RadioShack employees who were laid off in December and January will likely have to get in line with other creditors to collect their promised severance.
In early December, RadioShack changed its severance policy from giving departing employees a lump sum to providing payments bi-weekly, according to an email sent to employees by CEO Joe Magnacca. The action was taken about two months before RadioShack filed for bankruptcy reorganization.
Now, following last week’s bankruptcy filing by the consumer-electronics chain, the court will have to approve continuing those payments.
So far, the company has not petitioned the court to continue paying the severance. Employees have not received formal letters telling them that their severance has stopped. One employee who was laid off in January, who asked not to be identified, said she had only received two checks and was expecting to receive several more.
Company spokeswoman Merianne Roth declined to comment on the severance issue.
It’s likely that employees will have to file an unsecured claim with the court in an attempt to receive their severance. According to the email from Magnacca, which was obtained by the Fort Worth Star-Telegram, it appears that about 40 employees were laid off in January.
In its initial list of largest outstanding unsecured creditors, eight former executives are listed and said to be owed $5.5 million, representing money from part of a supplemental executive retirement plan, or SERP. Also, Telvin Jeffries, a former executive vice president who resigned in November, is owed $383,304 in severance pay.
In his December email to employees, Magnacca also said that the company was eliminating the company’s match to its 401(k) and 1165E plans, but the plans were still being offered to employees as a benefit.
“The Board continues to challenge us to find all opportunities to create cost savings in our business,” Magnacca wrote. “We are right-sizing our operation and have already made many changes that have resulted in savings. These include modifying store hours and tightening budgets.”
Fort Worth-based RadioShack filed for Chapter 11 bankruptcy protection on Feb. 5. The electronics retailer plans to sell 1,500 to 2,400 of its 4,000 U.S. stores to the Standard General hedge fund and close the rest.