Apple Lawsuit Could Decide Whether Network Engineers Are Eligible for Overtime Pay

CIO — The class action lawsuit network engineer David Walsh filed in U.S. District Court in California earlier this week against his former employer, Apple, for violating labor laws is a potentially high-profile and precedent setting case, says a legal expert.

In the suit, Walsh, a former senior network engineer, alleges that Apple misclassified network engineers and network support staff as exempt from protections enacted by the federal Fair Labor Standards Act (FLSA) and state overtime laws when they should have been classified as nonexempt, and as such, should have been eligible for overtime pay.

As a result of this alleged misclassification, the plaintiffs charge that Apple violated federal and state labor laws when it failed to provide Walsh and other network support staff with regular and overtime pay for routinely having to work more than eight hours a day, more than 40 hours a week and weekends. (In 2006, current and former IBM workers sued Big Blue for denying them overtime. IBM settled the case for $65 million in November that year.)

If the case goes to court, a jury will decide whether or not network engineers and administrators are exempt from federal and state labor laws, and therefore, whether they are eligible for overtime pay, says Jules Crystal, a partner in the Chicago office of law firm Bryan Cave LLC. Employers generally classify employees involved in "computer systems analysis" who exercise independent judgment and possess specialized knowledge as nonexempt workers, and therefore they aren't eligible for overtime, says Crystal.

The question in the Apple case, then, is essentially whether network engineers are knowledge workers who exercise independent judgment related to significant business matters, or whether they're laborers who carry out the physical tasks of installing, configuring and maintaining network equipment.

But the case probably won't get to court, says Crystal, who represents employers in labor relations matters. He thinks it will be settled out of court for a variety of reasons.

First of all, a lengthy court battle will be very expensive for Apple. Crystal notes that the case could go on for years if it does go to court because the complaint is so "hefty." It alleges six different counts of labor violations over a period of 12 years. That's an awful lot of back pay if a jury finds Apple guilty, especially since network administrators are relatively well compensated to begin with. Even though settlements from similar cases have topped $25 million (for a lawsuit against Rite Aid), says Crystal, a settlement could cost Apple less than protracted and very public court case.

Crystal also considers Apple's pristine public image and reputation as a good corporate citizen. He doesn't think the iPhone-maker will want to tarnish its reputation by going to court, nor does he think Apple will want to go to court and risk an adverse ruling.

"Do they want that imprimatur of disapproval from a jury rather than a settlement where they can issue a statement that says 'We don't feel we did anything wrong'?," says Crystal, who adds that Apple could negotiate for a confidential settlement with the plaintiffs. Then no one outside the case would ever know the amount Apple settled for.

Finally, Crystal notes that Apple needs to maintain good relations with current and potential employees. "They want to stay on good graces with them, and they want to go on making computers without this distraction," he says.