Terms of the Deal Are Key in Enforcing Retention Pay

Q: On July 1, our company said it planned to shut down the plant where I work in a year. We were offered a bonus and special retirement package to stay till the end. Many of us chose that option rather than look for alternate jobs.

But now we have been told that division managers are going to buy the division, creating a new company that does not plan to offer severance or continue the retirement benefits that were provided by the current employer.

We stand to lose big. The current employer says it’s not obligated to pay severance benefits to any employee offered a job by the new company, even if the employee refuses the offer.

Given the short notice and the fact that the company is closing this division to get out of the business, it is highly unlikely that we can find other positions within the company where our benefits will continue.

Can the new owner deny the severance and retirement package offered by the current owner? Can we receive unemployment benefits if we decide not to accept jobs with a new employer (due to insufficient compensation)?

--M.N., Irvine

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A: When word gets out that a company is selling its facility or closing a plant, employees understandably get concerned about their job security.

In many cases, employees find other jobs before the sale is completed. This can cause an employer tremendous problems in finalizing the sale or continuing business until the end.

Accordingly, many employers offer what is known as “retention” pay to encourage current employees to stay, when it might otherwise have been in the employee’s best interest to take another job.

Such promises are enforceable. The specific terms of the bonus are the key. If the original promise was vague and given orally, it might require a lawsuit to determine the implied reasonable terms of it. If there was a written commitment, those provisions would apply.

There could be a problem, however, if the terms were not specific enough. For example, if the company said that the benefits would not be paid to an employee offered a “job” by the new company, you have to determine what it meant. Did the company really mean any job, even if it isn’t in your job category and the compensation is different? Probably not.

If the terms are vague, the law will impose a “reasonableness” standard. If the job you are offered is not reasonably similar in terms of duties, pay and benefits to the one you had before, you could argue that such a different job does not prevent you from being eligible for retention pay.

If you refuse to accept a vastly different job, you still might have a right to employment compensation. However, you would have to show to the California Employment Development Department that it is substantially different from the job you left, and that you were reasonably justified not to accept it.

--Don D. Sessions

Employee rights attorney

Mission Viejo

Evidence Could Clear Air in Firing

Q: One of my friends was a cocktail waitress in an upscale restaurant/bar where she was well-liked by staff members and customers. She has been fired because of a bad attitude. The real reason, as I understand it, is that she was the only employee who didn’t smoke and was trying to enforce the law banning smoking there.

Does she have grounds for a lawsuit? How would she go about proving the real reason for her termination? Would character references carry much weight in a case like this?

--H.K., Los Angeles

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A: California law prohibits smoking in virtually all places of employment. This law also provides that no employer may knowingly permit smoking in its workplace and that employers must take reasonable steps to prevent nonemployees from smoking there.

California Labor Code Section 6405 states that any employer who coerces an employee to consent to smoking by other employees or who requires an employee to work in a smoking environment is subject to a penalty of up to $7,000 per violation.

In addition, if an employee such as your friend is able to establish that she was terminated because she was attempting to enforce the no-smoking law, she also would be able to bring a wrongful-termination action against her former employer. If successful, such an action would entitle her to lost wages, compensatory and possibly punitive damages.

To prove such a case, your friend would introduce any direct evidence she has that the employer terminated her because of her protests concerning smoking. This might include statements by the employer, or documents concerning smoking.

She also would be able to introduce certain types of indirect evidence, such as positive performance evaluations, evidence of salary increases and bonuses from the employer, to establish that the “bad attitude” cited as the reason for her termination was only a pretext--that the real reason for her termination was her complaint about smoking.

Character evidence, although possibly admissible for some purposes, would probably not be particularly helpful in this type of case.

--Diane J. Crumpacker

Management law attorney

Fried, Bird & Crumpacker

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If you have a question about an on-the-job situation, please mail it to Shop Talk, Los Angeles Times, P.O. Box 2008, Costa Mesa, CA 92626; dictate it to (714) 966-7873; or, e-mail it to shoptalk@latimes.com. Include your initials and hometown. The Shop Talk column is designed to answer questions of general interest. It should not be construed as legal advice.