TORONTO - Battered telecom equipment company Nortel Networks Corp. (TSX:NT) is withholding lump sum pension payments to 180 terminated employees while it asks an Ontario court to approve lower payouts to reduce costs by $8.1 million.

The payments, which were due on Monday, have been placed in limbo until the court makes its decision on filings that the company made last week.

Nortel is asking the court to grant permission to reduce payout ratios to Canadian defined benefit pension plans to 69 per cent from about 85 per cent.

The rest would be paid out later, if everything goes according to plan.

A hearing is scheduled for Thursday, but until the court makes its decision the payments aren't going anywhere.

That means former employees like Marie Lunney, who worked as a technical writer at the company for 14 years, don't have access to their money for now.

"It's another kick in the face, as far as I'm concerned," the Ottawa-area resident said in a phone interview.

Lunney was laid off from Nortel in March, and didn't receive severance pay from the company, which is under the Companies' Creditors Arrangement Act.

The single mother of two children said it adds another degree of uncertainty to her daily life, as she hunts for a new job.

A spokesman for Nortel defended the company's decision, acknowledging the impact it has on some former staffers.

"This is a necessary step in response to the decline in the financial markets and the need to ensure fair and even-handed treatment for all plan members, including retirees," said Nortel spokesman Jay Barta in a statement emailed to The Canadian Press.

He noted that the remaining 31 per cent of the pension balance would be paid out to employees within five years, as required by pension legislation.

However, Nortel's restructuring process could throw a wrench into those plans, according to Diane Urquhart, an independent adviser assisting terminated employees.

"The consequence of that is that the new buyers (of the company) will purchase assets and will apply to have the pension plan wound up," she said.

Then "there won't be five years left to pay up the difference."

Legal firm Koskie Minsky LP, a court-appointed representative for all of Nortel's employment-related claims, didn't return calls for comment.

Earlier this month, Nortel's chief executive Mike Zafirovski told analysts that the company will decide whether to remain a stand-alone entity or agree to join with a competitor within two months.

For the latest quarter Nortel's net loss was US$507 million, compared with a loss of $138 million a year ago.

The company is under court protection from bankruptcy until July 30, which allows it to work on a restructuring strategy under the CCAA.

Separately, Nortel is asking a court in France to appoint a local administrator to work with management from both the UK and France and potentially liquidate one of its two French facilities.

"This is intended to allow Nortel Networks SA to rapidly reduce its costs while continuing to trade," the company said in a statement.

"This development is part of the restructuring process and will allow Nortel Networks SA to continue to work with its suppliers and meet its obligations to its customers."

The move would affect an undermined number of jobs in the region, though a spokesman for Nortel noted that media reports pegging 700 layoffs was too high.

A court decision is expected on Thursday.

Nortel shares ended the day unchanged at 23 cents on the Toronto Stock Exchange.