Class Action against IBM settles

In a landmark class action lawsuit, instituted in January 2006, IBM recently announced that it has agreed to settle the case for a total of US$65 million. The class-action was brought in the US District Court in San Francisco on behalf of three employees, who claimed that they were not compensated for working overtime above their 40-hour work week and also on weekends.

The result of the case is that millions of dollars will reportedly be paid to some 32,000 of IBM’s US IT support staff including system administrators, network technicians and other technical support staff.

IBM reportedly employs more than 250,000 workers.

The case was brought as a result of IBM’s classification of “Technical Services Professional and Information Technology Specialists” as highly skilled professionals that it alleged were exempt from US overtime laws pursuant to legislation known as the US Fair Labor Standards Act and also under California labour laws. The plaintiffs claimed that they were unfairly labelled by IBM and should have been paid overtime.

Without admission of liability, IBM chose to settle the case, releasing a statement that “Litigation of this case would have been lengthy, burdensome and expensive, and IBM chose to resolve it”.

In concluding, IBM stated that “during its 90-year history as a major employer in the US, it has a long-standing and proven track record in accurately and appropriately paying many hundreds of thousands of employees. IBM continues to believe that its payment practices are fair and comply with all applicable laws and regulations.”

The case is not the first class action lawsuit brought against employers in the IT channel. For example, the settlement comes in the wake of a lawsuit that was settled earlier this month by Software maker Siebel Systems Inc, wherein workers are expected to receive a payout of some US$27.5 million.

Class actions allow a group, such as a group of employees of a corporation, to formulate a combined claim as an alternative to bringing separate, individual court actions.

Class actions are a form of litigation generally involving a large number of people whose cases involve common issues of law and fact. These people are known as members of the class. In Australia, class actions are known as representative proceedings and group proceedings, depending on the jurisdiction in which the class action is launched.

Litigation in class actions, like other court cases, can result in significant costs being incurred.

In certain circumstances such as the IBM case, it may be in either or both parties’ interests to settle the case in order to avoid the costs and other negative consequences that can flow from litigation. Generally, in litigation that goes all the way to a hearing, the losing party pays the costs of the winning party. The majority of cases, like the IBM case, are settled before the case is determined by a court.

In Australia, there is a range of laws that apply to employees. In certain circumstances, there will be awards that apply to employees and there are other laws that come into play in the workplace including occupational health and safety laws and compulsory superannuation laws, privacy laws, electronic surveillance laws and more.

IT organisations should take note of American industrial relations cases, which although did not result in a decision from a court of law, did result in a settlement involving substantial payouts by the defendant IT organisation corporations to the plaintiffs of the class action.

Disclaimer: This column is for general informational purposes only. It is not legal advice nor is it a substitute for legal advice. Readers should seek legal advice on their own particular circumstances.

Alan Arnott is a technology and telecommunications lawyer with qualifications in computer science and law with Arnotts Lawyers in Sydney. For more information, please visit: www.technologylaw.com.au or www.arnotts.net.au.

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