HP accused of labor violations cover-up

Whistle-blower lawsuit claims managers were told to shred notes from meeting that revealed that the company was misclassifying workers.

Hewlett-Packard wrongly denied benefits to workers by misclassifying them as "contractors," deliberately destroyed evidence of the problem and retaliated against a whistle-blower trying to rectify the situation, according to two lawsuits.

One of the suits, brought by HP employee Mike McClendon, claims company managers were directed to shred their notes after an October 2003 meeting in which it became apparent that HP was violating the law.

In addition, a source close to the matter says, a complaint from McClendon related to the incident was sent more than a year ago to an HP ethics committee led by now interim Chief Executive Officer Robert Wayman, but no action was taken.

HP spokeswoman Monica Sarkar declined to comment on the specifics of the two suits, which were filed this month in federal court in Idaho. But, Sarkar said, "we believe they are both without merit." She also declined to comment on the claim about the ethics committee receiving McClendon's complaint, or whether it was still looking into the matter. But she said the committee "takes any issues raised to them very seriously, and they do investigate them."

The suits against HP come amid a wave of litigation related to work conditions in the technology industry, mostly focused on overtime pay in the computer game field. One of the HP suits is more akin to a lawsuit against Microsoft in 1990s brought by workers who were given labels such as "temporary" employees, "freelancers" and "independent contractors."

In that case, dubbed Vizcaino v. Microsoft, the workers claimed they were actually Microsoft employees entitled to various benefits. It ended in a $97 million settlement.

HP is facing a class action suit from 34 workers who claim they were "incorrectly classified by the company as 'contractors' or 'contingent workers' or other similar names" when they were actually "common law" employees according to criteria including a questionnaire used by the Internal Revenue Service. The suit alleges the workers were deprived of benefits such as vacation, holidays and leaves of absence.

The suit, which seeks more than $300 million in damages, claims to be on behalf of more than 3,000 employees throughout the country who have been mislabeled by HP as contractors.

McClendon's lawsuit against HP also arises from alleged misclassification of employees by the computer giant. An HP veteran of more than 20 years, McClendon managed a team of about 19 people, with 11 of them at one point classified by the company as contractors or also referred to as contingent workers, according to the suit. McClendon thought their employment designation was illegal, and alleged in the suit that "the practice of illegally classifying workers as contractors had become widespread throughout HP by the year 2003."

The purpose of the Oct. 14, 2003, meeting, according to the suit, was to learn from an HP attorney how to classify workers as contractors rather than employees in a legal way. But as the attorney reviewed the Vizcaino case, "it was apparent to those assembled that HP was violating the law in a manner that was virtually identical to the Microsoft case," the suit says.

The managers told those assembled to shred their notes, according to the suit. McClendon and others did so, the suit says, but he raised concerns in the wake of the incident.

"It is difficult to describe how shocked I was at this 'destroy all notes' order," McClendon said in a memo to HP Senior Vice President George Mulhern, according to the suit. "There is only one reason that we were being ordered to destroy our notes: We all knew that we were doing something very wrong, so we had to hide it. And a dozen people in that room were hiding it, conspiring as a group to hide it."

According to the suit, HP retaliated against McClendon after he expressed his concerns, in part by terminating his position as a team leader. The suit claims HP violated whistle-blower protection provisions of the Sarbanes-Oxley Corporate and Criminal Accountability Act and the Employee Retirement Income Act.

Among other things, the suit seeks economic damages as well as the reinstatement of McClendon to his management position.

McClenden also asks the court to order HP to release him from an alleged "gag order" keeping him from talking to co-workers about the subject of the litigation or the illegality of misclassifying HP employees.

"Plaintiff desires to be able to speak out because throughout the early part of his 22-year career, HP was an exceptionally fine employer, valued its employees, and contributed to the welfare of the economy and the work force," the suit says. "Plaintiff believes it is in the public interest and in the interest of the shareholders and employees of the company that the illegal practices cease and that the company return to its once-held posture of being one of the finest employers among the major corporations of America."

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