- Associated Press - Saturday, March 29, 2014

MEMPHIS, Tenn. (AP) - A call center company lauded by politicians for planning to open a facility in Memphis and add 1,000 jobs has been cited by the federal government for alleged violations of labor laws.

Conduit Global announced in January that it was bringing its call-center operations to Shelby County in an event attended by Gov. Bill Haslam and other local and state political leaders.

However, according to The Commercial Appeal (https://bit.ly/1gzB63F), the U.S. Department of Labor says Conduit Global has violated labor laws, including record-keeping violations and failing to pay overtime and minimum wage. The Labor Department says that between 2009 and 2013, the New York firm shortchanged more than 14,000 people throughout the nation, the newspaper reported.

The company agreed in January 2013 to a settlement without admitting or denying the charges.

Conduit Global is a brand name for kgb USA, a New York firm founded by former Wall Street executive Robert Pines, according to the newspaper.

The company advertised a service called 542542 in which people could text questions to that number from their cellphones. A company website lists a few, such as “Why does ear wax turn brown inside of your ear?”

The answers came from operators searching the Internet at home.

Known as “special agents,” the operators were paid five to 10 cents per answer and often earned less than minimum wage of $7.25 per hour, according to court records. The company called them independent contractors, but U.S. Department of Labor officials argued they were employees subject to federal protection.

After a three-year investigation, the company agreed to settle. Back wages were paid to 14,568 current and former employees spread throughout the country. The back wages totaled $1.3 million, the newspaper reported.

The settlement “was a decision based on risk to the business,” said Jennifer Nellany, Conduit Global general counsel.

“We didn’t want to allocate any more resources to fighting it and we came up with a settlement that we thought was an acceptable amount based on the resources it was taxing in terms of internal resources and legal fees to defend the lawsuit going forward,” she said.

Tennessee’s state funding board reviewed the Conduit Global project at a Feb. 5 meeting in Nashville and approved $2 million in subsidies, but there’s no record in the meeting minutes that board members discussed the Department of Labor action.

State recruiters were aware of the U.S. Department of Labor action, said Clint Brewer, an assistant commissioner with the Tennessee economic development department.

“The company certainly didn’t try to hide it,” he said.

Factors such as the high job count caused the state to move ahead with the deal, Brewer said.

He also said that the company does not plan to repeat in Memphis the business model that got them in trouble.

In Memphis, officials were not put off by the firm’s actions.

“Some of our most important and successful local companies have run into issues,” said Reid Dulberger, head of EDGE, the Economic Development Growth Engine.

Very few states and cities withhold economic incentives from companies that have faced regulatory actions, said Greg LeRoy of Good Jobs First, a Washington-based group that criticizes subsidies.


Information from: The Commercial Appeal, https://www.commercialappeal.com

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