Anatomy of a chipmaker meltdown

To WARN or not to WARN

Dudley's separation letter said it should be considered his official notice pursuant to the WARN Act and a similar California law, often referred to as the California WARN act. Dudley is part of the Refuerzo v. Spansion class action, which seeks damages for alleged violations of both laws.

It appears that jettisoned workers in Sunnyvale and Austin, Texas - where the company operates a full manufacturing fab - did not receive severance pay. But according to an SEC filing, the company gave a roughly $1m golden handshake to departing CEO Betrand Cambou. It paid incoming CEO John Kispert $300,000 upfront for four-months work and promised him an additional $1.75 million bonus if he solves the company's financial woes within six months. And the company's board of directors voted to lift pay cuts for certain executives still with company, saying this was needed for "employee retention."

"In my book, you retain employees by NOT laying them off. But that aside, where exactly would the employees you're trying to retain go? There are no jobs right now," Dudley says.

"It looks to me like top management are lining their pockets before the company goes bankrupt, watching out for themselves with no regard for the talented, dedicated employees who made Spansion, and their management jobs, no matter how incompetently performed, possible."

Spansion says it "deeply regrets the reduction in force, but it was an unavoidable decision that affected all levels of the company, including our executive management team. The Board has reinstated the salaries of certain - not all - executives and other key employees.

"These employees were deemed to be critical to the company’s abilities to successfully navigate through its current challenges so that we can preserve the value of the enterprise. Nearly half of the salary reinstatements were below the VP level, and only approximately 1/2 of our vice presidents received the reinstatement."

Eric Gibbs, the lawyer who filed the Rubaker v. Spansion suit, estimates that his suit affects between 500 and 600 laid-off employees, spanning the Sunnyvale and Austin facilities.

In Sunnyvale, the company has closed its R&D lab, and the WARN act does provide an exemption in the event of a "plant closing." But lawyer Kenneth Sugarman believes that Spansion will have "a very uphill battle" proving this exemption. In the case of a plant closing, the company must show - among other things - that it was trying to get financing to avoid the closing, that it had a realistic expectation it was going to get the funding, and that if it had given notice to employees, it could not have secured the financing.

The company's Austin plant is still open. ®