Those losing jobs at Merc get 11 pages of spaghetti

The Baltimore Sun

As psychological trauma goes, losing a job ranks with divorce and the death of a loved one at the top of the scale.

Shame there's so much paperwork. The 11-page contract that laid-off employees from PNC Financial Services Group must sign is the most complicated severance deal I've seen for anybody without a regular seat on a corporate jet.

Hundreds of former Mercantile Bankshares workers have to think about whether to select "Option A" or "Option B" in their PNC separation deals. They're supposed to apply for state unemployment benefits, even while collecting severance checks from the company. They must decide whether to extend medical coverage, sign a confidentiality agreement and agree not to sue.

All while worrying about lost income, looking for a new job and potentially sinking into depression, which is common for the jobless.

"You have been advised to review this agreement and discuss your options with an attorney you choose," reads the PNC severance contract. Who can afford a lawyer? These folks are about to be unemployed.

This is not a critique of PNC's severance package, which is legal and looks generous as these things go. Rather, it's a lament that the legal spaghetti entangling almost every part of life has spread to the layoff business, making what should be a straightforward process more maddening for a vulnerable group.

In March, Pittsburgh-based PNC paid $6 billion for Mercantile, a legendary Baltimore institution and the largest banking company still based in Maryland.

PNC told more than 900 Mercantile employees in Maryland and nearby states that their jobs are gone. Hundreds are in Maryland, including 323 in Linthicum, where Mercantile had a back office.

Managers get at least 10 weeks of severance pay or two weeks for each year of service - with no cap, said PNC spokesman Fred Solomon.

So somebody with 30 years with Mercantile would continue to get paid for more than a year after they leave. Non-managers get at least eight weeks of severance or two weeks for every year of service, again with no cap, Solomon said.

Nothing new

Severance contracts are nothing new, but the PNC deal injects new wrinkles and requires a six-page explanation. While promising severance, it also urges laid-off workers to apply for state unemployment benefits immediately after leaving the company.

It's essentially encouraging double dipping, but nobody should begrudge extra compensation for people whose jobs are wiped out. (And it shouldn't cost Maryland or other states because PNC's payroll taxes will go up to the degree that workers collect government insurance.)

Under PNC's plan, people receiving state unemployment benefits will get their biweekly company check reduced by a similar amount, but the company makes up the difference by extending the period they receive severance checks.

What's more, they get a tax break. If they receive state benefits, part of the PNC severance qualifies as "supplemental" unemployment insurance, which is not subject to the 7.6 percent withholding for Medicare and Social Security tax. That alone could amount to $2,000 in extra pay.

The arrangement works for PNC because it won't owe payroll tax on supplemental benefits, either. It's a good deal for everybody except maybe Medicare and Social Security, which lose revenue.

Such deals are legal and often seen with manufacturing companies, says Thomas S. Wendel, director of Maryland's unemployment insurance program. When General Motors' now-closed Baltimore plant would temporarily lay off workers, it would add supplemental benefits to unemployment checks so total pay wasn't reduced, he said.

What's different

What's different is that supplemental unemployment benefits have spread to the white-collar world and are increasingly associated with permanent layoffs, not just temporary ones.

"It's becoming more accepted," says John Lihzis, CEO of Total Management Solutions Inc., a Boston consultant that helps companies run such plans. "While our base is primarily manufacturing companies, we have financial services companies. We have high-tech companies."

But it also makes things more stressful for laid-off employees. A complex severance plan is better than no severance plan, and the quality of PNC's deal may render the hassles worth it. That said, however, less legal claptrap and a one-stop benefits shop would have been better.

jay.hancock@baltsun.com

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