Offshoring Industry Trends Affecting California Employment Law

Offshoring Industry Trends Affecting California Employment Law

Apr

14

2017

By Steve Danz

Businesses around the world are expected to spend nearly $1 trillion dollars on outside IT labor services in 2017. Perhaps this figure does not seem overwhelming on a global scale, but, the implications for employers and employees, on a micro-level, can be jarring and disruptive. Take, for example, the case of the IT department at the University of California at San Francisco (UCSF). Earlier this year, UCSF completed the transition to offshore their entire clinical IT team to an India-based company named HCL, resulting in the displacement of approximately 80 employees. A mere seven months ago, these individuals were gainfully employed. Next thing they know, they are being asked to train their replacements, ultimately culminating in the termination of their employment in favor of their new, ostensibly less expensive, counterparts.

What is striking is how pernicious this trend has become. In this case, this “organizational solution” was implemented at UCSF, a public nonprofit educational institution, who could not reasonably defend such a decision by borrowing the tired line used by for-profit companies that the move was in the “best interests of the shareholder and the bottom line.”  According to UCSF, the move will save nearly $30 million annually and will curb clinical-side IT costs that have nearly tripled between 2011 and 2016. In reality, the $50 million dollar contract would send the majority of the work to India and bring foreign IT staff to the UCSF campus on H-1B Visas.

Aside from the privacy and security concerns resulting from offshoring IT services, there are numerous business and employment law related concerns.  For instance, many large corporations are merely “shells” and offshore every job that does not interface with customers.  This makes it more difficult to bring a breaching or harmful company to court, and may even curtail enforcement from certain agencies such as the California Labor and Workforce Development Agency and the U.S. Department of Labor.  Our court system and laws have a storied history of protecting California workers.  Permitting companies to contract their labor with the ability to simply terminate a contract, or to instantly disappear altogether, is unacceptable.

When the lines are blurred between employment and contract labor, it not only affects our American tax system by giving reprieve to unscrupulous corporations, it also destabilizes and disenfranchises the American workforce.

The legislature must ensure that these companies are held accountable for how they pay and treat their workers.  This may mean creating new laws to govern these types of contracting industries.  We could look north of the border for an example where Canadian laws permit a third, legally recognized category known as “dependent contractor.”  This worker is economically dependent on, and subject to the control of, one principal employer, but uses his or her own tools and may expect a profit from the services provided. In return, an employer must give the dependent contractor reasonable notice of termination and the dependent contractor can sue the principal similar to how an employee may sue the employer.

The Protect and Grow American Jobs Act, introduced by Darrell Issa, a California Republican, and Scott Peters, a California Democrat, aims to curb the outsourcing of American jobs by reforming the nation’s high-skilled immigration program and helping to adjust the requirements in the issuance of H1-B Visas.  One way that the bill may encourage U.S. based companies to hire American workers is by increasing the minimum salary for foreign workers under the H-1B visa program from $60,000 to $100,000.  This will unquestionably help when companies are considering hiring an American worker versus a foreign worker.

There may still be time to save American jobs.  California’s legislature, as it usually does, should take the lead in protecting our local economy by introducing similar legislation and fighting for the employees, before it is too late.

Steve Danz is senior partner and chief trial attorney at Stephen Danz & Associates. He represents plaintiffs in wrongful termination, discrimination, disability, wage and hour class actions, and false claims act whistleblower litigation in partnership with the Department of Justice.

About Our Guest Bloggers

Our guest bloggers include members of CELA and other employee advocates. Email us if you are interested in guest blogging.

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Uber and tech: Are you listening now?

Uber and tech: Are you listening now?

Feb

21

2017

PhoneBy Lisa Mak

This past Sunday, ex-Uber engineer Susan Fowler published a powerful blog post about the gender discrimination she experienced while working at Uber. It started with her male manager sending her messages, stating that he was in an open relationship and was trying to stay out of trouble at work but couldn’t help it, because he was looking for women to have sex with. Susan sent screenshots of the chat to Human Resources. The response? Uber HR and upper management told her that even though this was clearly sexual harassment, they were not comfortable giving the manager anything besides a warning. The reasons? This male manager was a “high performer” and it was his “first offense,” so they did not want to ruin his career over “an innocent mistake.” The company then gave Susan the “choice” of moving to another team, or staying on the male manager’s team and likely receiving a negative review from him.

When Susan later tried to transfer to other teams, her transfers were blocked due to undocumented “performance” problems. Her performance review was downgraded from a positive to a negative score, and she was told that she needed to prove herself as an engineer.

Presumably Uber, like most large U.S. companies, has a policy encouraging employees to report incidents of discrimination. Each time Susan received a sexist email, she forwarded it to HR. This included emails with her director when he said the company would not order promised leather jackets for the female engineers because they had not been able to get a bulk discount on the women’s jackets as they had for the men’s jackets. When Susan reported this to HR, she was told that maybe she was the problem, that she should not be surprised at the gender ratios in engineering, and that it was unprofessional to report things to HR via email.

Less than a week later, Susan’s manager told her that she was on “very thin ice” for her HR report and could be fired if she did it again. He also said that his threats to fire her for reporting things to HR were not illegal. Susan reported this conversation to HR and the CTO, but again the company did nothing. Susan left Uber for a new job.

After Susan’s blog post went viral, Uber CEO Travis Kalanick suddenly announced that the company is launching an “urgent” internal investigation into the matter, headed by former U.S. Attorney General Eric Holder.

Some takeaways from Susan’s terrible experience: We need to stop pretending that the tech world is a pure meritocracy, and instead call out the prevalent sexism in that sector. For starters, there’s the numbers issue. On her last day at Uber, Susan calculated that of the over 150 reliability engineers there, only 3 percent were women. Just last month, civil rights activist Rev. Jesse Jackson called out Uber to release its workforce diversity data. Why does a tech company of this size still need to be urged to be transparent about its diversity numbers? And then there’s the cultural issue – a culture that favors men in the STEM fields, that marginalizes women, and blames them when they speak out about misogyny. The problem of victim-blaming is also amplified in the tech space where employees are often on social media, with the risk of being judged by potential employers and targeted by internet trolls. We’ve known about these problems for years. So why hasn’t anything changed?

We also need to fix the double standard that underlies companies’ responses to these complaints. When Susan reported her male manager’s behavior, Uber did not want to ruin his career over a “first offense.” She later learned from other Uber female engineers that it was not, in fact, his first offense. Unfortunately, we’ve seen how companies use this excuse to sweep complaints under the rug, whether in tech or in other sectors. This attitude presumes that a man’s career opportunities are somehow more valuable and worthy of protection than a woman’s workplace rights.

Whether it was the harasser’s first offense or his fiftieth, Uber’s response was out of line as a matter of law. There is no exception to enforcing employment laws based on whether someone’s career and reputation would be “ruined” over claims of harassment and discrimination. It certainly is not a reason to avoid addressing the problem. Employers are legally obligated to investigate all complaints of harassment and to take prompt, effective action to stop it. Forcing the harassment victim to transfer is retaliation, not a remedy. Our laws focus on protecting those who suffer harassment, discrimination, and retaliation, and on eliminating those evils from our workplaces – not on whether the perpetrator will have hurt feelings or a derailed career.

Companies need to start taking complaints seriously, doing fair investigations, and taking appropriate remedial steps at the time these issues are raised. Uber is not some small start-up with five employees stuffed in a garage. It has thousands of employees, an HR department, legal counsel, and a board of directors. Why was nothing done to help Susan until she made her story public?

Uber does not get credit for now conducting an investigation into Susan’s claims, after she has already left the company and after she made a public blog post about her experience. Uber does not get credit for now committing to release its diversity statistics after this incident. Investigating and taking action should have happened long ago, instead of letting the situation spiral out of control. Kalanick’s apology now is simply too little, too late.

It should not take a blog post and public outrage to make a company finally pay attention to employees’ complaints of sexual harassment, gender discrimination, and retaliation. Our laws require companies to treat their employees fairly all the time, every time, not just when it is a PR nightmare.

About Lisa Mak

Lisa Mak is an associate attorney in the Consumer & Employee Rights Group at Minami Tamaki LLP in San Francisco. She is passionate about representing employees and consumers on an individual and class basis to protect their rights. Her practice includes cases involving employment discrimination, harassment, retaliation, wrongful termination, labor violations, and severance negotiations. Ms. Mak is the Co-Chair of the CELA Diversity Committee, Co-Chair of the Asian American Bar Association’s Community Services Committee, and an active volunteer at the Asian Law Caucus Workers’ Rights Clinic. Ms. Mak is a graduate of UC Hastings School of Law and UC San Diego. She is fluent in Cantonese and conversant in French.

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Lisa Mak

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Did Apple, Google and other tech giants really steal $9 billion from their own employees? 1

Did Apple, Google and other tech giants really steal $9 billion from their own employees?

Mar

28

2014

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The luminaries of Silicon Valley are idolized like sports stars. They are adored for the revolutions they have launched and praised for the fortunes they have amassed. They are revered for their business savvy and shrewdness. But it turns out there is another darker side to the Silicon Valley success story.

It was early 2005. Silicon Valley had finally shaken off the hangover from the Dot Com Bubble and things were back in full swing. Steve Jobs had just introduced the iPod Shuffle to the world, the latest in a long line of tech hit wonders that were about to send Apple share prices into the stratosphere. Google Maps had just gone live, destined to send paper maps the way of the dodo bird. And the demand for high-tech engineers was about to go into overdrive. Google’s human resources department had recommended that the company “dramatically increase the engineering hiring rate”, which would involve “drain[ing] competitors to accomplish this rate of hiring.” In other words, Silicon Valley appeared to be on the brink of a bidding war for high-tech talent, threatening to stifle growth, profit margins and share prices.

Cue the quick-thinking CEOs of Silicon Valley, who got together and formed a pact not to recruit or hire each other’s employees and stave off the bidding war. The day was saved! Capitalism had prevailed!

Or had it?

Not according to an antitrust lawsuit filed by the Department of Justice in 2010 and a civil class action lawsuit filed against Adobe, Apple Inc., Google, Intel, Intuit, Pixar and Lucasfilm in 2011. According to the lawsuits, what Steve Jobs, Eric Reid and company had done was nothing less than an anti-competitive conspiracy to violate federal and state antitrust laws. The lawsuits estimated that the wages of over 100,000 tech employees were unlawfully reduced as a result of the illegal pact, leading to an estimated $9 billion in wages effectively stolen from them to pad the tech giant’s profit margins.

As one publication noted, there is a certain irony in the fact that spiraling demand for high-tech engineers may actually have lead to a reduction of their wages.

David Pando of Pando Daily has constructed an authoritative account of how the tech giants formed and maintained the pact to keep high tech wages down. He quotes from numerous emails that clearly weren’t vetted by any lawyers before they were sent. Based on the emails, it is clear Steve Jobs wasn’t exactly shy about bullying and goading other CEOs into line.

When Google began recruiting Apple’s Safari team, Jobs shot off this email to Google CEO Sergey Brin: “If you [Brin] hire a single one of these people that means war.” Brin immediately ordered a freeze on all recruiting of Apple employees.

Likewise, when Adobe began recruiting junior-level Apple employees, Jobs emailed Adobe CEO Bruce Chizen asking for an explanation. Chizen replied that he had thought the pact was limited to non-recruitment of senior level employees. Jobs then threatened: “OK, I’ll tell our recruiters they are free to approach any Adobe employee who is not a Sr. Director or VP. Am I understanding your position correctly?” Chizen immediately backed down and agreed to stop all efforts to recruit any Apple employees. Chizen told his staff: “if I tell Steve [Jobs] it’s open season (other than senior managers), he will deliberately poach Adobe just to prove a point. Knowing Steve, he will go after some of our top Mac talent…and he will do it in a way in which they will be enticed to come (extraordinary packages and Steve wooing).”

For all its glitz and glamour, Silicon Valley is becoming a tale of two cities, of haves and have-nots. John Plender of the Financial Times has calculated that Apple, Microsoft, Google, Cisco, Oracle, Qualcomm and Facebook have amassed a cash pile amounting to a staggering $340 billion in the form of cash and liquid investments. Awash in cash, these tech giants had no good reason to break the law in order to steal $9 billion from its own employees.

Unfortunately, civic responsibility is in exceedingly short supply in Silicon Valley nowadays. According to one study, the gap between the privileged and the rest in Silicon Valley has only grown more vast over time. The average house in Palo Alto sold for more than two million dollars in 2013. There are fifty or so billionaires and tens of thousands of millionaires in Silicon Valley. Meanwhile, poverty levels have also hit record levels accompanied by a 20% rise in homelessness due to soaring housing prices. Emmett Carson, chief executive of the Silicon Valley Community Foundation put it thus: “Rising tides do not lift all boats. . . We have to be intentional as a community about addressing inequality.”

George Packer of the New Yorker suggests tech titans have turned a blind eye toward the plight of their lesser brethren in part because they have constructed and lived in their own virtual worlds, physically and mentally aloof from their surrounding communities: “At Facebook, employees can eat sushi or burritos, lift weights, get a haircut, have their clothes dry-cleaned, and see a dentist, all without leaving work. Apple, meanwhile, plans to spend nearly five billion dollars to build a giant, impenetrable ringed headquarters in the middle of a park that is technically part of Cupertino. These inward-looking places keep tech workers from having even accidental contact with the surrounding community.”

This epidemic of moral aloofness has not infected all. Palm CEO Edward Collagan was one of the few willing to stand up to Jobs and fight for his workers. He emailed Jobs: “[Y]our proposal that we agree that neither company will hire the other’s employees, regardless of the individual’s desires, is not only wrong, it is likely illegal.…I can’t deny people who elect to pursue their livelihood at Palm the right to do so simply because they now work for Apple, and I wouldn’t want you to do that to current Palm employees.”

Fast forward to 2014. Palm is no longer around. Apple continues to dominate the tech world. And that class action? It settled for $20 million, a fraction of the $9 billion estimated to have been stolen from high-tech workers. What’s that saying about good guys finishing last?

About Eugene Lee

Eugene D. Lee represents employees throughout California who seek to protect their legal rights in the workplace. Mr. Lee has obtained numerous six- and seven-figure settlements and judgments for employees throughout California. Mr. Lee received a B.A. with honors from Harvard University, and a J.D. with honors from the University of Michigan Law School. Prior to starting his own firm, Mr. Lee was a lawyer in the New York offices of Shearman & Sterling and Sullivan & Cromwell.

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