Business

Sears managers to earn thousands in bonuses while laid-off workers get no severance

Bonuses are necessary to keep key staff, retailer says

Sears Corner Brook

Sears store managers and executives stand to earn tens of thousands in bonus payments, even as the company's 2,900 laid-off employees aren't receiving severance. (Colleen Connors/CBC)

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Sears Canada plans to dole out big bonuses to senior management while the retailer restructures, even as thousands of laid-off workers aren't being paid severance. 

According to court documents, Sears will pay up to $7.6 million in retention bonuses to 43 executives and senior managers at the company's head office in Toronto. That works out to an average of $176,744 per employee, although it's unlikely the money will be divided up so evenly.

The news isn't going over well with the company's laid-off workers. The cash-strapped retailer plans to close 59 stores and eliminate 2,900 jobs across the country as part of a court-supervised restructuring process.

Sears won't be paying the employees severance which, for some, adds up to a loss of tens of thousands of dollars.

"Why aren't they able to pay us out the severance if they have this [bonus] money?" says Zobeida Maharaj, a laid-off senior operations manager who spent 28 years working for Sears in the Toronto area.

"They have no moral values, no compassion, nothing in their hearts."

Big money to keep execs

Sears Canada points out that the bonus payments — known as the Key Employee Retention Program (KERP) — have been approved by the Ontario Superior Court.

Offering cash incentives during restructuring is common and often necessary to retain key employees, the company says.

"A lack of a KERP in this scenario would potentially result in a worse outcome and negatively impact a variety of stakeholders," spokesperson Joel Shaffer told CBC News in an email.

The executives and senior managers tasked with guiding Sears through the restructuring will earn up to an additional 25 per cent to 100 per cent, on top of their base salary.

Most will get their bonuses in quarterly installments, receiving 75 per cent of their payments within six months. The final 25 per cent won't be paid out until a successful restructuring is complete.

Sears also plans to pay retention bonuses of up to $1.6 million to 116 senior store employees who will oversee liquidation sales at locations that are closing. That amount works out to an average of $13,793 each and will be contingent on certain sales targets.

'Little ants at the bottom'

Maharaj says she can understand paying retention bonuses to store employees working on the front lines. But she argues the big payouts to higher-ups at head office are unfair when ex-workers like her have lost their severance.

"I'm shocked as to how they got this grant permitted to have these people — these headquarters [big-wigs] — fill their pockets even more on the suffering of Sears employees," says Maharaj. "We're just the little ants at the bottom."

Zobeida Maharaj Sears

Zobeida Maharaj, who worked as a senior operations manager at a Toronto store, says it's unfair some executives are getting bonuses while she has lost her severance. (CBC)

Rosa Dalessandro also wonders why there's money to pay Sears executives when she's losing severance that amounts to about a year's salary.

"It's very upsetting," says the former Toronto-based sales manager, who worked for the company for 20 years.

Dalessandro was laid off in March and Sears cut off her severance payments last month. This week, the retailer also cut her benefits and she got hit with an unexpected $400 dental bill.

"I'm opening all the bills right now and I'm like, 'Wow, wow, wow,' because you don't have money coming in. It's really affected me and my family," says Dalessandro.

"It's almost like what they took from us, they're giving to the executives downtown."

'Necessary evil'

While it may sound "cold and heartless" to some workers, putting money aside to keep key employees is considered a prudent move, says employment lawyer Adrian Ishak. "These KERPS are a necessary evil."

When a company is insolvent, Ishak explains, creditors line up to try to recoup their losses. While laid-off employees are considered low priority, retention bonuses for key staff — if approved by the court — often get top priority because those employees are needed to help restructure the company.

"Where you really need to incentivize are people at the top levels, those who are going to be responsible for elaborating the plan, as well as implementing it," says Ishak, a partner with Rubin Thomlinson LLP in Toronto.

If key staff manage to successfully restructure Sears, he adds, it will be the best-case scenario for the company's creditors. "If it's a continuing enterprise, there will be far fewer losers," he says.

Many laid-off Sears employees, however, doubt they'll ever see a dime of their severance and wonder why they're not at the top of the retailer's priority list.

"We supported and built Sears," says Maharaj.

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