AT&T ON THE LOW ROAD:

Outsourcing and Offshoring, Employment Law Violations, & Customer Dissatisfaction

PRELIMINARY REPORT

Published by Communications Workers of America

I. INTRODUCTION
AT&T has a history of providing good, middle-class, union jobs with employees delivering high customer satisfactionbut that history may be turned around if the company pursues a new path. This report details recent AT&T employment practices that, if expanded, portend a drastic and misguided, change in its long tradition as a high road employer that offers quality jobs and sets positive community wage standards. This report details a disturbing trend of AT&Ts exploration of low road options outsourcing to companies that pay low wages and cheat workers out of earned wages, as well as violating wage and hour laws itself. This approach is practised by non-union telecommuncations employers and throughout the non-union call center industry. But until recently, AT&T has held itself to a higher standard. The low road approach to its employment practices is not just bad for AT&T employees; its also bad for AT&T shareholders and the communities where AT&T employees live and work. Importantly, AT&Ts new path is having a clear impact on AT&Ts customers. The low wages, high turnover and lower quality stemming from the companys outsourcing strategy contributes to AT&Ts low ranking in customer satisfaction compared to its competitors. As it looks to the future, AT&T must refocus on the history that made it a great company: good wages, good service and satisfied customers. That will only happen if the company sticks to the high road.

II. AT&TS OUTSOURCING AND WAGE LAW VIOLATIONS

Outsourcing to Low-Road Companies As AT&T outsources formerly in-house jobs to unscrupulous low road companies, often sending these jobs to overseas, it has encouraged increasingly lower standards across its network of contractors.

My big complaint is that orders are being placed, specifically out of the Philippines, for services for a customer, that the customer didnt ask for and I keep seeing this more oftenI get the call when the service gets changed and they get it on their bill and the [customer] is furious. Julie, AT&T Customer Service Rep
Many of these contractors pay low wages, offer inadequate training and provide poor working conditions that ultimately undermine customer service. AT&T employees often interface with customers who have been forced to deal with these contractors. In interviews they have shared stories of inaccurate service orders and repeated complaints about the difficulty understanding the accents or English spoken by overseas contractors.
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Even at U.S.-based contractors, the working conditions for employees are extremely poor and far below the historical standards of AT&T. Some of the contractors have been charged in multiple class action lawsuits with egregious violations of employment laws. Three significant examples: VXI Global paying workers in debit cards: In May 2011, employees of AT&T call center contractor VXI Global filed a class action lawsuit in California alleging that the company paid workers in debit cards riddled with excessive bank fees and violated wage and hour laws.1 California law requires that employees be able to cash paychecks without incurring bank transaction fees, yet as the complaint by employees argues, they were assessed fees for transactions such as withdrawal, balance inquiry, and debit card transactions in addition to the fees charged by the banking institution. The lawsuit also claims that VXI Global has failed to pay employees for hours worked, overtime and meal breaks. The lawsuit is pending. Arise Virtual Solutions Illegal misclassification of employees as independent contractors: Another pending lawsuit involves virtual call center agents also in California who, according to a class action lawsuit filed against AT&T and its contractor Arise Virtual Solutions, were illegally misclassified as independent contractors to lower the companys overhead and labor costs.2 According to the lawsuit, AT&T used Arise Virtual Solutions to hire customer support agents to work from home to provide services to AT&Ts wireless customers. While AT&T and Arise required all of these Virtual Call Center Agents to incorporate as independent businesses, they were required to login to AT&T systems to perform their duties and were barred from working for AT&T wireless competitors.

We as the frontline call reps have to interface with that customer on the phone and always present that its a rosy picture and were able to seamlessly solve the problem for that customer when behind the scenes is a complex web of outsourced vendors and people that are not worried about that customerthey have no vested interest in that customer because theyre removed. Joe, AT&T Customer Service Rep.
As the suit argues, the arrangement between AT&T and Arise illegally misclassified employees as independent contractors in order to shirk the responsibility to pay overtime, provide meal and rest breaks, and to avoid contributing to payroll withholding taxes, workers compensation insurance premiums, unemployment insurance payments, and Social Security taxes.

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Robinson Jr. v. VXI Global Perry v. AT&T Mobility LLC, et al

Convergys national call center overtime lawsuit: At one of AT&Ts largest contract call center operators, Convergys, thousands of employees at more than 60 call centers in 23 different states mounted a class action lawsuit in 2010 alleging the company owes them millions in unpaid wages.3 The complaint alleges that Convergys illegally requires call center employees to work without pay every day before and after their official shifts. This includes starting up their computers and other preparation for their shift, as well as closing down their systems and finishing necessary paperwork. This can often take a lot of time since typically call center workers are afforded little time during the normal work day to complete orders and follow up on service requests.As a result, call center employees argue they were forced to work without overtime, which cost call center employees thousands of dollars a year in illegally unpaid wages and overtime individuallyand millions of dollars collectively. Convergys is currently in settlement negotiations with the plaintiffs in this suit. AT&Ts Own Employment Practices Not only has AT&T been hiring contractors engaged in illegal employment practices, AT&T itself is also facing a rising number of lawsuits by its own employees over the companys employment practices. Recently settled class action lawsuits: In recent years AT&T has been forced to settle at least eight major class action lawsuits over alleged overtime violations. In 2010, AT&T settled three class action lawsuits brought by outside plant engineers in Wisconsin, Illinois and Michigan over wage and hour violations. While the terms of this settlement are confidential, AT&T was reportedly forced to pay out untold millions.4 AT&T settled two separate class actions since 2010, brought on behalf of IT workers in California who alleged they were cheated out of overtime. These settlements require AT&T to pay out $29.5 million to the affected workers. 5 In 2009, AT&T settled a class action brought by sales representatives who alleged overtime violations of $1.5 million. 6 Pending class action lawsuits: AT&T is currently facing at least six additional major class action lawsuits seeking hundreds of millions in unpaid overtime for thousands of employees located in Illinois, California, Georgia, Florida, Mississippi, Tennessee, North

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Shofner, et al. v Convergys Corporation Id. Stoll Berne. AT&T Blue Sky Project overtime pay class action settled. April 21, 2001; http://www.stollberne.com/ ClassActionsBlog/2011/04/21/att-blue-sky-project-overtime-pay-class-action-settled/; Schonbrun DeSimone

Seplow Harris Hoffman & Harrison. AT&T Class Action. http://www.losangelesemploymentlawyer.com/AT-T-Class-Action/ (accessed on April 2, 2012).
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Yelena et al. v. Pacific Bell Telephone Company. Notice Of Proposed Settlement Of Class Action. United States District Court (ED-CA). CASE NO. 2:07-CV-00392-FCD; http://www.kcrlegal.com/PDFs/Lebedchik_Notice%20of%20Proposed%20Settlement_V7.pdf

Carolina, Alabama, Louisiana, South Carolina and Kentucky. 7 These lawsuits include allegations that AT&T illegally misclassified workers as exempt from state and federal wage and hour laws and refused to pay them overtime wages they were due under the law. Classes of employees filing lawsuits include frontline managers, cable splicers, account managers8 and customer service representatives9 demonstrating the apparent breadth and depth of this practice at AT&T. Two lawsuits filed by frontline managers could cover 5,000 active workers owed as much as $1 billion in overtime.10 Case Study: Cable splicers cheated out of overtime: Cable splicers at AT&T filed a class action lawsuit in 2011 that alleges that not only were they cheated out of overtime, but they also faced punishment for speaking up for their legal rights. Blakes v. Illinois Bell is the class action lawsuit filed by these AT&T employees who install, repair and maintain the companys telecommunications network. It alleges that these employees were required to work in excess of forty hours per week but were never paid the additional half-time pay required for such overtime. Making clear this was not an accounting mistake, the lawsuit alleges AT&T management routinely disciplines employees for seeking compensation for overtime that has not been preapproved. The result is that cable splicers are cowed by fear of retaliation and discipline and do not report all hours worked. 11 The pending lawsuit covers 2,200 cable splicers in Illinois owed between $5000 and $70,000 each, with AT&T facing between $11 and $154 million liability for the unpaid wages. 12

III. THE RESULTS OF THE LOW ROAD ON THE COMPANY, COMMUNITIES, AND CUSTOMERS
If AT&T expands its adoption of low-road employer strategies as documented above outsourcing, misclassification of employees as independent contractors, and illegally pushing employees into overtime its practices will hurt not just the workers involved but also the communities in which AT&T operates and the quality of service for customers. For AT&T, shortchanging employees may help the company to boost its bottom-line and earnings per share, but its a short-term solution that comes at a long-term cost. For the employees affected, the wages lost to wage theft by AT&T and its contractors represent a direct financial loss. For the communities where those employees live and work, the

Sanford Wittels & Heisler. Phone Company Dials Wrong Number On Employees Overtime. Press Release. Dec. 16, 2009; http://www. swhlegal.com/data/public/ATT_Overtime_Class_Action_Press_Release_12-16-09_FINAL-63924-1.pdf Goldstein, Demchak, Baller,Borgen & Dardarian. AT&T. Announcement of Casas v. Pacific Bell Telephone Company dba AT&T California case http://www.gdblegal.com/Cases/Current_Cases/Wage_Hour/Casas_v_AT_T.aspx (accessed on April 2, 2012). Goldstein, Demchak, Baller,Borgen & Dardarian. Pacific Bell (dba AT&T California). Announcing Ellis, et al. v. Pacific Bell Telephone Company dba AT&T; http://www.gdblegal.com/Cases/Current_Cases/Wage_Hour/Ellis_v_AT_T.aspx (accessed on April 2, 2012) Id., Sanford Wittels & Heisler. Phone Company Dials Wrong Number On Employees Overtime. Blakes v. Illinois Bell Information compiled by Locker Associates.

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impact of the hundreds of millions of dollars in wages lost to wage theft compounds into an economic loss, exacerbating the effects of the recession. When those workers cannot spend the wages lost to wage theft, then they cannot pay rents, they spend less on food and clothing, they dont travel. The companys current low road path undermines the economic and social dynamics that help a community to thrive.

They dont appear to be spending the money to help benefit the customers ultimately, I mean thats who it really hurts- you know, increased service outages, their downtime, repair times are increased due to this, but theyre not investing in the plant, and obviously we dont have the workforceConstruction is reducing their head count, we dont have the employees to do the work even if the company would spend the money. James, AT&T employee
There are serious danger signs for AT&T in the rising customer dissatisfaction being registered in multiple consumer surveys. According to both the American Customer Satisfaction Index13 and Consumer Reports14, AT&T ranked last in customer satisfaction in 2011. Similarly, the American Customer Satisfaction Index rated AT&T landline below average in customer satisfaction as well.15 Reinforcing the suspicion that this customer satisfaction problem is related to recent job cutbacks and falling employee morale, AT&Ts ranking are not just low but have been falling in recent years. According to the American Customer Satisfaction Index, AT&Ts wireline customer satisfaction fell 5.3% from 2010-2011. The connection between employee layoffs and lower customer satisfaction has been well documented in recent years, particularly in the call center sector. One recent study by Rosemary Batt and Alexander Colvin detailed how the combined level of quits and dismissals [at a company] is significantly negatively related to customer satisfaction.16 Noting the wide variation in pay and conditions in the call center industry, they found strong evidence that the short-term savings some companies like AT&T may be reaping by outsourcing to low-road options are resulting in long-term costs in the form of dissatisfied customers.

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American Consumer Satisfaction Index. May 2011 and Historical ACSI Score. May 17, 2011; http://www.theacsi.org/index. php?option=com_content&view=article&id=205:acsi-scores-may&catid=14&Itemid=261 David Goldman. AT&T still worst carrier, Consumer Reports says. CNNMoney. Dec. 6, 2011; http://money.cnn.com/2011/12/06/ technology/att_worst_carrier/index.htm American Consumer Satisfaction Index. Scores by Company. http://www.theacsi.org/index.php?option=com_content&view=article&i d=149&catid=14&Itemid=214&c=AT%26T+&i=Fixed+Line+Telephone+Service (accessed on April 2, 2012). Batt & Colvin. An Employment Systems Approach To Turnover: HR Practices, Quits, Dismissals, And Performance. February 2010.

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IV. CONCLUSION
The pattern of AT&T business behavior detailed in this report is a departure from the companys traditions and that is a bad sign for the health of the company in the future. Outsourcing, offshoring, not paying employee overtime, misclassification of employees as independent contractors or management employeesall of these low road practices may result in short term savings for the company but they arent the way to deliver long term growth. They are not only unjust for American workers; they are also bad for local economies, bad for consumers and, in the end, bad for company stakeholders of all kinds. In a time of massive job losses in the United States, companies like AT&T need to have a commitment to keeping good jobs in our communities not shipping them overseas. Given the overall strength of the company, AT&T can turn the problem aroundif it chooses to. The question is what path AT&Ts management wants to take: the low road to litigation and consumer dissatisfaction or the high road to being partners with its workforce in continuing to build a great company.