Starkey Hearing, citing inflation and recession fears, is furloughing 84 workers and its top two executives are working without pay, company officials confirmed Friday.
The decision, which affects roughly 1.6% of Starkey's global workforce and includes those at its Eden Prairie headquarters, caught many employees by surprise. Several said they were shown a four-minute video Thursday from Starkey CEO and President Brandon Sawalich, explaining the decision.
Sawalich said in a statement to the Star Tribune that these were "unstable" times.
"With the high inflation and daily indicators of a global recession, Starkey, like many other companies, had to make some difficult decisions to responsibly manage through these uncertain times," he said. "One necessary action was a temporary reduction in our workforce by furloughing approximately 1% of our global employees."
The decision was not made lightly, he said, but was a "precaution to avoid further action in the future."
Furloughed employees will receive pay through December and continue to receive medical benefits. Sawalich also said he and Starkey Chair Bill Austin "have stopped receiving compensation and all executives and vice presidents will be receiving reduced pay."
The furloughs began Friday. It has not been determined when they will end, officials said.
Sawalich said the company's difficulties were not related to a recent decision by the U.S. Food and Drug Administration to allow hearing aids to be sold over the counter to consumers, without a pre-requisite medical exam or fitting by an audiologist.
Historically high inflation has led to rising prices on food, gas, heat, rent and other expenses. Industry watchers said consumers may be delaying hearing aid and other purchases as they grapple with high inflation. Hearing aids can cost thousands of dollars.
Starkey Hearing is one of the nation's largest hearing aid manufacturers with annual revenue estimates of $800 million as recently as 2016.
The company has survived several turbulent years. In 2018, former Starkey President Jerry Ruzicka, former chief financial officer Scott A. Nelson and W. Jeff Taylor, a former components supplier, were convicted on federal embezzlement and fraud charges and sent to prison. In 2019, employees sued Starkey managers, alleging they breached their fiduciary duty with regard to the company's employee stock ownership plan.