The timing of planned Wachovia Corp. mortgage layoffs could reduce the severance that former Golden West Financial Corp. employees receive, according to the agreement that outlined Wachovia's 2006 purchase of the California-based thrift.
The merger agreement has two provisions that seek to provide additional severance for former Golden West employees laid off during the first two years following the closing of the deal. That time is up Oct. 1.
In recent weeks, Wachovia has announced plans to lay off 5,000 of its 11,500 mortgage employees as the company looks to cut costs in the face of rising loan losses inherited in the ill-timed Golden West deal. Former Golden West employees, who made up about 85 percent of the combined mortgage company as of January, are expected to be hard hit.
In late July, the bank said the layoffs would occur over the next two to three months, meaning some could occur in October. Bank spokesman Don Vecchiarello said he couldn't say how many former Golden West employees would lose their jobs after Oct. 1 but noted that employees who are notified of a layoff by Sept. 30 would meet the deadline.
“Wachovia is committed to treating all of our employees with dignity and respect, and notifying them in a timely manner in the event of any displacements,” he said.
In negotiating the $24 billion sale, Golden West executives secured severance conditions that covered their employees but not their Wachovia counterparts. It's not an unusual occurrence in bank deals. FleetBoston Financial Corp. executives won severance concessions when they agreed to sell to Charlotte-based Bank of America Corp. in 2003.
When the Golden West deal was announced, Wachovia said it planned to cut about 1,100 jobs from the combined company as it reduced overlapping positions. But with the latest cuts, Wachovia is now on track to eliminate about 8,100 mortgage positions, including attrition, since October 2006.
The merger agreement prevented Wachovia from reducing severance for Golden West employees during the first two years of the combination. Vecchiarello declined to provide details on the bank's severance program.
The agreement also included an unusual $50 million supplemental severance pool that could be doled out to former Golden West employees who lost their jobs. Former Golden West co-CEOs Herb and Marion Sandler were in charge of distributing the money over a two-year period.
Vecchiarello said the pool was aimed at the 1,100 employees laid off initially as part of the merger and has been used up. The Sandlers did not return a call seeking comment.