Office Depot layoffs could cost millions

Firm was paid job incentives

Office Depot, which laid off an undisclosed number of workers last week at its Boca Raton headquarters, has collected $5.3 million in economic incentives from Palm Beach County and Boca Raton from contracts aimed at retaining the headquarters after Office Depot merged with OfficeMax in 2013.

Fearing they might lose the headquarters to a more lucrative offer from Illinois, state and local officials scrambled to offer Office Depot more incentives in 2014. Florida, Palm Beach County and Boca Raton agreed to an incentive package worth $5 million in August of that year. Both the county and city have begun paying on their separate incentive contracts with Office Depot as the company has confirmed that it had created jobs.

But with the recent layoffs, Office Depot could fall below the county’s requirement of retaining 1,950 headquarters jobs at its headquarters and fall below Boca Raton’s contract requirement of retaining a total of 2,010 jobs.

If so, there would have to be “full restitution” of the incentives, said Sherry Howard, deputy director of Palm Beach County’s Department of Economic Sustainability. “There is an obligation to repay the funds to the county if they are not in compliance with the requirements,” she said.

Office Depot spokeswoman Karen Denning said Wednesday that, “as always, Office Depot will continue to work directly with government entities to comply with the terms of agreements.”

The office-supply retailer is in the throes of change, with new CEO Gerry Smith coming on board on Feb. 27 from Lenovo Group, a technology company based in North Carolina. The leadership change follows a restructuring that Office Depot undertook after its $6.3 billion deal to merge with Staples fell apart last May.

Just before the layoffs last week, Office Depot asked the county for a month’s extension on its audit, where the state verifies whether the company has retained the required jobs, Howard said.

Boca Raton’s 2014 incentive contract with the company worth up to $1.5 million — the largest award ever from the city. The contract requires Office Depot to retain the 2,010 existing jobs it had that year for five years, or through 2019, and to create 548 new jobs at an average annual salary of $104,000, for five years from creation.

In June, the city paid $1.3 million in incentives in accord with the 2014 agreement, said Jessica Del Vecchio, economic development director for Boca Raton. She said expects to meet with the company soon about whether it has retained the jobs required for incentives, despite the layoff. The new job count is due on March 31, Del Vecchio said.

Office Depot confirmed last week that there had been layoffs at its headquarters but declined to disclose the number, saying they didn’t warrant a notice to the state under Florida’s WARN law. Notice of a mass layoff is required only if a company lays off 500 or more, or for 50 to 499 employees, if they make up at least 33 percent of the workforce.

Del Vecchio said that if Office Depot didn’t retain the 2,010 existing and the 203 new jobs, the city would have to “claw back” on incentives paid, requesting a refund based on the rate of $586 per job.

“Should Office Depot not meet their job requirements, they would be required to pay back a portion of the payments — depending on how many jobs they did or did not create or retain,” Del Vecchio said.