A&P’s motion to grant $5 million in payments to retain certain employees as it winds down its business has been met by a rash of objections in U.S. Bankruptcy Court, including one from the Trustee overseeing the case, arguing in part that the plan unfairly discriminates against union employees.
In addition to the objection from Trustee William K. Harrington, the Key Employee Retention Program (KERP) motion faces opposition from the United Food and Commercial Workers International union, nine UFCW locals and a local chapter of the Service Employees International Union, representing certain warehouse employees. A hearing on the motion is set for later this week at U.S. Bankruptcy Court in White Plains, N.Y.
A&P late last month filed the KERP motion seeking to incentivize 495 “key employees” to stay on one additional month, to Oct. 10, and 283 of them to stay on through Dec. 12. Although the participants in the proposed KERP weren’t named, they include 83 corporate and 412 non-union store employees, and does not include senior management.
A&P said the plan was necessary to effectively complete its Chapter 11 “sale strategy” based on rapid-fire auctions of all of its stores, amid a rash of defections and resignations including corporate officers, store managers, and department directors.
The program specifically seeks to exclude union employees, noting that that group had seen little attrition inasmuch as workers whose stores are to be sold are already incentivized to stay with the company, and that, because of a precarious financial position and the sheer number of union workers, retention payments would be too small to retain them. A&P also argued union workers have better severance benefits than non-union workers — although the company in the case has already successfully argued to limit those payments to 52% of what was agreed to in its collective bargaining agreements.
Unions in objecting to the KERP called the plan “outrageous,” noting that under the proposed motion around 20% of the $5 million would go to just 11 employees (the U.S. Trustee separately said that five employees would receive 11% of the total payouts). They noted that the company set up a separate, $6 million trust prior to the Chapter 11 so as to ensure six members of its senior management team would be paid.
In addition to saying A&P failed to provide evidence that the KERP does not discriminate unfairly against union workers, the Trustee argued the proposal failed to establish a relationship between effort and outcome; does not provide sufficient evidence that costs are reasonable; and does not provide sufficient evidence that the plan meets industry standards with respect to store-level workers.
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