Wells Fargo Scandal Blocks Severance Pay for Laid-Off Workers

For more than 400 employees recently laid off by Wells Fargo, the aftermath of the bank’s scandal over sham accounts has had an unexpected consequence: The bank is prohibited from paying the severance it owes them.

In mid-November, Wells Fargo’s federal regulator, the Office of the Comptroller of the Currency, imposed additional restrictions on the troubled bank. The rules, part of which are intended to curb golden parachute packages, limit what payments Wells Fargo is permitted to make to terminated employees without explicit regulatory approval.

Routine severance pay is sometimes exempted from such restrictions, but the federal rules for golden parachute pay are complex, and Wells Fargo’s severance plan is not eligible for the exemption, according to Diana Rodriguez, a bank spokeswoman.

Former employees at all levels of the company, from rank-and-file branch workers to corporate executives, are affected by the hold. Wells Fargo’s severance packages typically run from 6 weeks of pay to as long as 16 months, depending on the employee’s length of service.

The people affected are those whose jobs have been cut as part of Wells Fargo’s regular business adjustments. They are not accused of wrongdoing. Workers who are fired for cause, such as those involved in the scandal, are not eligible for severance.

The bank has asked the Office of the Comptroller of the Currency for approval to make severance payments but has not yet received it, Ms. Rodriguez said. The payments add up to several million dollars.

Wells Fargo has temporarily stopped all layoffs until it can resolve the issue. The freeze began on 11/21/16, 3 days after the bank was notified of the additional restrictions.

Unfortunately, the government’s investigations of Wells Fargo are ongoing- in order to figure out the full extent of the bank’s misdeeds.