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Ex-Workers Win Back Pay for Layoffs Without Notice : Atari Settles Landmark Lawsuit

Times Labor Writer

In a landmark lawsuit settlement, Atari, once the nation’s leading manufacturer of video games, has agreed to distribute more than $600,000 in back pay to about 500 former employees who lost their jobs in a massive layoff in 1983.

The case stemmed from Atari’s announcement on Feb. 22, 1983, that it was firing 1,700 California employees and moving most of its manufacturing to Hong Kong and Taiwan to lower production costs. The 537 employees potentially affected by the settlement were all laid off that day.

“They kept telling us how well the company was doing and then, bam, they laid us all off and moved our jobs out of the country,” said Maria Carson, a former quality-control clerk and one of the plaintiffs in the case. She and 536 other former Atari employees each are eligible to collect $1,182.92--roughly the equivalent of four weeks’ back pay--under the settlement.

“I believe it’s the first time where an employer who failed to give advance notice of a layoff has had to give back pay,” said John True of the Employment Laws Project of San Francisco, the lead lawyer for the plaintiffs. He announced the settlement Tuesday at a press conference in San Jose after Santa Clara County Superior Court Judge Peter Stone gave preliminary approval to the pact earlier in the day.

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The ex-employees’ suit asserted that although officials of Atari and its then-parent company, Warner Communications, had planned the shutdown long in advance, they gave workers no notice of the impending layoffs. On the contrary, the suit asserted, workers had been told that their jobs were secure until at least 1985.

Downturn at Warner

At the time of the layoffs, the San Jose-based glaziers’ union was waging an organizing drive at Atari. The union claimed that the layoffs were made in response to its campaign. (In November, 1983, about 200 of Atari’s remaining video-game workers voted not to be represented by the union.)

The company retorted that the layoffs were a matter of economic necessity, noting that the dismissals came just one week after Warner said a downturn in video game sales had led to sharply lower profits in the last quarter of 1982.

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The union accused Atari of unfair labor practices, but the National Labor Relations Board declined to issue a complaint. Union organizer Ed Jones said one of the reasons for the labor board’s decision was that Atari had said it had planned the layoffs as far back as 1980, before the union organizing drive began.

Lawyers for the plaintiffs noted that this contradicted the company’s public statements at the time of the layoffs. They asserted that Atari violated the California Labor Code and the state Business and Professions Code by concealing the layoff plans.

The company filed a response asserting that it had no duty to give notice under California law. But Judge Stone rejected this argument, and the case would have gone to a jury if a settlement had not been reached.

“This settlement, along with the court’s earlier approval of our legal theories, means that employers will now have to notify their employees of planned layoffs or face the possibility of a costly lawsuit,” said True of the Employment Law Project, a unit of the Legal Aid Society of San Francisco. He said that Atari also will pay out $390,000 in legal fees as part of the settlement.

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Atari Corp., which bought the assets of Atari Inc. in 1984 and no longer manufactures video games, issued a statement saying it had settled the suit on “favorable terms,” noting that the plaintiffs had originally asked for $13 million in damages when they sued in August, 1983.


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