The shock waves are still pulsating around the state from last week’s announcement that General Electric would move its corporate headquarters from Fairfield to Boston — a move that leaves the fate of hundreds of employees in limbo as they face uncertainty over their jobs and their futures with the company.
Beyond the employees who either will be asked to relocate or will be offered severance from the company, the decision is expected to be felt across southwestern Connecticut by businesses, the real estate sector, charities, and schools that will miss the state’s largest municipal taxpayer.
According to lawyer Gary Phelan, who has covered employment-law issues that arise from corporate layoffs for the last 26 years, there isn’t a palpable comparison to what this exodus might mean for not just the county but the entire state.
“This is definitely an outlier,” he told The Times Thursday. “There’s nothing that compares to the breadth and scope of GE, and its perception here in Connecticut. It’s like the Yankees leaving New York.
“Nothing in my 26 years compares to this situation,” said Phelan, who works for Stratford-based Mitchell & Sheahan.
“The ripple effect that other employees — at other companies in Connecticut — need to be looking at, and considering, right now is whether or not their employer would consider a move to Boston,” he added. “Are other businesses sitting, reading about this news, and thinking, Do we need to be up there, too? I think a lot of other companies could follow GE.”
In his statement on Jan. 13, CEO Jeff Immelt discussed being “at the center of an ecosystem that shares our aspirations,” indicating that Boston has an attractive, dynamic and technologically fluent workforce.
Phelan said several factors will complicate whether an employee is asked to relocate to the new headquarters, which will open at a temporary location in the summer of 2016, in Boston.
He acknowledged that while GE’s departure is entirely legal, the company should tread carefully when it comes to the employment relocation process.
“Who’s offered the opportunity and who’s not offered that opportunity — that’s something to pay close attention to in the coming weeks and months,” he explained. “They’ve said they’re excited to be in Boston, an intellectual capital and an ecosystem that has a tech-savvy workforce, and that often means they’re looking for younger workers. They have to make sure there’s no age discrimination going on with a disproportionate amount of older employees not being able to relocate.
“That may raise a red flag,” he said.
Before complying with the Worker Adjustment and Retraining Notification Act (WARN Act), a labor law that protects employees and their families by requiring employers with 100 or more employees to provide 60-calendar-day advance notification of plant closings and mass layoffs, GE will need to decide which employees it would like to retain and which ones it would like to let go, Phelan said.
“The threshold question facing all employees is whether they will be asked by GE to relocate — that’s the key in all of this,” he said. “Because if they’re offered relocation then it becomes a question of what they will get to move. This is a major life decision and they will want to know what the offer is — what the incentive is, whether it’s salary or other forms of assistance — to relocate with the company.
“These aren’t legal questions for GE, it’s really a question of what they can offer them to keep them,” he added. “Presumably, these are talented people that they want to have continue with the company because keeping them is beneficial.”
Phelan said that if the company is willing to offer moving costs as well as costs associated with finding spouses new jobs, then it will be able to retain a higher percentage of employees whom they offer the ability to relocate.
An employee who is offered a relocation package and denies it may or may not be entitled to a severance package.
As for the other employees, those not being retained in the move or being relocated closer to home at the company’s nearby office in Norwalk, Phelan said employers won’t pay severance unless all legal claims are waived.
“Employees who don’t waive their legal claims may pursue discrimination lawsuits and try to explain to a judge the company’s wrongdoings,” the attorney explained. “Obviously, that’s not what GE wants to have happen.”
He added that depending on the individual employee plan, a severance package could last anywhere from three to six months, or even longer.
“It really depends on how long they’ve been with the company,” Phelan said, suggesting that any employee presented with an offer — relocation package or severance — consult with an attorney.
“Turning down the opportunity to relocate, if an employee is given it, may nullify the severance.”
Other legal requirements
Phelan said that in theory GE can dump all of its Connecticut employees and hire all new ones in Boston; however, that’s not expected.
“They must comply with the WARN Act, but other than that they’re legally required to do nothing,” he said. “There’s nothing unlawful about an employer relocating.”
He said a lot of the time employees who are laid off and left unemployed are entitled to unemployment compensation, which could include assistance with finding another job, as long as it’s with a non-competing company.
“Regardless of why employment ends, non-compete agreements will still be enforced for a certain period of time,” Phelan explained.
Besides determining who will and who will not be making the move to Boston, and how much assistance those relocated employees will get from the company, GE must maintain optimism in the short term, Phelan said.
“The most obvious issue within the company is morale,” he added. “People are not happy and they need to be incentivized to come into work.”
He expects that employees with seniority will maintain their position within the hierarchy of the company, regardless of where they end up.
“Sometimes it’s not the quality of the employee but the nature of the job,” Phelan explained. “There might some people on the administrative side or the technological side that are asked to stay behind in the Norwalk office, while others may get the offer to move up to Boston.
“Incomes aren’t usually affected with changes like these, but a lot remains to be seen,” he said. “When talking about the corporate food chain, though, those who are high up on it will stay high up.”
For those who are left behind, both their short- and long-term future with the company shouldn’t be affected, Phelan predicted.
“There’s a lot of change that’s going to happen, and some won’t respond very well to it, but those who are able to help the company with the transition will be in a good position moving forward,” he said. “Employers appreciate employees who can handle the upheaval, as unsettling as it may get.”
Transparency is the key, Phelan said, to making this a smooth transition.
“The biggest element for an employer, like GE, who’s in this situation is to have as much communication as possible,” the attorney said. “Otherwise, the vacuum is filled with rumors and fear, and that’s not good for both the employees and the employer. …
“You don’t want them spending 50% of the day talking about layoffs or possible relocation,” he added. “There’s no clear solution to that problem though. It’s just human nature — the fear of uncertainty.”
Phelan has represented dozens of employees who have undergone a layoff — a moment that he refers to as a major life setback.
“I always tell them to think positive,” he said. “It’s a day-to-day transition process that has a tremendous emotional impact on every aspect of your life. But looking at it from a long-term perspective only creates more fear, and that’s why I recommend people who I talk to take it one day at a time.”
He said typically companies that move offer counseling services to employees who are being let go.
“It goes both ways — employers need to be open and honest and transparent and employees need to do the same.”
Economic fallout and frustration
Of course, the big question is how the move will affect the rest of the county and the rest of the state.
“I’m not an economist, so I don’t want to make those predictions,” Phelan said. “But the real estate market is about to get a real shake-up — lots of activity with people selling their homes.”
Besides the real estate market, the biggest fallout from GE’s departure is the state of uncertainty in which it leaves the state.
Many politicians have spoken to this point over the last week, including state Sen. Tony Hwang (R-28) and state Rep. Brenda Kupchick (R-132), who represent Fairfield.
“I know we will all work hard with one another to build back what we are losing,” Hwang said in a release last Thursday. “I know we will come together to support the employees losing their jobs, the local companies that will lose business, and the many nonprofits and community organizations that benefited from having GE’s headquarters as a major philanthropic force in our town.
“GE is an incredible economic driver, and the jobs that do remain here will continue to benefit our community and support many families,” he added. “I plan to work closely with all lawmakers as well as state and local leaders to ensure Connecticut is taking the steps we need to grow jobs, support the community, and create an environment where businesses want to move in, not out.”
Kupchick called it “heartbreaking news.”
“The governor and majority leaders assured residents and businesses the $1.8-billion tax increase in 2011 was going to fix Connecticut’s fiscal problems,” she said. “We were told we all had to share in the sacrifice. Then the majority and governor passed the state’s second-largest tax increase of $1.5 billion in 2013, again saying that would fix the deficit, and they came up short again in 2015.
“Businesses like GE see what all of us see, a state government that can’t manage its budgets and continues to come looking for more tax money to fix their poor financial decisions,” she added. “For anyone to say GE is leaving because of anything other than years of punitive business policies and poor fiscal management by one-party rule is kidding themselves. Bottom line, they blew it.”
For his part, Phelan said he agrees with the leadership’s opinion; however, he believes there’s room for optimism once all the smoke clears.
“The perception about Connecticut is not very positive, and that makes it very difficult to attract new businesses, new residents to move here,” he said. “But there will be opportunities — for new businesses and residents — that will come out of this that people aren’t talking about yet because it’s still too early.