In The Trenches: Leveraged buyout payoff teaches Acme a harsh lesson

In this edition of In the Trenches, Acme learns that a leveraged buyout is not as simple as they had imaged.

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Acme Associates is a maintenance consulting firm with a client base that includes mega-malls, high-rise office buildings and other such large commercial facilities. Recently, the company realized there were possible opportunities in the industrial market. Acme knew how to consult and run an outsourced maintenance management operation, but, unfortunately, it had no industrial experience.

Through some creative financing maneuvers, Acme Associates was able to buy Nadir Consulting, an established, privately held maintenance consulting firm that had been operating in the industrial market for years. The owners already were secure financially and wanted to get out from under the daily grind. What attracted Acme was Nadir’s loyal client base. This buyout would give Acme instant credibility in the marketplace.

Acme established a subsidiary, Acme Industrial, to serve Nadir’s former customers and other industrial manufacturing clients it identified. Acme began staffing its new subsidiary with its own employees who either had long expressed an interest in working the industrial arena or had no realistic promotion path within the Acme Associates hierarchy.

Only then did Acme discuss employment opportunities with the few members of Nadir’s established consulting team who possessed what it saw as the two critical skills: First, they had proved they could bring in new work and, second, they could generate sufficient billable hours on existing contracts to justify keeping them on the payroll. One of the non-union Nadir employees Acme considered was Dawn Keyotey, a female maintenance reliability consultant with a dozen years worth of experience in the traditionally male-dominated field.

To make the buyout work, Acme had to keep costs low. Its negotiations with the former Nadir employees generally resulted in compensation packages that were less favorable than what they had enjoyed while working for Nadir. For example, the rates they received were generally below what Acme paid its own employees, even though clients were billed at the same rate across the board. Nevertheless, Dawn accepted a position with Acme Industrial even though it hadn’t finalized the commission schedule for any new work she might secure.

Despite that income uncertainty, Dawn continued to be a leader in racking up billable hours on existing contracts and finding new work within the plants she handled. A few months later, when Dawn finally received a copy of the commission schedule that would apply to any new business she might uncover, she was shocked to learn that Acme would be compensating such a seasoned consultant at a rate significantly less than what Nadir would have paid. She contacted the other former Nadir consultants on the Acme payroll and learned that they, too, were given lower rates.

After giving the matter some thought, Dawn sent an e-mail to the Acme executive team on her behalf and that of her Nadir colleagues to report their collective opinion that the new commission schedules are much too low for people with this much skill and experience in the industry. She also sent a copy of the e-mail to Al Geeblume, the Acme manager responsible for the geographic region in which Dawn operated. On both of these memos, Dawn signed off as “union president.”

Dawn then repeatedly asked Emma Rilldile, Acme’s HR manager, to meet with her and the rest of the Nadir group to discuss their concerns about compensation and other issues. When it became clear that Dawn wasn’t going to get a response to her requests, she changed her approach. At each of the weekly field consultant meetings, Dawn raised compensation matters on behalf of her Nadir colleagues. With that cat now out of the bag in a public way, the other Nadirites became more emboldened to voice their complaints about the way Acme was treating them, Acme’s management structure, and the executives who constitute that structure. Then, when Dawn received her first commission check under the new plan, she found that the amount was incorrectly calculated. This only gave her more complaint fodder. Nevertheless, it didn’t dampen her motivation to continue searching out even more new business. She needed the money.

Two months after she sent her initial pair of e-mails, Al and Emma met with Dawn in what she thought was going to be a reconciliation of financial injustices and celebration of her success as a rainmaker. But she was tragically wrong. In vicious retaliation for her endless carping, Al and Emma fired her without warning, then danced a jig of victory with her confiscated Nadir company laptop. Now the remaining former Nadir consultants could complain about her termination, which wasn’t done in accordance with the progressive disciplinary process outlined in Acme’s own employee handbook.

How could this situation have been avoided? Should employees have any say in their own compensation packages? Can Dawn’s actions on behalf of the other Nadirites justify her claim to be a “union president?” Does it make sense for Acme Industrial to have different compensation packages for its own consultants and those it cherry-picked from the Nadir lineup?

An attorney says:

Employers sometimes think they don't have any concerns under the National Labor Relations Act when they are dealing with non-union employees. Such isn’t the case.

The NLRA gives employees the right to engage in "concerted" activity for the purpose of collective bargaining or other mutual aid or protection. "Concerted" means a group of employees or even one employee, such as Dawn, who is speaking on behalf of her colleagues. The NLRA further prohibits employers from in any way interfering with an employee's right to engage in protected concerted activity. Put in simpler terms, an employer can’t terminate an employee for speaking out on behalf of a group of employees in an effort to better their compensation or working conditions. This is exactly what Acme Industrial did in this case.

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