If a group of creditors get their way at a hearing today, almost 600 laid-off Circuit City employees may lose all pay and benefits more than a month earlier than what was expected. Creditors are speaking before a U.S. Bankruptcy judge beginning this morning and making a case that the employees are not providing services to Circuit City, and therefore should not receive pay or benefits.
Federal law requires corporations to give 60 day notice to both employees and local government when planning mass layoffs of 100 or more workers. No notice was given to either, and Circuit City therefore opted to layoff employees immediately and give them full pay and benefits through January 9, 2009, costing the company up to $10 million. Interestingly enough, if the judge rules in favor of the creditors, who argue that money should be used to run the company, employees would then be considered creditors themselves and have to petition the court for their salary and benefits.
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