As has been recently reported by the Indiana Business Journal, Pavlack Law has filed a class action complaint on behalf of former HHGregg employee Dwain Underwood. Mr. Underwood was a valued employee of HHGregg in its accounting department prior to his recent voluntary separation from the company. Mr. Underwood was part of a group of valued HHGregg employees who were entitled to incentives based upon the performance of the company throughout its fiscal year. For the 2012 fiscal year, Mr. Underwood was presented with a form outlining his incentive targets. Under the express terms of the “Total Rewards Statement,” the incentive payments were tied to the company’s “earnings before interest, taxes, depreciation and amortization” – better known as EBITDA.
After the close of HHGregg’s FY2012, it informed the employees eligible for EBITDA based incentive payments that the company failed to meet its necessary target and thus no payments would be made. The basis for the class action complaint is that this assertion was inaccurate. The error arises from HHGregg’s use of what it refers to as “Adjusted EBITDA.” By utilizing “Adjusted EBITDA” the company has sought to remove a substantial windfall that it received as the result of a keyman life insurance policy that generated $40 million with only $600,000 going to the estate of the late Jerry Throgmartin and the remaining $39.6 million into HHGregg’s coffers.
Pursuant to HHGregg’s accounting records and public filings, its EBITDA, properly calculated to include the keyman insurance proceeds, met the incentive threshold and entitled Mr. Underwood to an incentive payment of at least $25,000. The class action complaint alleges that HHGregg’s use of Adjusted EBITDA is in direct violation of the clear and unambiguous terms of the incentive payment contract.
As Mr. Underwood is not alone in having been injured by the misapplication of Adjusted EBITDA to his incentive payments, he has filed his complaint seeking to represent all those similarly situated to him. Specifically, the purported class would contain:
All current and former employees of H.H. Gregg who were subject to an EBITDA based Incentive Payment plan, and whose Incentive Based Payments or lack thereof were based on amounts that were less than HHGregg’s EBITDA for the applicable fiscal year. The class specifically includes, without limitation, current and former employees whose Incentive Based Payments or lack thereof were based upon HHGregg’s “Adjusted” EBITDA, which did not include the key man life insurance proceeds from the passing of Mr. Throgmartin in early 2012.
With the help of Pavlack Law, Mr. Underwood will vigorously pursue this case in an attempt to hold HHGregg to its legal and contractual obligations and the promises that it made to many of its most valued employees. We will bring you updates and developments in this matter as they become available.