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Document: MGM Resorts furloughs could turn into layoffs Aug. 31

Updated May 5, 2020 - 5:09 pm

The furloughs of almost 63,000 MGM Resorts International employees soon could turn into layoffs.

A legal notice sent to many employees Tuesday, obtained by the Review-Journal, is another indication that Las Vegas resort operators are preparing for a significant drop in tourism once the state allows them to reopen. All Nevada casinos have been closed for more than a month because of the coronavirus pandemic.

The notice, which also announced the extension of affected MGM employees’ health benefits from June 30 to Aug. 31, said layoffs may last more than six months or become permanent.

An accompanying letter signed by President and Acting CEO Bill Hornbuckle said executives “just don’t know how many employees will return to work within the coming months” as travel demand is expected to be “significantly decreased” for the remainder of the year.

During an earnings call last week, Hornbuckle said the company has furloughed nearly 63,000 workers. According to company regulatory filings, MGM had roughly 70,000 full-time and part-time domestic employees as of Dec. 31.

“The temporary closure in March of our U.S. properties and the painful decision to furlough thousands of colleagues has made this the most challenging period ever faced by our Company and industry,” Hornbuckle said in the letter. “I know how difficult this period has been for so many of you and your families. Please know we are hard at work on plans to reopen our properties and bring back as many employees as possible.”

A slow return

Employees will remain on furlough status until Aug. 31, then MGM would be allowed to permanently separate them from the company.

Former MGM employee Joseph Guerrero said the news was upsetting. At this point, he believes his best alternative is to search for work in other states.

“How am I supposed to plan my future when I don’t know how I am going to survive?” he said. “There’s no definite return-to-work date and we are kept in the dark.”

The notice complies with the Worker Adjustment and Retraining Notification Act, which is meant to ensure employees have advance notice before significant layoffs so they have time to find work elsewhere.

According to the U.S. Department of Labor’s website, a 60-day notice is required if a company with at least 100 full-time employees plans to lay off at least 50 people at a single site. Employers who do not comply with the WARN Act are liable to pay each affected employee an amount equal to back pay and benefits for the violation period, which can stretch up to 60 days.

MGM’s WARN notice comes as the company expects to see continued revenue drop; cancellations and reduced demand for hotels, restaurants and events; and significant convention postponements and cancellations.

“When our industry bounces back, we will welcome you with open arms,” Hornbuckle said in the letter. “However, we understand you may find permanent employment elsewhere. We encourage you to do whatever is best for you and your families during this challenging time.”

Spokeswoman Debra DeShong said the company is hopeful the industry will recover quickly but that MGM believes it “may take some time for business to return to pre-pandemic levels.”

Recent reports back this up. An ongoing study from the University of Florida shows roughly 37 percent of those surveyed in mid-April said they don’t want to rebook canceled trips until two to six months after the virus is contained. Only 6 percent would be comfortable rebooking within a week after the virus is contained.

“It continues to be apparent that volumes are going to return slowly. It’s not going to be a V-shaped recovery,” said Josh Swissman, founding partner of Las Vegas gaming and hospitality consulting firm The Strategy Organization.

SunTrust Robinson Humphrey gaming analyst Barry Jonas said the coming layoffs could also be a sign MGM is using this crisis as an opportunity to make more permanent changes to its operating and cost structure, which would help it to be “more competitive in an increasingly efficient market.”

Health benefits extended

All union leaders were notified by the company on Tuesday. Furloughed employees who are nonunion can expect a WARN notification from MGM this week.

Former Aria food and beverage worker Tommy Carothers said he wasn’t surprised to hear that MGM was likely moving toward layoffs, knowing that occupancy rates will likely remain low.

“If a hotel is operating at 70 percent of what they had been, they can’t keep 100 percent of the employees,” he said.

He plans to keep an eye out for other job opportunities, but remains hopeful that he can return to his old job. If not, he hopes future developments like Resorts World or Circa will be looking to hire someone with his skill set.

“There’s no jobs to look for right now,” he said.

Furloughed employees enrolled in the company’s health plan can receive benefits with no employee premium contribution through Aug. 31. The company previously had said health benefits would remain in effect until June 30.

Hornbuckle said the company is continuing to process employee grants to aid expenses such as rent, mortgage payments, groceries and utilities. The Employee Emergency Grant Fund recently surpassed $13 million.

A representative of the Culinary union criticized MGM’s move.

“The Culinary union again urges MGM Resorts to do better and do right by its employees, their families and other stakeholders in Las Vegas and other communities it operates in,” said a statement Tuesday by Geoconda Argüello-Kline, secretary-treasurer of Culinary Workers Union Local 226 in Las Vegas.

“MGM can afford to be a socially responsible corporate leader in this unprecedented crisis instead of following the commands of its Wall Street masters who only see numbers and are blind to the people who have made this company successful,” she said.

“The best way for MGM Resorts to be able to guarantee to bring workers and business back in Las Vegas is to support the comprehensive public health recommendations the Culinary union made in our press conference earlier (Tuesday).”

Brendan Bussmann, director of government affairs for Las Vegas-based Global Market Advisors, LLC, said it would be difficult for MGM to position itself without a timetable, solid information and fuzzy phasing offered by the state.

“Every gaming company, including MGM Resorts, is faced with trying to right the ship in this sea of uncertainty,” Bussmann said. “They are fighting for their long-term survival and burning through cash at an accelerated pace while not knowing when their properties may open.

Bussmann said MGM won’t be the only company to lay off workers, furthering the “economic reality of the Great Shutdown.”

Contact Bailey Schulz at bschulz@reviewjournal.com or 702-383-0233. Follow @bailey_schulz on Twitter. Contact Richard N. Velotta at rvelotta@reviewjournal.com or 702-477-3893. Follow @RickVelotta on Twitter.

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