U.S. Edelman to Close Russian Unit Following Labor Scandal

Jul. 16 – U.S.-headquartered Edelman Imageland will close down its local unit in Russia this coming October. According to the firm’s management, the Russian subsidiary hasn’t met the parent company’s expectations. However, at the same time, the company is not leaving Russia.

“We’ve been undertaking a strategic review of the Russian operations since the end of last year. … Unfortunately, the Imageland business hasn’t met Edelman’s expectations over the last several years,” Edelman management told The Moscow Times, adding that it was impossible to continue business because of some commercial problems, which they didn’t specify.

The announcement came amid a battle between the company’s local management and a group of its employees, who claimed that they had been forced to quit.

Edelman Imageland, which became part of the U.S. agency via a 2008 acquisition, currently has 39 staff, after a round of layoffs saw 11 people depart the company last month. That decision, along with the overhaul of senior management at the agency, drew sharp criticism from a Russian labor union, and ex-employees.

The company announced in May that it would lay off 10 employees starting August, 1, said project director Alexander Sokolov, who is also due to leave.

The official reason for firing people was a lack of work, Sokolov said, adding that in fact he and his colleagues had long-term clients and successful projects.

But instead of just cutting the staff, the company insisted that those leaving sign documents stating that they had resigned based on mutual agreement with the firm.
Resignation based on mutual agreement is hard to dispute in court.

“Even if an employee signs such an agreement under pressure from the company, it will be impossible to prove that the person had been forced to do so,” said Olesya Salayeva, a lawyer with Yukov, Khrenov and Partners.

To avoid subsequent claims, some companies that are cutting staff insist that the employees sign the documents confirming that they are resigning under mutual agreement, she said by telephone.

Edelman acquired one of the oldest Russian PR firms, Imageland, from founder Veronica Moihseeva in 2008.

The restructuring has so far seen Imageland founder Veronica Moihseeva move into a non-executive role. Kerry Irwin has taken charge of the firm.

The ex-employees with Edelman Imageland have formed a labor union to protect their rights. They plan to submit a claim with the General Prosecutor’s Office, according to Sokolov.

Meanwhile, Robert Phillips, Edelman’s president and chief executive for Europe, Middle East and Africa, denied any wrongdoing, saying the company was acting “in compliance with the Russian law.”

The impact of the closure on current staffers remains unclear, but Phillips said that “there will be no impact on business continuity whatsoever.”

“The decision in no way impacts Edelman’s continued commitment to Russia and to servicing its local client base,” he added. “We’re definitely not leaving Russia.”

Among Edelman’s customers in Russia were Procter & Gamble, Motorola, Microsoft, and big pharmaceutical companies like Takeda and Pfizer.