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April 16, 2007
Circuit City Faces Suit Over Move to Replace Employees with Lower-Paid Workers

Three workers whom Circuit City laid off because their wages were above market rates have filed an age-discrimination and wrongful-termination lawsuit against the company, the Christian Science Monitor reports.

In the lawsuit, the workers say the company's move had a disparate impact on older workers.

The company recently laid off 3,400 employees whom the company says were paid well above the market-based salary range for their role. The company says it will replace the employees with lower-paid workers.

The company says it made the move to improve financial performance. The company says the laid-off workers can reapply for their former positions after 10 weeks if they are willing to take a pay cut.

One of the workers who filed the lawsuit was earning a little over $15 per hour and would see his pay cut by almost $5 per hour if he went back to work for the company, the newspaper reports.

Was Circuit City's cost-cutting move a smart business decision? The answer depends on whom you ask. Some say the move will help the company compete in an increasingly competitive environment by getting wages in line with market rates. Critics say that in cutting higher-paid workers, the company also lost its most experienced employees, which could affect customer service and sales.

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