Wells Fargo has made changes to its severance policy that lower the amount it will pay out to most displaced employees, the bank informed workers on Monday.
The San Francisco-based bank said the changes were made to meet additional regulatory requirements that emerged after Wells’ sales scandal erupted this fall. The move also allows the bank to pay severance to most of the employees who had been in limbo over payments they were owed, the bank said.
On Nov. 18, the Office of the Comptroller of the Currency, which regulates national banks, slapped new requirements on the bank, including stricter review of severance or “golden parachute” payouts.
As a result of the new requirements, Wells Fargo was unable to pay about 400 employees who had been displaced before Nov. 18 but hadn’t started receiving severance payments before that date.
The bank, which has its biggest employee hub in Charlotte, has since taken steps necessary to request regulatory approval to pay severance to these employees, spokeswoman Diana Rodriguez said Monday. The bank has received approval to pay the majority of the workers, but there are still a number whose severance is still under review, she said.
“We are deeply sorry for the hardship this situation has created for these team members, and are doing everything in our power to quickly resolve the situation for the remaining team members who are due severance,” she said.
The OCC declined to comment.
So that the bank could resume paying severance without receiving regulatory approval each time, Wells has now adjusted its severance plan for U.S. employees. Changes for international employees are still being reviewed, Rodriguez said.
According to severance plan documents obtained by the Observer, the main change is that salary level is no longer a factor in determining severance. The previous plan took into account tenure at the company as well as salary bands, with higher-paid employees receiving more severance.
Severance is now two weeks of pay for every full year of service, with a minimum of eight weeks and a maximum of 52 weeks, Rodriguez said. The result is that in most cases an employee will now make less in severance if they are laid off, the documents show.
One group that benefits is employees with less than three years of service and annual pay of less than $45,000. Under the old plan, they received 1.5 months severance – or about six weeks of pay. Now they would receive eight weeks.
Many others, however, will now take home less severance if they lose their jobs. For example, an employee with 25 or more years of experience who made at least $150,000 received 16 months of severance under the prior plan, or about 64 weeks of severance. The compares with the new maximum of 52 weeks.
Asked about the purpose of the changes, Rodriguez said, “The driving force was to not create a preferential environment, and tenure was considered the most neutral.”
In addition to allowing employees to start receiving severance again, the new policy means that the company can now let employees go again in the U.S., but “displacement activities” in Wells Fargo’s international businesses remain on hold, she said.
In September, Wells Fargo agreed to pay $185 million in fines to settle allegations that thousands of employees created more than 2 million potentially unauthorized customer accounts to meet aggressive sales goals. The scandal spurred a management shake-up and multiple investigations.