September 29, 2023


The Number One Source For Business

Nordstrom says workers need to pay it back for health insurance

  • When Nordstrom temporarily closed stores and furloughed workers this spring, it told employees they would continue to receive their health benefits.
  • However, some store workers say they didn’t realize they would have to pay Nordstrom back for the premiums the company covered when employees weren’t getting paid.
  • “We let employees know they would be responsible for paying their portion of the healthcare premium for April and May when they returned to work but that we would make both the employee and the employer portion of these payments on their behalf in the month of June,” a Nordstrom representative said. “Employees have options on how they make these payments over time after returning to work.”
  • Visit Business Insider’s homepage for more stories.

Nordstrom employees who returned to work as stores reopened this spring are finding that they owe their employer some cash.

When Nordstrom furloughed store workers in April, it told them their health-insurance benefits would still be in place even though they wouldn’t be getting a paycheck.

“Benefits for all unscheduled and furloughed employees will be covered through May. The benefits for which you are currently enrolled are not changing,” an email sent from Erik and Pete Nordstrom on April 3 said. Erik Nordstrom is the CEO of the department-store chain, and his brother Pete Nordstrom is the president and chief brand officer.

Read more: How well is your employer handling the return to offices during the pandemic? Business Insider wants to know.

Some store workers who have returned from furloughs, including two who spoke with Business Insider and many who posted on social media, said they didn’t realize that they would have to pay back their share of the health-insurance bill for April and May.

These workers said they were surprised to see costs deducted from their first several paychecks after returning from furloughs.

Employer-sponsored health-insurance plans commonly involve contributions from both the employer and the employee. If an employee is enrolled in health benefits, their contribution is typically deducted from their paycheck.

One full-time Nordstrom worker told Business Insider that he and his coworkers felt reassured that their benefits would still be covered while they were not working or getting a paycheck.

“We kind of assumed that that was the company being generous, as it is very often in certain situations,” this employee, who works at a Nordstrom store in Illinois, said. This employee asked to remain anonymous for fear of jeopardizing his job.

Nordstrom store workers were paid for about two weeks after locations were closed on March 16. For Nordstrom and other “nonessential” retailers, the initial plan was to keep stores closed for just a few weeks in an effort to halt the spread of the coronavirus.

But it soon became clear that stores would need to stay closed for longer. After April 4, Nordstrom stopped paying store workers and furloughed some. The furlough duration depended on the store location; stores were permitted to open as early as the beginning of May in states like Georgia but not until later in June in places like New York.

As the furloughs extended, Nordstrom told employees by email that it would cover the entire cost of workers’ insurance premiums for the month of June — both the employer’s portion and the employees’ — which may have contributed to the confusion.

Regardless, store workers found that their initial paychecks after furloughs were lower than usual because of the health-insurance deductions.

The employee in Illinois said that when workers came back, it was “a massive complaint across the board.”

This worker said he started adhering to a stricter budget when the pandemic hit, as he expected that even when stores did reopen he would be earning a lower commission than he did previously, because fewer people would be coming into stores to shop. Before he was furloughed, his premiums typically cost him about $80 a paycheck, he said. But when he came back to work, he saw that more than $200 was taken out of his paycheck for medical expenses.

Since he had budgeted for a lower income, he said, the unexpected health-benefits expenses in his paycheck didn’t affect him too much.

But he said some of his colleagues, particularly younger workers, were not as prepared.

Communicating in fine print

In a statement to Business Insider, Nordstrom said it took the same approach in this scenario as it would for any type of leave.

“As we made the difficult decision to furlough some employees due to the impact of COVID-19, we continued paying all employer costs for medical and dental benefits so that their healthcare would be available during that time period,” a company representative said.

They continued: “We let employees know they would be responsible for paying their portion of the healthcare premium for April and May when they returned to work but that we would make both the employee and the employer portion of these payments on their behalf in the month of June. Employees have options on how they make these payments over time after returning to work.”

When asked to clarify when the company told employees that they would need to repay their April and May premiums, the representative said the company communicated its approach to employees “when they first enroll in the Nordstrom benefits program, and we reiterated those details when letting them know about the furlough.” The company said it has resources to assist employees who are having financial difficulties.

“It’s always important when employers are communicating with employees that those communications be explicit,” said Doreen Lilienfeld, a partner at Shearman & Sterling who focuses on employment and compensation issues.

“You would hope that at the time of the furlough, which was probably also formally documented, that people were given documentation of what the furlough meant and how the benefits would be provided,” she said.

But the practice of asking for insurance premiums from employees returning to work is not specific to Nordstrom. Lilienfeld said that in the past she had heard of other companies asking employees to pay back premiums over a period of time.

Neiman Marcus told furloughed employees returning to work in a letter that they would need to pay their employer back “upon 60 days of return” to work, The Dallas Morning News reported in September. It has since allowed workers to extend the repayment period on an individual basis.

“We’re doing everything we can to protect the health of the business and the welfare of our associates. We have been working with associates on flexible repayment options,” a Neiman Marcus Group representative told Business Insider.

Macy’s and JCPenney similarly covered health-insurance premiums for store workers who were furloughed, but they are not requiring those premiums to be paid back.

An unexpected invoice

Nordstrom has also looked for repayment from employees who left their positions for various reasons while being furloughed.

Three former Nordstrom employees said they received an invoice requesting repayment of their insurance premiums after being laid off by the department-store chain this summer. Depending on the insurance plan they had while employed, these former workers owed amounts ranging from about $200 to $2,000.

The invoice from Nordstrom said the balance could be paid by a personal check, a cashier’s check, or a money order.

“If this balance is not repaid and you are rehired in the future, deductions will be taken from your paychecks until repaid in full,” the invoice said.

Nordstrom did not return Business Insider’s request for comment on the invoices sent to employees who were not brought back to work after furloughs.

The invoices came at a particularly difficult time for many Americans. In a survey of 1,006 American adults by Bankrate in July and August, 21{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of respondents said they had no emergency savings at all. One in five said they had enough saved to cover their expenses for three to five months.

neiman marcus closed temporarily

Neiman Marcus is taking a similar approach to Nordstrom.

AP Photo/Nam Y. Huh

The request for premium payments isn’t the first time Nordstrom has faced backlash from employees during the pandemic.

Former store workers told Business Insider in July that they received calls from their managers asking them whether they would be comfortable returning to work during the pandemic. Three workers said they were let go after expressing doubts to their managers during those phone calls. Some who stayed on were offered new roles with fewer hours and no commission.

The pandemic has led to widespread job losses and economic hardship, with hundreds of thousands of layoffs across the retail industry. As of October 2, there were 483,000 fewer retail jobs than there were in February, according to the US Bureau of Labor Statistics.

Like many fashion retailers, Nordstrom has announced permanent store closures. In May, the company said it would close 19 stores: 16 full-line department stores and all three of its Jeffrey boutiques.

“I know companies are going through obviously difficult times with a pandemic, and they have to balance their costs and budget and capacity to continue business with their needs to their employees,” Shannon Liss-Riordan, an employment lawyer and partner at Lichten & Liss-Riordan, told Business Insider. “But it seems to me that a company trying to pin these costs back on their employees who have been suffering so much from this pandemic is really not the way to go.”

Do you work at Nordstrom or another department store? Contact this reporter at [email protected] or on the secure messaging app Signal at (646) 889-2143 using a non-work phone.