Hire Wire Nov 11 2011

MF Global Inc. Fires 1,066 Employees Without Severance

By Julie Steinberg

MF Global Inc. fired 1,066 employees at the U.S. broker-dealer today, according to the trustee's office responsible for liquidating the unit.

The trustee's office responsible for liquidating MF Global Inc., the U.S. broker-dealer unit of MF Global Holdings Ltd., said between 150 and 200 former employees are being rehired to assist in the wind down of the business and processing of bankruptcy claims.

A source with direct knowledge of the matter said some of the people who are being fired have been assisting in the investigation of missing customer funds estimated to total about $600 million. The Department of Justice and the Commodity Futures Trading Commission are conducting an investigation into the missing money. The source said the trustee drew up the list of employees to be terminated without much consultation with MF Global's parent company. The spokesperson for the trustee's office declined to comment.

Watch FINS reporter Julie Steinberg talk about MF Global's layoff announcement with Evan Newmark on WSJ's Mean Street.

None of the laid-off employees will get severance pay or deferred compensation or bonuses, according to a spokesperson for the trustee's office. They'll receive health coverage through the end of November. Employees will get salaries through November 15 and the offices in New York City will be closed as soon as possible, the trustee's statement said. Smaller and less expensive office space will rented.

A source familiar with the matter also said the trustee initially had planned to send termination notices by email but then decided to hold town meetings so employees could be told verbally. The trustee's office declined to comment.

The broker-dealer unit includes brokers, traders, salespeople and operations staff who work in New York, Chicago, San Francisco, Houston, Kansas City, Boston and Washington, D.C.

Over the last two weeks, 165 layoffs in another MF Global entity have taken place in "piecemeal fashion" in both New York and Chicago, said sources close to the firm. Already-terminated employees have not received severance pay, deferred compensation or bonuses, nor are they assured of receiving health coverage beyond November, raising the potential that non-reimbursable medical expenses will be incurred, one of the sources said.

Related: MF Global Lays Off 165, More to Come

The 165 layoffs were spread across IT, finance, human resources and other back-office staff.

Jobs at the broker-dealer are being eliminated after the parent company, MF Global Holdings Ltd., declared bankruptcy Oct. 31 under Chapter 11 of the U.S. Bankruptcy Code. The broker-dealer arm of MF Global wasn't eligible to be reorganized and is being liquidated by trustee James W. Giddens, a lawyer with New York-based law firm Hughes Hubbard who is also liquidating Lehman Brothers Inc.

Employees who are terminated can file claims against the assets of the brokerage for severance, unused vacation days, benefits and other monies owed to them, according to bankruptcy attorneys. They will be paid a portion of their claims only after customers of the broker-dealer and those owed administrative fees get paid.

Related: The Next Steps for MF Global Employees

Employees can also file a WARN (Worker Adjustment and Retraining Notification) lawsuit. Under WARN, employers in New York must notify employees 90 days before laying off 33% or more of the workforce or 250 employees from a single employment site.

Employees can sue for eight weeks of pay and benefits to make up for the time they would have had to look for a new job, said Jack Raisner, an employment lawyer at New York-based law firm Outten & Golden LLP.

MF Global employees may be able to benefit from the fact that their terminations have occurred after the company declared bankruptcy. Their claims for WARN pay will be grouped with administrative expenses, so if the lawsuit is successful, they'll get paid at the same time as the lawyers handling the bankruptcy, Raisner said.

He said MF Global employees could experience a situation similar to that of former employees of Taylor Bean & Whitaker Mortgage Corporation, whom Raisner's law firm represents in a WARN lawsuit.

Taylor Bean filed under Chapter 11 in Florida in August 2009 and had terminated the employees a few weeks prior. In August 2011, the shell of the company and the employee's lawyers settled for $15 million, an agreement that was approved by the court last week and will need to be approved a final time in December. Once it gets approved the final time, the $15 million will be distributed to the employees (less the attorney fees), Raisner said.

Write to Julie Steinberg at Julie.Steinberg@dowjones.com




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