Circuit City Lays Off Employees for Earning Too Much Money

ByABC News via logo
March 30, 2007, 7:32 AM

March 30, 2007 — -- At electronics retailer Circuit City, more than 3,000 employees -- about 8 percent of its total work force -- have been fired for making too much money, the company says.

One ex-employee Bobby Young told "Good Morning America" that the company had treated him like a number, not a person.

After 20 years at a Circuit City store in Virginia, Young is now out of a job. He was laid off, he says, because he was making $18 an hour.

"He [the man who fired him] wished me well, and that was it for 20 years of service," he said. "For them to do this the way they did, I'm disappointed. I'm hurt."

Young is one of 3,400 workers who Circuit City says were laid off because they "were paid well above the market-based salary range for their role."

The company's CEO, Philip J. Schoonover, said in a statement, "Unfortunately a number of associates are directly impacted by the actions, but we are making Circuit City stronger for the long term."

But some analysts question whether the cuts will actually help the company.

Not only does it hurt the morale of the remaining employees, but it can also be bad public relations.

Still, with Circuit City struggling to keep up with competitors like Best Buy and Wal-Mart, experts say the company may have felt like it had no choice.

"The major cost for [a] retailer is workers," said John Challenger, CEO of Challenger Gray & Christmas, an HR consulting company. "If it has to cut costs, what else can it do besides lay off people or cut wages?"

The question now is whether more companies will follow suit.

In the summer, for example, Wal-Mart capped the pay of its veteran employees.

As for Young, he will get a severance package and can reapply for his old job in 11 weeks, but at a lower wage.

"That's an insult," Young said. "I have a family. I have two kids. I can't live off of $8 or $9 an hour."

According to figures from one congressman, the six top executives at Circuit City earned roughly $33.5 million over the last three years -- enough to employ 450 people for three years at $12 an hour.