Technology giant Facebook has assumed an enviable position in the pantheon of American businesses. Alongside its eponymous social media platform, the company now owns Instagram, WhatsApp and virtual reality outfit Oculus VR, raking in nearly $4 billion in net income per financial quarter. But according to new legal allegations, Facebook has a problem with overtime pay. A federal lawsuit filed on Friday, October 27, 2017 by a former employee accuses the tech giant of misclassifying hundreds of workers as managers, Ars Technica reports.
Facebook Lawsuit: “Systematic” Wage Violations
As part of a “systematic, companywide” scheme, the former client solutions manager says, salaried employees who did not perform any managerial duties were intentionally mischaracterized as “executive” workers for the purposes of federal law. That classification system allowed Facebook to skirt federal and State labor laws, the suit continues, in part by withholding rightfully-earned overtime wages.
The Facebook overtime lawsuit (PDF) was filed in the US District Court for the Northern District of Illinois. The plaintiff says she worked at Facebook’s Chicago Office as a full-time salaried CSM between May 2013 and March 2017. The case has been logged as number 1:17-cv-7753.
Collective Action For 200+ Workers
The lawsuit is now seeking status as a collective action (similar to class action) under the Fair Labor Standards Act (FLSA), a federal law that governs minimum wage and overtime requirements for most of the country’s workers.
If approved, the case would be able to represent the interests of current and former Facebook employees who were labeled as client solutions managers, customer solutions managers, customer account managers and “other similarly titled positions.” The plaintiff estimates that at least 200 current and former workers could be able to secure back wages through the collective action’s FLSA claims. About 40 employees, the lawsuit continues, would be covered by the Illinois-specific allegations.
“This lawsuit is without merit and we will defend ourselves vigorously,” Facebook said in an emil to Ars Technica. An identical statement was sent to tech reporting site The Register.
Facebook Misclassified Salespeople, Plaintiff Says
In reality, the lawsuit notes, client solutions managers, customer solutions managers and customer account managers (referred to collectively as CSMs in the complaint) all do basically the same thing.
The plaintiff says she and similarly-situated employees were responsible for “communicating with existing Facebook advertising customers, implementing their marketing plans, and selling Facebook marketing products and services to existing customers.” A large share of the compensation for CSMs comes from commissions, the suit states, primarily “from the sale of Facebook’s marketing products.”
Former Employee: Managers In Name Alone
These are not management jobs, the plaintiff argues in court filings. Client solutions managers “do not perform duties related to the management or general business operations of Facebook,” she writes. Their “primary duties do not involve the exercise of discretion or independent judgment with respect to matters of significance […] all major strategic decisions for customers are made at the team level.”
How Sales Teams Work At Facebook
There’s a historical angle here that shouldn’t be left out. As the lawsuit outlines, CSMs work on sales teams, internally referred to as “pods.” Each pod is made up of Account Executives (or Client Partners), CSMs and, before 2015, Media Solutions Managers.
Account Executives are the people who actually interface with customers; they’re the real outside sales work-horses for Facebook, attempting to sell the company’s marketing products to businesses and individuals. Media Solutions Managers, on the other hand, take care of operations, actually implementing the marketing plans and reporting results.
Media Solutions Managers Were Entitled To Overtime
Crucial for the lawsuit, before being phased out, the Media Solutions Manager position was classified as “non-exempt,” the complaint states. That means Media Solutions Managers were entitled to overtime wages, according to both federal and Illinois labor law.
Labor laws normally define two types of employees: exempt and non-exempt. Non-exempt employees are entitled to overtime. Exempt employees aren’t. The question of “exemption” usually comes down to three factors:
- the worker makes a salary, a guaranteed amount of money regardless of hours worked
- the worker’s salary is at least $23,660 per year
- the worker’s primary job duties are “exempt”
Media Solutions Managers are paid on a salary basis, and it’s definitely higher than $23,660 per year. Glassdoor lists the average salary for a client solution manager at Facebook as $103,573. Additional commissions bring average compensation for the position to $158,126 per year.
Job Duties Make The Difference
That’s a good deal of money, but it’s really the “duties test” that decides whether or not an employee is entitled to overtime. You can make a super-high salary and still be entitled to overtime wages, just because you perform “non-exempt” duties. And the thing is, Facebook itself considered the job duties performed by a Media Solutions Manager as “non-exempt.” These workers, the lawsuit says, were entitled to overtime wages.
Then, in 2015, Facebook eliminated the Media Solutions Manager position, the plaintiff says. Facebook “reorganized its sales pod structure,” she writes, ultimately assigning “additional non-exempt duties” to CSMs. So Facebook cut down on Media Solutions Managers, but shifted their job duties onto client solutions managers, customer solutions managers and customer account managers.
Just about the only thing that wasn’t transferred from Media Solutions Managers to CSMs was the “non-exempt” overtime status. Despite being saddled with a raft of new duties, responsibilities that Facebook had once considered “non-exempt,” CSMs weren’t making any overtime. That flies in the face of federal and Illinois overtime laws, the lawsuit argues.
Outside vs. Inside Sales
The Fair Labor Standards Act has a specific exemption for outside sales people, because they so clearly resemble independent contractors, who aren’t entitled to overtime pay. A job in outside sales usually requires deep motivation and some level of independent managerial skill, according to job search site Monster.
Those general observations are reflected in federal labor law. The US Department of Labor describes the position like this: “outside sales employees sell their employer’s products, services, or facilities to customers away from their employer’s place of business, in general, either at the customer’s place of business or by selling door-to-door at the customer’s home.” That certainly doesn’t sound like a CSM at Facebook. More likely, client solutions managers should be considered inside sales people, who make sales from the employer’s place of business.
Violations May Be Rampant In Tech Industry
“Inside sales people are very commonly misclassified,” Chicago attorney Doug Werman told Crain’s Chicago Business. That’s especially true in the tech industry, where companies tend to grow fast, if they grow at all. When your business is hurtling into the future, riding a wave of venture capital, your first thoughts probably aren’t on building an effective HR department. “All [of a] sudden you’ve got 200 employees,” Werman continued, “and you’ve got all sorts of violations of wage and hour laws.”