Author: Christina Comben

The UK sandwich giant Pret A Manger will pay $875,000 to settle claims with its underpaid staff in New York. Earlier this month, employees filed a class-action lawsuit against the company, accusing the fast-food chain of violating US labor laws through an illegal practice called “time-shaving.”

Pret A Manger Rounded Down Working Hours to Pay Less

According to its employees, Pret A Manger wanted to profit from its staff by altering time records. The sandwich seller tried to avoid paying employees for part of the hours they worked, as well as overtime rates.

After some mediation, staff managed to squeeze $875,000 in unpaid compensation out of the company, according to The Times.

It’s the second time Pret A Manger has been forced to pay almost $1 million to settle wage claims with American employees. Back in 2014, 4,000 staff members from New York filed a similar lawsuit against the fast-food chain to recuperate their money.

Just like this time around, employees hadn’t received overtime pay for the hours worked. In the first lawsuit, staff also accused Pret A Manger of illegal tip-pooling and not providing them with the appropriate wage statements. For the first settlement, the restaurant chain paid $910,000. The company did not admit liability, however.

But with the reputation of being a bad employer, the picture doesn’t look too good for the sandwich-making giant, although, the company insists that they treat staff correctly and offer fair pay. A spokesperson for Pret A Manger told City AM:

“We are absolutely committed to making sure all our team members are paid for all the hours that they work.”

Several Lawsuits for Pret A Manger

Whether that statement was dealt with any real conviction or not remains to be seen, since Pret A Manger seems to be leaping from one scandal to another. Although, most of them appear to be caused by inadequate labeling.

Top management faced criticism after boss Clive Schlee failed to deal with the disaster generated by the death of Natasha Ednan-Laperouse.

The teenager died in 2016 due to an allergic reaction caused by some of the ingredients used in preparing the baguette her sandwich was made with.

The investigations following the girl’s death revealed that the labeling on the food was unclear, generating a wave of anger against the brand in the UK and abroad.

The company is also battling another two lawsuits in the US, both for misleading customers by labeling products containing chemical substances as “natural.”

Pret A Manger is known for using the same practices in the UK, where sandwiches are labeled as products that don’t contain preservatives, despite not meeting these characteristics.

The company belongs to JAB Holdings, a Luxembourg-based investment fund, owned and managed by Germany’s billionaire Reimann family.

The fund bought the fast-food chain this spring for $2 billion. Let’s hope they won’t see the name change soon to Pret A Fermer.

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The UK has finally rained on the parade of tech giants operating in its shores without paying taxes. Or at least, they will be starting in 2020. The government said that they will be introducing dramatic changes to how large tech companies are taxed to ensure that they pay their fair share.

UK chancellor Philip Hammond made the announcement on Monday that the UK would soon be taking action with a “digital services tax” enforced by 2020.

This measure will help the country raise some £400 million per year ($510 million) and was necessary to ensure fairness in the tax system. The chancellor said:

“It is only right that these global giants with profitable businesses in the UK pay their fair share.”

About time too considering that companies like Amazon and eBay have been operating in the country for years either without paying a dime in taxes or by making next-to-zero contributions.

The nature of internet businesses that undercut retailers with cheaper products has caused much anger from businesses in the UK both large and small for not paying corporate taxes and for creating an unfair competitive advantage.

How Will the Digital Services Tax Work?

The UK will impose an additional 2% tax on any revenue generated in the UK from search engines, online marketplaces, and social media platforms.

If Facebook was starting to feel unwelcome in Europe after being fined in a German court for data infringement and facing a GDPR fine of up to $1.63 billion, this latest announcement will serve as another blow to Zuckerberg & Co.

It should be noted that the tax will only apply to profitable companies with global annual revenues of at least £500m ($635 million).

The chancellor also said that the UK is open and committed to incorporating international reforms on digital services tax, however, until such time as an agreement had been reached, UK taxes would apply.

A lawyer working with Clifford Chance quoted in FT said that the new law directly targeted at the likes of Facebook, Google, Apple, and Amazon was:

“A clear attack on the large internet companies.”

With the exception of Spain, who introduced a draft last month to impose a digital services tax by next year, the UK’s new measures on digital tax are the among the strictest yet.

Possible Global Backlash

The UK proposal will be investigated by the European Commission, and we all know how swimmingly the UK gets on with them. If the measure is seen as protectionist, it could trigger considerable backlash from the EU since it is unlikely that any British company will be affected by the measure.

The US may also react negatively to the digital services tax, seeing it as a direct attack on its companies in one of its more successful industries.

While many retailers across Britain will welcome the news as leveling the playing field a little, some see the tax as a potentially dangerous move that could impact technology innovation in larger companies–and even spark a trade war at a time when the country is losing allies fast.

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Things are going from bad to worse for China this year. A survey released today by the American Chamber of Commerce (AmCham) South China revealed that over 70% of US companies with operations in the region are either delaying further investment or seriously considering relocation of their manufacturing facilities to other countries.

As the US-China trade war begins to eat into profits, American companies are particularly affected by the ongoing dispute.

The AmCham surveyed 219 companies in Southern China, of which one-third came from the manufacturing sector.

A massive 64% of companies were looking into relocation outside of China, although just 1% said that would mean reestablishing bases in North America.

On top of that, almost three-quarters of American businesses in Southern China are stalling investment in the country, while just half of their Chinese counterparts are taking a similar stance.

Although, that also means that some 50% of Chinese companies in Southern China are also looking for more affordable pastures, with Southeast Asia in view.

Rising Competition from Foreign Rivals

US companies surveyed reported facing rising competition from countries like Germany and Japan, as well as cheaper production in India and Vietnam. Harley Seyedin, President of AmCham South China, told Reuters:

“It could very well be that people are holding back on placing orders until times are more certain or it could very well be that they are shifting to other competitors who are willing to offer cheaper products, even sometimes at a loss, in order to get market share… One of the most difficult things about market share is once you lose it, it is very hard to get back.”

The companies that have been hardest hit by rising US tariffs are those in the retail and wholesale sectors, whereas companies suffering worse from the hiked Chinese tariffs hail mainly from the agriculture-related sphere.

The AmCham survey was held between September 21 and October 10, shortly after US tariffs became applicable on some $200 billion worth of Chinese goods and a Beijing response imposed tariffs of their own on $60 billion of US, leading to the trade war that’s damaging both economies.

No End in Sight for US Firms in Southern China

At the current time, there is no end in sight to the trade war, with the US set to impose further tariffs at the start of next year. While the signs are not looking good for US businesses in China or the export-reliant cities they operate in, President Trump is expected to meet with President Xi Jinping at the G20 summit next month. It is hoped that they will come to some kind of amicable agreement.

The biggest concern of the companies surveyed was that the rising cost of goods would result in reduced profits. One-third of companies already reported that the trade war had affected volumes ranging from $1 million to $50 million, with 10% of manufacturers reporting a higher volume loss in excess of $250 million.

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IBM Corp. announced on Sunday that it would be acquiring US software company Red Hat Inc. in a deal worth $34 billion. While IBM is no stranger to acquisitions, this will be the largest for the company so far, as it looks to leverage Red Hat’s specialist hardware technology knowledge and consulting business for higher profit margins.

This latest acquisition also demonstrates IBM CEO Ginni Rometty’s focus on expanding into subscription-based offerings in the face of slowing growth from its own software sales and declining demand for mainframe servers.

IBM currently has a market cap of $114 billion and will pay $190 per share in cash for Red Hat, which is a 63% premium on Friday’s closing share price at $116.68.

About Red Hat Inc.

A pioneer in opensource technology, Red Hat Inc. was founded in 1993 and specializes in Linux operating systems, still the most popular open-source software today as an alternative to Microsoft Windows.

Red Hat works on a subscription model and charges fees to its corporate customers for technical support, maintenance, and certain custom features.

In a choppy environment up in the clouds, Red Hat is one of a small few groups of cloud computing companies that have both free cash flow and revenue growth. In an interview with Reuters, IBM CEO Rometty said:

“This acquisition we are clearly doing for growth synergies. This is not about cost synergies at all.”

This type of acquisition makes sense for older technology companies like IBM in a bid to gain scale, as the main competitors in the space begin to gobble up market share.

While the company has a lot of ground to catch up on, IBM is hoping to compete on the same scale with the likes of Amazon, Microsoft, and Alphabet.

For context, IBM has lost nearly one-third of their share value in the last five years, while Red Hat has gained some 170% in the same period.

About IBM

IBM has been around for over a century, founded in 1911. Known in the industry as Big Blue due to its hallmark blue computers, the company has been facing dwindling profits for years and is transitioning from a legacy computer maker to a player in the emerging technologies space.

Some of these recent initiatives from IBM have been AI-powered IBM Watson and the IBM Hyperledger blockchain.

Other long-standing tech companies are also looking to compete in a new era through acquisitions, as showcased in Microsoft’s acquiring of Github this year and Adobe Inc acquiring Marketo.

If all goes according to plan, the deal with Red Hat will close in the second half of next year.

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Forget about bendy phones and 5G, the latest hiccup on the horizon for tech giant Apple is an illegal teen labor case. The company has launched its own investigation after getting clobbered by a complaint from Hong Kong-based human rights group, Sacom.

Apparently, one of Apple’s suppliers in Taiwan, Quanta Computer, has been employing students illegally to assemble parts for Apple Watches in a Chongqing factory in mainland China.

Sacom said they had interviewed some 28 high school students at the Quanta Computer factory during the summer. The students reported being sent over to the factory by their teachers to take up internship positions. However, their duties were the same as full-time assembly line workers.

All of the students interviewed said that they were forced to work night shifts and overtime, which is illegal for student internships under Chinese law.

A further 11 of the students said that they would not be able to graduate from high school if they did not complete the internship. One student was quoted by Sacom as saying:

“We are scheduled to work at night, from 8pm to 8am. Only one day off is allowed per week.”

Questions About How Apple Manages Its Supply Chain

Tim Cook may have been vocal over protecting user data, but what about protecting its workers throughout the supply chain? Using young students as robots and forcing them to work 12-hour night shifts is hardly a solid foundation for Apple’s high principles.

Apple is known as one of the better companies when it comes to supply-chain management, publishing a yearly list of suppliers to highlight its seriousness over monitoring its overseas partners. But that doesn’t seem to be enough.

Just last year, labor violations were uncovered in the supply chain for Apple’s iPhone (also made in China) at the Foxconn Zhengzhou factory. Both Foxconn and Apple admitted that students had worked overtime against Chinese labor law–and also stated that they would put an end to using student interns to work long hours.

In response to Sacom’s allegations over the Quanta factory, a spokesperson for Apple said:

“We are urgently investigating the report that student interns added in September are working overtime and night shifts. We have zero tolerance for failure to comply with our standards and we ensure swift action and appropriate remediation.”

Rising Costs Often Equals More Teen Labor

As reports of an economic slowdown in China, the trade war with the US and rising tariffs, companies’ profit margins are continually squeezed. This often sees a spike in cases of child labor in China’s factories.

Some activists even report that local governments encourage schools to supply factories with teen labor to attract investment to their area.

Moreover, in October when Apple tends to announce its newest products, the factories see a surge in demand for labor that they cannot fill by hiring temporary employees under Chinese law, which leads to a rise in illegal internships.

Featured image by Shutterstock.