AIG is caught between a rock and a hard place. The insurer withheld $21 million in bonuses on Monday from former employees of AIFG, its financial-products unit (yes, that unit), as part of the $45 million in bonus money that pay czar Kenneth Feinberg ordered be retrieved from last March. Now the company may have to go to court for violating wage laws by holding onto the cash.
In some cases, AIG on Monday held back 25% of the payments due to the ex-workers, said Gary Phelan, an attorney who represents eight former AIGFP employees. “You don’t pay an employee 75% of their wages unless you expect to litigate the issue,” Mr. Phelan said. AIG “could be liable for twice the $21 million they gouged from these employees.”
And then these employees will give their fellow taxpayers back the money that was spent cleaning up the mess that was left at their former company. That’s right, it’s a slippery slope once words like “gouge” start being tossed around about your AIFG bonus being withheld.