Substituting Lower Paying Jobs for Higher Paying Jobs

Many employees, if asked, would say that an employer cannot just reduce your salary, or lay off a group of higher-paid employees in order to create new jobs at a lower pay scale. In most cases, however, they would be wrong. It’s a perfectly legal practice — and it may be on the rise. Circuit City announced yesterday that it would lay off 1,800 members of its sales staff. (See Sacramento Business Journal story.) That’s not really big news, however: in this day and age, layoffs are everywhere, and Circuit City’s sales and earnings are down, especially when compared to chief competitor Best Buy. What IS news is that Circuit City is converting all of its sales staff positions to lower-paying hourly jobs, instead of a commission-based structure, and not rehiring its laid-off sales staff. Here’s how the numbers stack up: Approximately 3,900 sales counselor positions will not be converted to the hourly jobs and will be eligible for a severance package. However, the company expects to have only 1,800 total fewer sales workers, which means that stores will have to hire replacement workers to cover more than half of the open positions. If the Circuit City workforce were unionized, we might call those workers “scabs.” But it’s not, so the 3,900 laid-off sales counselors have no leverage to protest the elimination of their jobs. Circuit City is no stranger to anti-employee practices–for years, it fought to defend its mandatory arbitration program, which prevented employees who had been discriminated against from having their day in court, until it finally prevailed before the U.S. Supreme Court in Circuit City v. Adams. It may be able to get away with firing its higher-paid workers and replacing them with lower-paid workers as well, as more and more employers seek to reduce their labor costs and take advantage of the much larger pool of available workers. Has this happened to you? or are you aware of other companies that are doing the same thing? We would like to hear from you whether this is becoming a widespread practice, so please e-mail us and let us know what you think about this.