
re: WorldCom Workers Get the Shaft Not in any defense of former mgmt, but I remember Sidgemore testifying before Congress that over half of the 17,000 targeted workers (those not yet laid off) were not receiving severance benefits because they were moving with their respective divisions this summer as they were sold off.

Admitedly not a guarantee they will retain their jobs, but at least a credible explanation which at a mimimum excludes them from any benefit limitations imposed by the bankruptcy.

On another front, I'm with everyone else that mgmt retension benfits be paid out to workers with reduced or no severence benefits.

Titanic Optics 12/4/2012 | 9:59:27 PM
re: WorldCom Workers Get the Shaft I guess the lancing of the technology bubble will probably result in some bad things, namely laws that will take decades for the country to realize are a mistake.

Here's hoping that there is intervention for the positive from Washington. Here's a fable:

Once upon a time, the nations largest carrier went bankrupt and had executives that had committed fraud. The ensuing panic led to a full-fledged financial panic. Fortunately, things righted themselves and that company still has a nationwide network that is stronger than when it first went bankrupt. In fact, over 125 years later, that company is running ads on CNBC these days, its the Union Pacific.

It would be nice if Washington would intervene in the economy and look to the future, instead of make hasty punitive measures designed to sound like they are doing something on the nightly news. The upshot will be that all that will end up happening is that some engineer that lives in Corning New York will lose his stock options in the future. America is about moving forward, and an update to telecom regulation is badly needed, not a "get them" mentality. Without the FCC, WorldCom could quickly sell MCI to an RBOC, raising cash and allowing itself to emerge from bankruptcy. Not only would it save jobs, but the country could move forward again. Why is Washington so focused on "getting somebody" instead of making risky, bold moves that would move the tech economy forward?
photonsu 12/4/2012 | 9:59:25 PM
re: WorldCom Workers Get the Shaft All,
Please forward you messages to:

[email protected]

Let's let them know what it is like in the trenches, and how we feel about it. But don't complain, offer solutions.

rjmcmahon 12/4/2012 | 9:59:24 PM
re: WorldCom Workers Get the Shaft Why is Washington so focused on "getting somebody"?

1) They desire votes. The public is angry about losing so much money. Revenge will get more votes than forgiveness. It's basic human nature.

2) The majority of the Senate is up for grabs in the next election. The majority party receives the prize of committee chairs. These positions have a lot of power.

3) They are jealous because public officials don't get stock options. They get mad when others make more money than they do. FCC Powell has complained about this more than once.

PS. What does McCain think motivated Buffett to amass all his wealth as the Senator preaches to us all about personal greed? Urghh. Look past false words but rather to behaviors to see the truth in motives.
papabear 12/4/2012 | 9:59:14 PM
re: WorldCom Workers Get the Shaft Worldcom's restatement appears to have increased by $2.5B to $6.8B.

Man! They need to get new batteries for those calculators. Maybe they could afford batteries if Ebbers and Sullivan gave back some of their money.
rjmcmahon 12/4/2012 | 9:59:11 PM
re: WorldCom Workers Get the Shaft Why is Washington so focused on "getting somebody"?

I forgot to mention the most probable reason Washington is after telecom execs:

o Our administration and too many of our representatives want to divert the attention away from Enron. (Likely, many were accepting Kenny-boy's handouts) It's really strange that NO Enron execs have been arrested, while Senator Levin's investigations suggest Enron was by far the most corrupt institution, taking from both public investors and state coffers.

This suggests "exemption" from our laws is granted to those who have friends holding elected positions (or who hold the position themselves).
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