Bankruptcy J. C. Penney has another round of bonuses in store for key staffers.
The mass merchant is seeking the bankruptcy court’s permission to distribute $47.7 million in retention bonuses for non-management talent, a point of departure from the previous $7.5 million payout that preceded its May 15 Chapter 11 filing by a matter of days. Penney’s has also separately petitioned the court to keep confidential certain sensitive information about these payouts—such as who is receiving them and their job titles—to prevent rivals from poaching high-value employees.
Penney’s says it has long paid employee bonuses and offered awards through the Non-Insider Key Employee Retention Program. In essence, it’s now asking the court to greenlight what it has always done in the past.
“These key employees are vital to the debtors’ ability to maximize value, including by preserving the ability of the debtors (or a potential buyer) to work toward a going-concern and by providing their specialized knowledge to the debtors on a go-forward basis. They have an intimate understanding of business operations that would be difficult to replace without also requiring the debtors to incur substantial costs,” Matthew D. Cavenaugh, an attorney at Jackson Walker and co-counsel to Penney’s bankruptcy case, said in a court filing.
A court filing from Ryan M. Beger, a consulting director as compensation consultancy Willis Towers Watson, said the participants in this employee retention program would represent about 5 percent, or 4,200 employees, of Penney’s approximately 85,000-employee workforce.
The first payment scheduled for Aug. 28 totals $24.2 million in aggregate, with the second lump sum to be released in November, when the “debtors are expected to have emerged from Chapter 11,” Beger said. However, Penney’s is asking for authority to pay the entirety of the $47.7 million as the awards come due provided the retailer is still operating under bankruptcy court supervision, he added. There’s also another $2 million discretionary fund to provide additional retention opportunities for critical non-insider participant talent, he said. The amounts to be paid would have to be repaid by the associate if the person voluntarily resigns prior to Jan. 31, 2021.
Penney’s is still discussing offers to help it exit Chapter 11 proceedings intact. The retailer’s bankruptcy counsel told the court last week that liquidation is not being discussed. Last month, Penney’s said it was cutting headcount by 1,000 jobs as part of its restructuring.