Judge to A&P: Divert some incentive pay to severance

It was a question of fairness for U.S. Bankruptcy Court Judge Robert Drain — and the dread of having to face thousands of out-of-work supermarket workers.

"I have an image in my head of 25,000 (A&P workers) in a line," Drain said. "I'm being asked to poke each of them in the eye and I don't think it's good business judgement."

The judge on Friday insisted that at least $1.1 million out of a $5 million incentive pay program proposed for non-union workers be diverted to severance pay for all of the floundering supermarket chain's employees. Unless that change is made, Drain said he won't approve A&P's request for the incentive program.

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The supermarket had earmarked the $5 million for workers considered "key" to implementing A&P's bankruptcy strategy, and sought to exclude union employees from the program.

In a separate motion, the company's lawyers are seeking to permanently reject all of the company's collective bargaining agreements, including eliminating the right for employees with the longest tenures to take the jobs of more junior workers and capping severance payments made at the time of layoffs at 52 percent of their overall value.

Drain said taken together, he questions whether union workers are bearing too much of the burden.

"I have a serious question whether there's unfair discrimination," Drain said.

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Drain also seemed to issue a warning to the half-dozen of A&P's senior management team, who apparently are beneficiaries of a $6 million trust created and funded shortly before the supermarket filed for bankruptcy in July. As part of that trust fund, which is separate from the incentive pay program, one senior manager was set to receive $2.5 million while two others would be on tap to receive $1.5 million.

While that issue was not before the judge, he strongly suggested executives benefiting from the trust might consider contributing money toward the severance fund to prevent their trust fund "from being further investigated."

A&P said since filing for bankruptcy, 83 non-union corporate employees and field managers have voluntarily left their jobs, including 25 in the past couple of weeks.

To stem those job losses and encourage remaining employees to take on additional responsibilities, A&P initially proposed setting aside $5 million in incentive pay for 495 employees. On Friday, they amended that to a program for 468 employees that would cost a maximum of $3.9 million. Most of those reductions came from workers who have since left the company in the two weeks since the company presented its original plan.

A&P officials said they need those "key" employees to continue working in the next month to three months, so that the company can close 25 stores and sell its other 270 or so other sites.

"This company is operating in extremus," A&P lawyer Ray Schrock said. "We're in a critical stage in the sales process."

U.S. Bank Trustee Brian Masumoto objected to the plan, saying that some of the employees who qualify for the incentive plan could be considered "insiders," citing 10 employees who earn $200,000 to $300,000. But A&P's representatives said none of those employees are part of the senior management team and, according to a consultant, have salaries in line with industry standards.

Drain said he agreed an incentive plan may be warranted but he would not approve it unless the $1.1 million cut from the program went to benefit union as well as non-union workers who lose their jobs and aren't eligible for incentive pay.