IBM is not new to being sued for shortchanging its sales employees when it comes to handing out their commission. As of now, the multinational giant – nicknamed ‘Big Blue’ – is facing at least a dozen cases worldwide of non-payment or underpayment of sales commission to its employees.
International Business Machines Corporation (IBM) is an American multinational technology and consulting company headquartered in Armonk, New York. It is one of the largest employers in the world, with more than 350,000 employees employed in 170 countries.
In Pakistan, the stature of the company is no different. For fresh technology and IT graduates and experienced professionals alike, a job at the IBM is a coveted opportunity.
However, in recent years, IBM has found itself – increasingly frequently – facing legal complaints and class action lawsuits for denying full payment of commissions to its employees.
After several court cases, (and evidently not-damaging-enough stories in the international media), now the practice of depriving employees of their due compensation has apparently come to Pakistan.
Case Study from the US
Most of the cases of the sort are concentrated in the United States with lawsuits ongoing in North Carolina and Georgia. But recently it has come to light that IBM has also refused to pay the due commission to one of its sales employees in Pakistan.
In November 2019, a team of Whitfield Bryson & Mason LLP, helmed by Raleigh, North Carolina based Partner Matthew E. Lee and Attorney Jeremy Williams, secured a major victory against International Business Machines Corporation (IBM) for its employee David Swafford after he was denied his rightfully earned sales commissions. Swafford had alleged that IBM underpaid him $249,675 in commissions for sales he made in 2016.
Earlier in 2019, another sales representative, Jerome Beard, had filed a similar lawsuit for non-payment of his full sales commission. In August 2020, a security client executive Bruce Reingold filed a lawsuit against IBM for withholding payment of $350,000 against his sales commissions. The same year, a 17-year veteran of IBM, Mark Comin, also sued the company for not paying the amount of commission he was promised at the time of assigning of the sales task.
According to a practicing attorney in the US, Matthew Lee, who was quoted by The Register, there are at least two dozen lawsuits filed against the Big Blue for withholding payment of sales commissions. A lawsuit filed against IBM in California revealed that from 2013 to 2015, IBM secretly underpaid its sales representatives in the US by more than $40 million.
The Story Here in Pakistan…
The employee at the receiving end of this denied payment this time is from Lahore. (To preserve the anonymity of the said employee, we will not mention his real name. For the ensuing discussion, let’s call him Umair).
Umair is employed as the “Territory Manager” in the Global Technology Services Department at the Lahore office since January 2017.
Here in Pakistan, IBM offers 55 percent of the salary as fixed, and 45 percent variable, dictated by Incentive Plans, offered to employees, semi-annually.
During the course of his employment, Umair was offered five IBM Sales Incentive Plans. In January 2019, he was offered another incentive plan comprising of primary and secondary signings. It was this plan that led to an ongoing lawsuit for the past year.
According to the official documents obtained by ProPakistani, the performance to date (PTD) offered to Umair for primary signings was $5,710,000, against which he managed to bring $13,770,017. For Secondary signings, he was given the target of $76,000 against which he managed to bring $7,333,617.
In both cases, the employee performed far better than the assigned targets. This is not unusual for sales employees, especially in companies that offer ‘uncapped’ commissions, as IBM also led their employees to believe. (More on this below).
To make it easier for our readers to understand, according to Harvard Business Review, “An individual’s PTD is defined as the ratio of cumulative revenue produced in a bonus period to the quota that needs to be met. For example, if a salesperson’s first-quarter quota is $400K and she has produced $200K in total at the end of February, the PTD is 50% against the first quarter quota at that point in time”.
With the results that Umair produced against the given PTD, the calculated amount of commission as per the IBM formulae, and what was promised in the incentive plan, amounts to approximately Rs. 5.5 million for primary signings and north of Rs. 85 million for secondary signings. (Disclaimer: We do not have access to the inner workings of IBM’s salary calculation formulae, except the breakdown into fixed and variable salaries. These figures have been taken directly from the case files, which include plaintiff’s application as well as signed documents by IBM).
In May 2019, a small-size contract was signed, and payment was made in June as per incentive plan terms without any objection.. In June 2019, two large deals were signed. The agreed upon payment was due in July, but in August, IBM rejected the payment saying it is “extra ordinary”.
The documents also revealed that upon Umair’s complaints to IBM for the non-payment of his due commission, he was told in October 2019 that the initial targets given to him in January 2019 were “miscalculated” and IBM will revise those targets retrospectively according to the new calculations the amount he has already received is the only amount that he was truly owed.
As a result of these actions by IBM, Umair has only received a little over Rs. 9 million out of the total Rs. 90.5 million, until the publishing of this story.
Another thing that highlights the case of IBMs dishonesty is that the case against them was filed in January 2019 and IBM didn’t file any reply to the allegations and kept seeking time on one pretext or the other.
According to Court records, the only effort made by IBM so far to resolve the situation is to request the court to dismiss the petition, along with many other usual tactics of delaying the hearings instead of presenting any counter-arguments.
So is IBM really ‘I Block Money’
The Register published a story about such a lawsuit, with the title “I Block Money”. That seems to be turning out true in Pakistan as well.
IBM has not answered any of the queries by ProPakistani until the time of publishing of this article. Despite repeated calls and emails to their Country General Manager Rana Ghanzanfar Ali, Takreem El Tohamy General Manager MEA, and their legal counsel Ajay Dua, the only response received from them was from their External Relations Manager, IBM Middle East & Africa, Jumana Akkawi, who said, “We do not discuss human resource matters publicly.”
They were asked three simple questions:
- Whether they tell their employees that their commissions are going to be capped?
- What justification they may have for retrospectively changing PTD targets?
- And if they are not to be blamed for the current case, why haven’t they yet attempted to close the case, through litigation or through mitigation and out of court settlement?
Despite the absence of any answer from IBM, a look into details of international litigation against IBM might reveal some answers. While it is difficult to obtain the court rulings from the lawsuits that IBM lost in the United States, the media coverage of David Swafford’s case does shed some light.
This case is important because it was in these proceedings that it came to light that IBM had repeatedly circulated educational material to its employees stating that their commission on sales would be “uncapped”.
There is an obvious justification for that, which is that in case of capped commissions employees are unlikely to go the extra mile and achieve the results that they will in case their commissions are directly proportional to the sales they bring for IBM.
The lawsuit against IBM, that was filed in Pakistan, also points out how IBM did acknowledge the receipt of the primary and secondary signings that Umair brought to the company, and it was only afterwards that they decided to claim that the initial targets offered to him were miscalculated.
The lawsuit is still playing out as IBM continues to face complaints about not just the non-payment of commissions but also on its labor practices on other fronts.
The Herald Sun reported that the company has been through multiple waves of layoffs, prompting questions on social media and otherwise about whether it’s consciously trying to push out middle-aged employees in violation of age-discrimination laws.
With all these allegations catching media hype and social backlash, would IBM continue to operate at the same level of impunity and whether it will be able to maintain its hold on the corporate and technological executives of tomorrow is only for the time to tell.
