IBM Sales Commission Lawsuit
International Business Machines (IBM) is being accused of using “bait and switch” tactics to underpay its sales representatives.
IBM advises its sales representatives that their income is limited only by how much they are able to sell. But according to the sales representatives who have sold its products and services, IBM’s claims are untrue. In fact, sales representatives allege in multiple lawsuits that IBM intentionally misled them about its “uncapped commissions” program, incentivizing representatives to pursue large deals, then capping their commissions once a deal was reached.
Lawsuits Accuse IBM of Lowering Commissions
Milberg attorneys have settled lawsuits on behalf of IBM sales representatives who have sued the company for allegedly reducing their commission payments. Milberg also won a jury verdict against IBM on behalf of a former manager who was terminated after reporting racial bias in connection with unpaid commissions.
David Swafford v. IBM
David Swafford, an IBM sales representative since 2009, filed a lawsuit against IBM in 2018 in United States District Court in San Francisco. According to Swafford’s lawsuit, the company unequivocally told salespeople that commissions were uncapped. After he closed two large deals for IBM in 2016, Swafford was owed a commission of nearly $1 million. However, he was paid only a portion of those commissions. At the time his lawsuit was filed, he was still owed approximately $250,000 in commissions that were arbitrarily capped by IBM.
Swafford’s case alleged that IBM committed fraud and violated California Labor Code. The case settled confidentially in November 2019.
Matthew E. Lee, a partner at Milberg, said that workers like Swafford spent years boosting IBM’s bottom line but were never compensated for the commissions they were owed.
“IBM promised them payment for their hard work, and then changed the rules after the fact, instead penalizing the most productive sales employees for going above and beyond their sales quotas,” said Lee in a press release.
Choplin v. IBM
Lee also settled a case on behalf of Bobby Choplin, who was paid $296,568 less in commissions than he was owed.
IBM agreed to settle after a judge denied its attempt to have the case tossed out of a North Carolina district court.
IBM: “No Enforceable Contract”
IBM has relied on a legal loophole to avoid the payment of commissions by providing salespeople with a document called an Incentive Plan Letter (IPL), which IBM claims is “not an enforceable contract.” Without a valid contract, IBM contends that it may cap commission payments at its discretion.
Plaintiffs contend that IBM uses this strategy to recruit in a highly competitive field, enticing high-performing representatives with a misleading “uncapped commission” program. While this bait and switch tactic has avoided legal consequences for years, the tide has turned against IBM.
During a deposition, IBM’s finance manager said that the company held back a combined $43.4 million in prospective commissions in 2013, 2014, and 2015, reports the News & Observer.
IBM’s Pattern of Mistreating Workers
Over that last fifteen years, around two dozen salespeople have sued IBM for failing to pay promised commissions but the company’s legal woes have not been limited to unpaid commission allegations.
In April 2021, Milberg won an $11.1 million verdict on behalf of client Scott Kingston, who worked as an IBM sales manager for 17 years. Kingston claimed the company wrongfully terminated him after he raised claims of racial bias against a black sales executive, Jerome Beard, who had his commissions slashed.
Kingston also alleged that he was not paid all commissions owed to him by IBM in the first quarter of 2018. A Washington State jury awarded Kingston $1.9 million in past economic losses, $3.1 million in future economic losses, $113,000 in unpaid sales commissions, and $6 million in emotional distress damages.
The company eventually settled a lawsuit filed by Beard, who claimed he was denied $2.4 million in commissions due to fraud and racial bias. Milberg’s Lee similarly represented Beard.
“We are proud of our client for standing up for what’s right,” said Lee. “He deserved justice and, after three long years, this verdict has given him that.”
IBM also faces a class action lawsuit related to age discrimination charges.
A former IBM salesman who claims he was laid off due to his age said IBM is a difficult opponent in court, calling them, “a law firm that happens to own an IT company. They’ve got lawyers everywhere,” he told the News & Observer.
IBM Unpaid Commission Lawsuit Review
Current and past employees of IBM may be entitled to significant compensation if they were denied their rightfully earned commissions.
If your commissions were capped and you’re owed money, contact Milberg for a free legal consultation.