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Nortel’s next chapter: $22M in bonuses for some; ‘agonizing deal’ for others

Nortel wants $22M more for bonuses

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RESEARCH TRIANGLE PARK, N.C. — Laid-off Nortel employees in the Triangle and elsewhere who have been denied severance and retirees worried about pensions must be glad to know that the bankrupt telecommunications gear-maker was back in court Friday seeking approval to pay $22 million in bonuses to select employees.

Meanwhile, workers are receiving the following take-it-or-leave-it letter about severance, according to All About Nortel blogger Mark Evans, a longtime journalist in Canada.

“For many former Nortel employees, there’s an agonizing deal on the table: if they want early access to their pensions and the retiree medical plan, they have to surrender their claim to severance payments,” Evans wrote.

The letter:

“Subject: Voluntary Waiver of all Benefits under the Nortel Networks Severance Allowance Plan

“Dear XXX:

“Attached is a waiver of benefits in the Nortel Networks Severance Allowance Plan (”the severance allowance plan”). We are sending this waiver to you as a previously notified terminated employee in the US who has not received any benefits to date from the severance allowance plan. We want you to be aware of this newly-available waiver of severance allowance plan benefits since it may be of interest to terminated employees. The waiver of severance allowance plan benefits may allow an earlier commencement of benefits in the Nortel Networks Retirement Income Plan and the Nortel Networks Retiree Medical Plan. This may be beneficial since a participant cannot commence benefits in these plans until the end of severance payments from the company.

“It is important to note that if you waive your benefits in the severance allowance plan, you are also forfeiting your right to make a claim for these benefits under the Chapter 11 claims process. Additionally, if you waive your severance allowance plan benefit, you will not receive credit for vesting service under the Retirement Income Plan during your “standard severance period” (see waiver for definition). Vesting service may be important for you in qualifying for your Retirement Income Plan benefits or to qualify for coverage or subsidies under the Retirement Medical Plan. For these reasons, please consider carefully which of these options has greater value to you before you sign this waiver, Additional details about the impacts of signing this waiver are found in the various sections of the attached waiver document. Please note that you have 30 days from receipt of this letter to sign and return the document to HR Shared Services address shown on the waiver.

“If you have questions. please contact HR Shared Services at 1-800-676-4636, Select Option 1, Restructuring.

“Regards,
Elena King
SVP Human Resources”

(The News & Observer also reported in detail about this latest chapter in the plight of former workers.)

What Nortel is trying to do with the bonuses – prevent mass flight from the technical ranks and thus gutting what’s left of the shrinking company’s talent base – makes sense in a normal environment. For example, Evans noted in his blog that Clifford Holtz, head of Nortel’s enterprise sales in North America, quit and joined another firm.

But what’s normal today? Nortel’s timing couldn’t be worse. Look at the furor in Washington and on Wall Street about bonuses being paid to execs at firms the U.S. taxpayer bailed out.

Making matters worse is how laid-off workers are being treated.

Chief Executive Officer Mike Zafirovski isn’t on the list of eight top execs that Nortel wants to pay incentives in order to motivate and retain them, Canadian media reports. If he were, the anger among the Nortel ranks would likely be worse.

So far, $22 million has already been OK’d by bankruptcy courts in the U.S. and Canada for another 900 engineers and key employees that Nortel says it must retain in order to keep the company viable.

Some people realize that Nortel must survive if pensioners are to receive all benefits and if laid off workers are ever to get a chance to be rehired – or perhaps regain benefits that were wiped out by the January bankruptcy filing.

Here’s a very interesting comment from a lawyer representing some Nortel workers in Canada, as quoted by the Canadian Press:

"Our clients take no objection so long as there is no incentive plan that rewards employees for simply staying with the company or that gives them an incentive to reduce benefits for former employees and retirees.” Mark Zigler, Koskie Minsky law firm, Toronto

Even if the bonuses are paid and these key people remain, there’s certainly no guarantee Nortel will survive. Mike Z. and management are working on a restructuring plan that they hope will bring the firm out of bankruptcy. But talk continues about whether significant parts of the company will be sold off. There might not be much of a company left, asset sale or not.

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