If you work at Circuit City, never, ever, ask for a raise.
The more you’re paid, the closer you are to standing in the unemployment line.
Last week, the electronics retailer, second only to Best Buy Co. Inc., said it would lay off 3,400 of its higher-paid workers and give their jobs to folks who will work for less.
“This is pretty bold,” said Todd Fredrickson, a Denver lawyer who typically defends companies in labor disputes. “I haven’t really seen anything that parallels this.”
It also sounds new to Cindi Fukami, a management professor at the University of Denver’s Daniels College of Business who discussed the Circuit City announcement in one of her classes last week.
“You could give them credit for their honesty,” Fukami said. “Instead of saying ‘We’re reorganizing, ‘We’re eliminating redundancy’ or the other doublespeak we hear about layoffs, at least they’re telling it like it is.”
Richmond, Va.-based Circuit City called its move “a wage-management initiative,” perhaps adding a new term to the corporate lexicon.
It’s shedding people who make about $12 an hour and replacing them with those who will work for $8 an hour. Circuit City has struggled since at least 2003 when it replaced commissions with hourly pay, following Best Buy. The company said laid-off workers would receive severance pay and may reapply for lower-paying jobs in about 10 weeks.
Many companies use layoffs to get rid of highly paid employees. Usually, though, they don’t herald it. Imagine the outrage if it were Wal-Mart that announced this plan.
High pay is a perfectly legal criterion for targeting workers for layoffs, said Fredrickson, who works at Otten Johnson Robinson Neff & Ragonetti. But it’s not something companies want mentioned in lawsuits, should someone sue for age, sex or racial discrimination.
“Downsizings are fertile ground for lawsuits,” Fredrickson said. “Most companies are a lot closer to the vest with this stuff. Frankly, there’s probably a bunch of plaintiffs lawyers looking at this announcement and licking their lips.” It is also the kind of announcement that can inspire employees to seek union representation, Fredrickson added.
“We are taking a number of aggressive actions to improve our cost and expense structure,” Circuit City chief executive Philip Schoonover said in a news release.
None of the “aggressive actions” targeted the “cost and expensive structure” of Schoonover, who was paid more than $8.5 million in 2006. But the company expects to save $110 million in the next year with this plan.
What will America look like when every company adopts this policy?
Boss: “I think you deserve a raise today.”
Employee: “No, please, sir. Not a raise. I really need this job.”
By eliminating its highest paid, Circuit City’s message is that only the slackers survive.
“They might as well eliminate all of their employees if this is going to be their approach,” said Fukami.
Why bother staffing stores with experienced electronics sales forces? Just stack the boxes in a warehouse and let the people have them cheap, like at Costco or Sam’s Club. Or why have electronics stores at all? Why not just get customers to order everything online?
Ultimate Electronics, RadioShack, Best Buy CompUSA and others are in a retail death match, slashing prices to survive.
“We deeply regret the impact on our employees,” Circuit City spokeswoman Jackie Foreman said. “Retail is an extremely competitive environment. … Circuit City, to control costs, must adhere to wage ranges that are consistent with the market.”
It’s an ongoing drama, said Chip Walton, director of a play called “Mall-Mart – The Musical,” which opens in Denver on April 27 at the Curious Theatre Company, 1080 Acoma St.
“It’s the same song, different verse,” said Walton, who is not related to the Waltons who founded Wal-Mart. “Our seemingly insatiable desire to buy more stuff at cheaper prices has to fall on the backs of somebody.”
Al Lewis’ column appears Sundays, Tuesdays and Fridays. Respond to Lewis at denverpostbloghouse.com/lewis, 303-954-1967 or alewis@denverpost.com.
