Please ensure Javascript is enabled for purposes of website accessibility

Hit the brakes: Beleaguered car rental giant runs into legal roadblock

A judge has rejected Hertz's proposal to pay 14 executives a total of $5.4 million in bonuses.

  • By
  • | 6:00 a.m. September 25, 2020
  • | 2 Free Articles Remaining!
Courtesy. Hertz filed for bankruptcy May 23.
Courtesy. Hertz filed for bankruptcy May 23.
  • News
  • Share

Lee County-based car rental giant Hertz Global Holdings, in working its way out of bankruptcy, recently received a scolding from the federal judge overseeing the case.

Hertz, with a headquarters in Estero, had submitted a plan to pay at least 14 executives about $5.4 million in bonuses, with another $9.2 million going to 295 lower-level managers. The proposal, submitted to U.S. Bankruptcy Court Judge Mary Walrath, comes four months after the company paid out $16.2 million in retention payments to about 340 employees. Those payments came days before the company’s May 23 bankruptcy filing.

Walrath, in a Sept. 17 telephone hearing, rejected the latest proposal, saying “the incentive plan has serious problems," and it “seems offensive,” for senior leaders to get bonuses so soon after retention payments. Walrath, according to a hearing transcript, connected the Hertz request to the U.S. Bankruptcy Code, which requires strict performance goals for any executive bonus for a company in Chapter 11. While some retention bonuses are allowed, Congress wrote the rules to ensure executives who pushed a company into bankruptcy weren’t rewarded for sticking around, the judge added, according to a report in MarketWatch.   

The judge, in the hearing, didn’t rule out a possible future approval of the bonus plan. But the company will have to revise its financial performance targets the executives are required to reach and/or submit better information on the plan. "More has to be done to show why employees who got retention bonuses and agreed to stay with the company are not going to do their best to see that the company survives and succeeds,” Walrath said in the hearing.

Several different-but-connected entities objected to the bonus plan in court filings before the hearing. The list includes a group of retired Hertz executives, who say the bonuses further jeopardize secure retirement commitments the company made, and U.S. Bankruptcy Trustee Andrew Vara. Vara, according to MarketWatch, says the plan goes against agreements the executives made prior to the bankruptcy filing to waive 2020 bonuses.

A third objection came in the form of letters written to the judge from a handful of Hertz employees in the field. One employee, Erica Martinez, a customer service agent in Portland, Ore., says she’s lost about $800 a month in salary and commissions since COVID-19. That’s due to both the slowdown in customers caused by the pandemic and changes the company made to the commission structure, she writes.

“For every dollar I make for Hertz, I get four cents,” Martinez writes. “I’m sending this letter because I can’t pay my bills like I could before. The big bosses of Hertz want more money, and the rest of us are just barely getting by on (an) hourly wage.”





Latest News


Special Offer: Only $1 Per Week For 1 Year!

Your free article limit has been reached this month.
Subscribe now for unlimited digital access to our award-winning business news.
Join thousands of executives who rely on us for insights spanning Tampa Bay to Naples.