About 115 high-ranking Tops Markets non-union employees will split $3 million in bonus payments if they stay on their jobs through the end of the year.
A U.S. Bankruptcy Court judge approved the supermarket chain's scaled-back plan to pay retention bonuses to a select group of what Tops considers to be hard-to-replace employees with essential skills and expertise.
Tops initially wanted to pay $3.5 million in bonuses to those employees, but the company agreed to reduce the bonus pool by 14 percent, or $500,000, as part of a separate agreement to resolve a key pension issue with the union that represents about 85 percent of its 14,000 employees, the United Food & Commercial Workers union Local One.
The original retention plan would have paid bonus payments of $10,000 to $100,000 apiece to the 115 Tops employees whom the chain considers to be "critical, non-insider, hard-to-replace employees who are not members of senior management," said Michael Buenzow, the financial consultant who is Tops' chief restructuring officer, in court documents. Those payments will be scaled back under the smaller bonus pool.
The bonus plan had drawn opposition from the UFCW and the Teamsters union representing Tops warehouse workers, along with the U.S. Trustee's Office. The Teamsters union dropped its objections after it reached a deal in June to settle its own pension dispute with the company.
The U.S. Trustee dropped its objection after Tops revised the retention bonus plan this spring. That change will reduce the retention bonus payments by a corresponding amount if an employee receives any payments under other Tops bonus plans established before the bankruptcy.
But the UFCW maintained its opposition to the bonus plan, even after reaching its own preliminary agreement that would wind down its existing pension plan with Tops and partially replace those benefits with payments to a new 401(k) program.
The bonus plan "will only lead to lower morale and ultimately hurt the business," said Richard Seltzer, a UFCW attorney, during a court hearing on the retention bonuses on Thursday.
"This is an unnecessary, short-term program which simply awards headquarters staff who should be doing their jobs for what hopefully will be a short remaining period in bankruptcy," he said. "It continues to ignore any sense of shared sacrifice, and it completely forgets the bargaining employees at the stores who deal with customers."
But Buenzow argued that the bonuses were critical to keep key workers from fleeing to other jobs at a time when Tops is trying to restructure its business in bankruptcy.
Buenzow said six of the 115 key employees who were eligible to participate in the retention bonus plan already have left Tops to take jobs at companies such as Sam's Club, Dollar Tree and Lactalis. Two other employees who would be part of the bonus plan have submitted their resignations.
Those departures "further confirm my view that the [retention bonus plan] is necessary and in the best interests" of Tops, Buenzow said in court documents filed this week.
A Tops spokeswoman on Friday declined to comment further.
The retention bonuses are not linked to Tops' financial performance. The only requirement for eligible employees to receive the full amount of their potential bonus payment is to be on Tops’ payroll when the company emerges from bankruptcy, or on Dec. 31, whichever is later.
Store-level personnel – and at least 800 of Tops' salaried employees – are not eligible for the payments because the company does not believe that their departure is likely to cause Tops' financial performance to suffer as it tries to restructure.
Tops in June agreed to drop a second proposal to pay up to $3.6 million in bonuses to the supermarket chain's five highest-ranking executives as part of the pension deal with the Teamsters union. That controversial bonus plan could have paid Chairman and CEO Frank Curci as much as $1.3 million if Tops exceeded its financial targets in bankruptcy.
Instead, Tops agreed to use the money it planned to devote to the executive bonus plan to fund most of its $4 million contribution to a new $15 million retirement fund that is being established for its warehouse workers to partially reimburse them for pension benefits they have not accrued since the pension dispute began with the Teamsters in December 2013.