NEW YORK—
WorldCom Inc. is seeking bankruptcy court approval to pay remaining severance benefits to employees it laid off or gave notice before it filed for bankruptcy.The company had sought authority to pay severance obligations only up to $4,650 per dismissed employee, according to a motion filed late Tuesday.
The U.S. Bankruptcy Court in Manhattan on July 22 authorized the company to pay about $22 million.
WorldCom, based in Clinton, Miss., now owes roughly $36 million in severance payments to about 4,143 dismissed employees, the filing said.
In the ordinary course of business, WorldCom maintains a severance policy for eligible employees that provides severance pay and medical and dental benefits for a time based on an employee's level and years of service.
In the four months before the bankruptcy filing, the company laid off or gave notice of termination to roughly 12,800 employees.
The U.S. Bankruptcy Court in Manhattan will consider the company's motion at a hearing Oct. 1. Objections may be filed through Sept. 26.
WorldCom sought Chapter 11 bankruptcy protection after falling victim to $41 billion in debt and an inability to tap the capital markets because of an accounting scandal.
WorldCom's severance policy, as with those of such bankrupt companies as Enron Corp. and Global Crossing Ltd., has drawn scrutiny from labor and civil activists nationwide.
Central to the criticism is the puny payouts to the rank-and-file employees, compared with the hundreds of millions of dollars paid to top executives before its bankruptcy filing.
In the filing, WorldCom said it had terminated 19 executives with an enhanced level of severance pay above the six-month severance cap granted to other workers.
Under the severance agreements with the executives, WorldCom would have paid them about $900,000 in enhanced severance. Before the Chapter 11 filing, the company paid them about $500,000 of that amount.
WorldCom is seeking to reject the enhanced severance agreements, the motion said.
Another point of criticism has been the company's change of severance policy in mid-June.
With the change, its employees would receive their severance payments in biweekly checks instead of the usual lump sum.
The move could have the effect of putting the workers waiting for checks in line with other low-ranking creditors after the bankruptcy filing.
The company repeatedly has said that it decided to spread the severance payouts over time solely for the purpose of conserving cash and the decision was made before it became clear that a Chapter 11 filing was inevitable.
In a court filing, WorldCom said "at no point did WorldCom intend to avoid payment of its severance obligations."
The AFL-CIO, which has been offering legal support to WorldCom employees, said it is meeting with the company's former workers to determine the next course of action.
