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Nortel terminates laid-off workers’ benefits; U.S. employees aren’t paid due to ‘glitch’

Nortel Networks employs about 2,000 people in Research Triangle Park.

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Laid-off employees at telecommunications gear-maker Nortel (NYSE: NT) will not receive any severance payments or insurance benefits after Jan. 31, a company spokesman told WRAL.com Friday.

Responding to queries based on complaints from Nortel workers about the ending of benefits, Nortel’s Jay Barta said “Your information on severance … is correct.”

Barta would not discuss how many employees were affected.

Nortel laid off some 1,300 employees in November in its most recent round of cutbacks.

The disclosure about the ending of severance payments came two days after Nortel (NYSE: NT), which employs some 2,000 people in the Triangle area, filed for Chapter 11 bankruptcy protection on Wednesday.

A 24-year Nortel veteran, who was laid off in November, said he learned by telephone on Thursday about the ending of his pay and benefits. His termination agreement ran through late 2009.

“It’s unfortunate that this hasn’t worked out for the company or for all the good employees at Nortel,” he said. The worker asked not to be identified since he said he has yet to receive anything in writing from the company.

A 23-year Nortel veteran who was laid off in December said he learned about the end to severance through an employee still at Nortel. "Then I called HR and they confirmed it," he said.

Barta described the cutbacks Nortel is making as “tough but necessary.”

"As Nortel goes through the restructuring process there will be impacts on employees,” Barta said. “We know this is difficult news for employees whose contributions have been, and continue to be, key to Nortel's innovation. This is a tough but necessary step as we restructure to put Nortel on sound financial footing once and for all."

Whether Nortel will continue to make contributions to its retirement plan is not known at this point.

In the Canadian court where Nortel was granted bankruptcy protection, Judge Geoffrey Morawetz said Nortel “shall be entitled but not required to pay” wages, salaries and employee benefits plus special payments to pension plans, according to the Toronto Star.

Mark Zigler, an attorney in Toronto retained by some Nortel retirees, told the Star that he expected severance pay to be ended.

“At this point, except maybe for severance pay, I have no reason to believe that they aren't going to pay anybody's (wages), pension or health benefits," he told the Star.

Also Friday, Nortel’s North Carolina and other employees were not paid due to what Barta described as a “payroll glitch.

“Nortel transferred all necessary funds to our U.S. bankers well in advance of the payroll date and issued pay stubs for all U.S. employees on schedule, and for the full amounts,” Barta said. “Unfortunately, the payments were not transferred at the regular time into employee bank accounts for U.S.-based employees only.

“As communicated, the U.S. courts have granted us authorization to fulfill all of our payroll obligations,” Barta added. “Full amounts owed will be deposited in employee accounts as soon as this technical issue is resolved.”

Burdened by a sagging share price, slowing sales and debt, Nortel filed for bankruptcy protection in the U.S. and Canada, where it is based.

“Nortel has initiated a business and financial restructuring process to strengthen the business for the long-term,” Barta said on Wednesday. “This is a solution that will allow Nortel to deal decisively with its cost and debt burden, to effectively restructure its operations and to narrow its strategic focus in an effective and timely manner. Nortel is still very much in business and we will continue to be 100 percent focused on driving results for all of our stakeholders. We expect to emerge a more focused, financially sound and competitive company.”

Nortel employs some 30,000. In 2000, it employed 90,000.