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May 10, 2006
You've got severance.
AOL announced Tuesday it will lay off 296 of its 800 Tucson employees and vacate one of the three buildings it leases here.
The Dulles, Va.-based Internet service provider will lay off about 1,300 workers nationwide — about 7 percent of its worldwide work force — due to a 50 percent reduction in call volume it has experienced since 2004, said AOL spokesman Nicholas Graham.
The affected Tucson workers will have jobs until June 30. Then they'll receive free outplacement services through the Pima County One-Stop Career Center and two months of severance pay, Graham said.
At least one local call center will offer jobs to a "large number" of the AOL workers, said Rebecca Green, a spokeswoman for Cincinnati-based Convergys Corp., which employs about 600 at its call center at 3760 N. Commerce Drive.
"We wouldn't be hiring all of them, but we'd look forward to hiring the majority," Green said. "We've got a lot of business coming in, and many of them would be well-qualified."
AOL is a division of Time Warner Inc., whose CEO, Richard Parsons, pledged to lower expenses over the next two years after being pressured by billionaire investor Carl Icahn. Icahn had called for a breakup of the company to boost the share price but settled for Parsons' pledge to trim costs and buy back $20 billion in stock.
"It's a good thing that it's happening, but it could have happened earlier," said Scott Benesch, an analyst at U.S. Trust Co. in New York, which holds 6.18 million Time Warner shares. "The head count could have been addressed more heavily in prior quarters."
The 500 workers who will remain in Tucson after June 30 constitute just more than a third of the company's peak work force in 2002, when AOL reported 1,387 full-time employees at the end of year, ranking it 33rd in the annual Star 200 survey of Southern Arizona's largest employers. In the 2006 Star 200, AOL ranked 61st.
The company will retain its leases at 155 N. Rosemont Blvd. and 5401 E. Williams Blvd., but will move out of the building at 5421 E. Williams at the end of June, Graham said.
All 296 of AOL's laid-off Tucson employees were part of the company's "customer-retention" division, which was the subject of a class-action settlement the company reached in September with New York Attorney General Eliot Spitzer. Spitzer had charged that numerous AOL subscribers were wrongfully charged months after canceling their accounts, and that the customer-retention process required AOL employees to make it as difficult as possible for subscribers to cancel their accounts.
Graham said the Tucson layoffs had nothing to do with the settlement and everything to do with savvier subscribers and better online services. They allow more AOL customers to solve problems on their own rather than calling for customer support, he said.
Laid-off Tucson workers emerged one by one from an AOL call center at Williams Centre throughout Tuesday morning and afternoon, clutching blue manila folders that contained severance and outplacement information.
More than a few people toting the folders walked straight from the AOL building into the nearby Risky Business Bar & Grill at 250 S. Craycroft Road.
While AOL workers are a common sight at the establishment, Tuesday's gathering of about 20 people at any given time was special, said general manager Kristine Bigelow.
"They started coming in as soon as we opened at 11 (a.m.) and the crowd just keeps getting bigger," Bigelow said. "I think they're going to be drinking their lunch today."
The entrance of a new patron with a blue folder brought a sardonic chant of "A-O-L, A-O-L," from the workers.
"I feel sorry for them, but they're getting kind of rowdy, and we've had some customers complain about it," Bigelow said.
Workers in the crowd confirmed that they were given Tuesday off but will work through June 30. They declined to be named, citing disclosure agreements that would threaten their remaining employment stints and severance.
Unlike the laid-off Tucson employees, 780 workers in Jacksonville, Fla., 125 in Ogden, Utah, and "nominal" numbers of people at AOL call centers in Albuquerque and Dulles, Va., lost their jobs as of Tuesday's announcement, Graham said. The Jacksonville call center was completely shut down, while the other centers will continue to operate, he said.
A former AOL customer-retention specialist charged with talking customers out of canceling their AOL service challenged Graham's assessment that call volume decreased due to savvier users.
"AOL was the first (Internet service provider), allegedly the easiest, and had enhancements that helped the novice all along," said Rob Horgan, now a local real estate agent. "To say that the customer is now more advanced and more able to solve their own problems is really just a way of saying, 'Our business is going to hell in a handbasket and we need to make changes.' "
Horgan, who was fired by AOL in July 2004, has sued the company for $3,000 commission bonuses owed him for "customer saves," he said.
AOL's subscription base has been declining as more Internet users drop dial-up connections in favor of broadband. In September 2002, the company reported 26.7 million subscribers. That number had decreased to 18.6 million by March 31.
The terms of the New York settlement required AOL to record all cancellation requests through a third party, provide refunds to New York customers who were wrongfully charged after canceling their accounts, pay $1.25 million to the state in penalties and costs, and stop requiring that its employees meet a minimum number of subscriber saves to earn a bonus.
The agreement was binding only to New York, but AOL instituted the changes companywide, Graham said.
In 1995, the Tucson call center had 457 FTEs*
In 2002, the Tucson call center reaches its employment peak with 1,387 FTEs
As of June 30, the Tucson call center will have 500 FTEs
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