Deutsche Telekom under microscope over working conditions at T-Mobile including 'dunce cap' allegations
Published 07/01/2016 | 12:45
Deutsche Telekom (DTEGn.DE) is facing growing pressure from investors and lawmakers to ensure proper treatment of workers at its American business T-Mobile US (TMUS.O).
The German company's biggest subsidiary has enjoyed two years of rapid expansion in a fiercely competitive U.S. market that has seen it overtake its closest rival Sprint (S.N) in terms of subscribers.
But it has been accused by its main labor union, the Communications Workers of America (CWA), of flouting employees' rights and was last year found to have engaged in illegal work practices in two U.S. National Labor Relations Board cases.
T-Mobile, which has about 45,000 employees, says it abides by the law and denies mistreating workers.
Two major investors in Deutsche Telekom have expressed concern to the company about the treatment of T-Mobile employees, according to sources. Lawmakers in Washington and Berlin have, meanwhile, called on the German government - which controls 30 percent of Deutsche Telekom - to put pressure on the company to ensure its U.S. business respects workers' rights.
Pension fund manager APG Asset Management, which owns 0.15 percent of Deutsche Telekom, told Reuters it had requested an update on T-Mobile's treatment of workers in light of rulings by the U.S. National Labor Relations Board (NLRB) and the CWA allegations. "Based on this (update), we will consider our position," it said, without elaborating.
In 2011, APG removed Wal-Mart (WMT.N) from its portfolio, citing working conditions and insufficient willingness to allow staff to unionize.
"Human capital management is very important to us," said APG sustainability specialist Anna Pot. "It is an important indicator of the quality of management."
Norges Bank Investment Management (NBIM) - Deutsche Telekom's fourth-biggest shareholder with a 1.6 percent stake - has also expressed concerns to the company about the treatment of U.S. workers, according to two sources familiar with the matter.
NBIM said it had a policy of not commenting on specific investments or companies.
A senior manager at another top-30 Deutsche Telekom shareholder, who declined to be named because his employer does not allow him to discuss individual investments, said it was also concerned about the treatment of U.S. workers, but had not raised the issue with the German company.
Deutsche Telekom declined to comment, saying discussions with its shareholders were confidential.
Following complaints from the CWA, a judge on the National Labor Relations Board (NLRB) ruled in March that a number of T-Mobile's national policies were illegal.
The violations included those that prohibited employees from discussing wages with colleagues, speaking to the media about their work environment and seeking help from co-workers to gather evidence in disciplinary proceedings.
T-Mobile is appealing against the rulings on two of the 11 practices judged illegal, but has accepted the decisions on the other nine. At the time, it said the judge's rulings on the 11 policies were only on "a technical issue in the law", adding: "There are no allegations that any employee has been impacted by these policies."
In a second case, the NLRB ruled in August that T-Mobile's policy of prohibiting staff in call centers in South Carolina and Maine from talking to colleagues or others about employment conditions was illegal, as was asking workers to sign confidentiality agreements during internal investigations.
The company said it had changed its rules in response to the NLRB's decision, but declined to give further details. It said at the time it found the decision "puzzling, since T-Mobile's approach to confidentiality is consistent with the National Labor Relations Board's own investigation manual".
Separately from the NLRB cases, the CWA has documented several cases of alleged mistreatment of employees. They include allegations bosses yelled at call center staff, told those with low sales figures to wear "dunce" caps and banned a pregnant worker from taking bathroom breaks.
T-Mobile US declined to comment on individual cases. Deutsche Telekom said the cases documented by the union were isolated incidents.
The issue of the U.S. carrier's treatment of staff is also making political waves in Germany.
German trade union Verdi has taken up the CWA's case with the Berlin government. It organized a petition on the German parliament website, which has drawn around 50,000 signatures, demanding that the finance ministry ensure workers' rights are upheld at T-Mobile US.
Following the second NLRB ruling, 25 members of the U.S. Congress sent a letter to German Chancellor Angela Merkel, urging her to look into the matter. "We respectfully request action by your government as a significant shareholder to call on Deutsche Telekom and T-Mobile to fully respect workers' rights in the U.S.," they wrote in November.
Last April, German Green lawmaker Beate Mueller-Gemmeke made a similar appeal to the government, which said in a written response that it respected the T-Mobile US workers' rights "in accordance with U.S. law".
Asked by Reuters for comment, the German finance ministry, which is responsible for the country's shareholdings, declined to comment.
By offering a slew of affordable mobile plans and perks like free music and video streaming, T-Mobile US overtook Sprint last year in a race for subscribers, though both still lag Verizon (VZ.N) and AT&T (T.N). With more than 61 million customers as of September 30, T-Mobile has a market share of about 16 percent.
The turnaround has caught the attention of potential suitors. In 2014, Sprint was in talks with Deutsche Telekom to acquire T-Mobile, but they were abandoned in the face of opposition from antitrust regulators. Talks last year over merging the business with Dish Networks (DISH.O) stalled over disagreements about valuations.
The allegations from the CWA of mistreatment of individual T-Mobile workers were compiled in a report the union published in July. The union said it had documented scores of incidents.
In T-Mobile US's Chattanooga call center, former customer service worker Julia Crouse said workers were humiliated if they did not meet their targets when she worked there in 2010.
"The person who had the lowest (sales) stats would end up wearing a dunce hat and then with the stuffed turtle ... it would be on your desk," she told Reuters.
She left the company shortly after the alleged bullying and didn't lodge complaints about her treatment.
T-Mobile US declined to comment on individual cases but said Chief Executive John Legere and other senior managers visited call centers regularly and have an "open dialogue" with staff.
The company declined to disclose its average call center staff turnover rate. However during an NLRB court case in 2014, it said the turnover rate at the Wichita center was 74 percent in the previous year.
That is more than double the overall U.S. call center industry's average across various sectors, which is 25 to 35 percent, according to Forrester Research analyst Art Schoeller.
A T-Mobile spokesperson said that "currently the average retention rates at T-Mobile call centers are better than ever and are within the range of the Forrester Research analyst."