AT&T sued over layoffs—after promising more investment because of tax cut

AT&T explanation of layoffs undercuts claim that net neutrality hurt investment.

AT&T is “instituting an unprecedented massive layoff of employees represented by the union while at the same time massively subcontracting work that the employees are trained and qualified to perform,” the Communications Workers of America (CWA) said in a lawsuit filed Saturday in US District Court in Austin, Texas. The union also filed a complaint with the National Labor Relations Board.

When contacted by Ars today, AT&T didn’t deny the layoffs but said the union allegations that AT&T violated collective bargaining agreements are “baseless.”

AT&T also defended its employment levels. In doing so, AT&T undercut some of its own previous arguments that net neutrality rules suppress investment and that AT&T needed a big tax cut in order to boost investment.

When AT&T lobbies for favors from the government, it offers a black-and-white description of network investment. If the government does what AT&T wants, AT&T will increase investment, and vice versa, AT&T’s argument goes.

AT&T thus announced in November that it would invest “an additional $1 billion” if Congress passed a tax reform bill—but the telco never said what the exact level of investment would have been if the tax bill wasn’t passed.

Similarly, when AT&T wanted the Federal Communications Commission to repeal its Title II net neutrality rules, AT&T CEO Randall Stephenson said that Title II regulation is “suppressive to investment.”

AT&T got both the tax cut and the net neutrality repeal but then started laying employees off. AT&T’s explanation of the layoffs demonstrates that the company’s hiring practices are based on specific needs and changes in technology and are not direct responses to government actions.

“Despite its claim that a corporate tax cut would create thousands of middle-class jobs in its industry, AT&T recently announced that hundreds of workers in the Southwest would be declared ‘surplus’ and subject to layoff,” CWA said in an announcement of its lawsuit.

Here’s what an AT&T spokesperson told us today:

We’re adding people in many parts of our business that are experiencing higher customer demand. At the same time, technology improvements are driving higher efficiencies and there are some areas where demand for our legacy services continues to decline, and we’re adjusting our workforce in some of those areas.

We’ll work to find other AT&T jobs for as many affected employees as possible. Regarding premises technicians, we adjust the workforce based on changing market dynamics, which vary from region to region. In some regions, we are hiring these same resources and these employees have the opportunity to transfer to those locations. It’s important to note that we still have thousands more premises technicians than we did two years ago.

There are a few notable bits in there. When AT&T says it adds people in parts of its business that have growing customer demand and lowers staff in areas with less demand, it’s acknowledging a simple business reality that is at odds with its claim that a tax cut will boost its investment by the specific amount of $1 billion. Hiring is intended to bring in more customers and revenue, and layoffs reduce spending to match a lower revenue opportunity; by AT&T’s own admission, it hires employees to meet customer demand and reduces staff in areas with lessening demand even when it gets a tax cut that it claims will boost investment.

AT&T also argues that lower employment itself isn’t a sign that AT&T isn’t investing, because “technology improvements are driving higher efficiencies,” allowing AT&T to do more with less.

That stance is hard to square with what AT&T said when it was arguing for a repeal of net neutrality rules. AT&T told the FCC then that “a reduction in relevant capital spending during the period immediately following adoption of the Title II Order” shows that the rules harmed investment. But since AT&T says that spending also declines when technology improvements drive higher efficiencies, there’s no reason to conclude that any particular decline was caused by any particular government regulation.

Indeed, AT&T told the FCC in 2010 that capital investments are based on technology upgrade cycles and should not be expected to rise year after year. Capital investments are naturally “lumpy,” rising and falling from one year to the next based on specific needs at specific times, AT&T said at the time.

The difference is that in 2010, AT&T was asking the FCC to declare that the wireless market is competitive, and it didn’t want a slight decline in spending to be seen as a problem. In 2017, a slight decline in spending was touted by AT&T as a problem because it wanted the FCC to eliminate net neutrality rules.

Finally, AT&T’s statement today said that “we still have thousands more premises technicians than we did two years ago.” In other words, AT&T says that it greatly expanded its workforce during a two-year period when the Title II net neutrality rules were in place.

We asked the AT&T spokesperson to explain how the telco was able to boost its workforce despite the burden of net neutrality rules, and we’re still waiting for an answer. But AT&T’s statement that it has boosted staff under the Title II rules confirms what AT&T has occasionally admitted to investors—that the net neutrality rules did not hinder its business plans.

Similarly, Comcast recently claimed that it will invest more than $50 billion in infrastructure over the next five years because of the repeal of net neutrality rules and the new tax overhaul. However, Comcast’s own data shows that the company’s investments soared while the net neutrality rules were in place and would hit the “new” milestone if its investments continued increasing by a modest amount.

Layoffs are reportedly happening nationwide and affecting thousands of jobs, but the CWA and AFL/CIO lawsuit against AT&T focuses on 713 layoffs in Texas, Oklahoma, Arkansas, Missouri, and Kansas.

“The alleged reason given by the Company for this extensive layoff, ‘reduction in workload,’ is palpably false,” the union’s complaint in US District Court says. “There is no reduction in workload. The Company’s business is booming and earning massive profits.”

AT&T is laying off employees and replacing them with subcontractors in order to weaken the union, the complaint says.

“In light of the fact that the work 713 employees perform is being performed by subcontractors, the true reason is bad faith diminution of the bargaining unit,” the complaint says. AT&T refused to consider alternatives to layoffs, the complaint says.

The move “constitutes a blatant act of bad faith and breach of the promise of respectful and fair dealings set forth in the parties’ Agreement,” the union said. The complaint asks the court for an injunction requiring AT&T to reinstate the former employees to their positions and to provide them with lost earnings.

AT&T told Ars, “The fact is the allegations in the lawsuit are baseless. We comply with the terms of our collective bargaining agreements and did so in this case.”

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