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AOL's treatment of its volunteer workers should give pause to those arguing for less regulation of business

Wednesday, Jan 9 2002
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Sometime during the last two decades of the Technology Age -- perhaps it was after the publication of the 250th touchy-feely management best seller, or after the broadcast of public television's 100th Sesame Street-like investment tips show -- Americans came to fully accept the idea that profitable corporations are like churches.

Successful companies emphasize Love: "At firms with strong cultures, employees care about the company, each other, and customers," writes Whitney Tilson, a management analyst for The Motley Fool, a child-friendly stock-advice show, Web site, and book series. They foster Brotherhood: "They share information and cooperate," Tilson writes. Their employees achieve Inner Peace: "They feel good about their jobs." They are, above all, Caring: "They are willing to go the extra mile."

"This," Tilson writes in an online Fool column, creates the business version of salvation: It "can provide a meaningful competitive edge."

Tilson's platitudes have been penned in varying ways by thousands of like-minded business pundits. And their message has permeated our national psyche. UC Berkeley's Haas School of Business now requires students to periodically attend weekend camp-outs together, so they might bond. General Motors' Saturn Corp. division sells cars based on the idea that its factories are friendlier than its competitors'. Management gurus fill conference rooms at $1,000 a head by preaching and repreaching this message: Nurturing, empowering corporate culture is the straightest path to profitable grace.

This is the philosophy that led Internet start-ups to give employees free Odwalla and neck massages. And it is the theological bedrock of the Yoga Republicanism described in Paulina Borsook's book Cyberselfish, in which a dominant Silicon Valley libertarianism entertains left-wing ideas of social liberty while embracing right-wing repugnance for government oversight of business affairs. If corporations earn profits through Love, Brotherhood, and Inner Peace, this view holds, government regulation can only worsen people's lives.


But this may be a corrupt faith. A class-action lawsuit against the world's most successful online company suggests that profitable corporations still make money the old-fashioned way: They exploit, manipulate, and underpay employees; they usurp Americans' common patrimony; they flout the law. They're certainly not churches.

The class-action suit seeks back payment for around 5,000 California residents who volunteered to act as hosts and moderators for AOL's chat rooms. It seeks the California minimum wage of $6.25 per hour for the plaintiffs, some of whom spent as many as 80 hours a week testing AOL beta software, enforcing AOL terms of service, assisting subscribers, and keeping detailed time sheets and activity logs.

This volunteer army -- which at one point may have reached 20,000 worldwide -- was critical to the firm's survival just as competitors such as Prodigy and CompuServe were flailing.

According to one estimate, AOL may have saved $1 billion by using these volunteers who may at one point have generated nearly a third of the company's revenue. Left untended, AOL chat rooms devoted to subjects such as cancer survival, botany, and relationships rapidly dissipate into a chaos of cussing and pranking adolescent boys. By purging rabble-rousers, providing instruction and encouragement to AOL newbies, and writing original instructional and other chat room material, the volunteers helped lure millions of dues-paying, online-advertising-viewing customers.

The result: AOL accumulated so much cash it was able to thrive during its difficult, early years and eventually buy media giant Time Warner a year ago. According to Mark R. Thierman, whose San Francisco law firm is representing the California plaintiffs, AOL's peculiar reliance on volunteerism was no more legal than if Saturn allowed enthusiasts to walk into a factory and volunteer to install door handles, or if a janitorial firm encouraged employees to volunteer extra hours in lieu of overtime.

"Our whole labor law system is based on people getting paid for what they're working," Thierman says. "If you let people volunteer, it would undermine the whole system. If you want to do charity work, that's volunteering. AOL Time Warner's not a nonprofit corporation."

AOL's lawyers drafted a memo in 1995 fretting about the legality of using the volunteers, according to a Forbes magazine story that discussed a similar lawsuit filed earlier in New York. The volunteers initially signed on to save money on AOL hourly online charges, which for heavy users amounted to hundreds of dollars a month. But they continued working even after AOL began charging a monthly flat fee in 1996, and their $300 savings in online charges suddenly became worth less than $20. AOL appeared to understand that it was bending U.S. labor laws. According to the lawyers' memo cited by Forbes, the company realized that the volunteers' situation closely resembled what the law defines as employment: They were required to fill out time cards, undergo training, and file reports. In response to its lawyers' preoccupations, AOL hired a hundred of the busiest volunteers and shunted the rest of them off to a specially created subsidiary, changing some of their job requirements to differentiate them from paid employees. When the volunteers filed a lawsuit in May 1999 in New York, AOL again cut back its reliance on volunteers, further suggesting that the company knew it was on shaky legal ground.

The chat room volunteers have received little sympathy since they filed the New York suit. Why, after all, should one feel sorry for people whose social life consists of assuming a new identity online? One libertarian essay even used the case as an example of how old labor laws, drafted during the Industrial Revolution, have no relevance in today's technology-based economy.

This is nonsense. If other for-profit corporations were likewise allowed to use hundreds of millions of dollars in volunteer labor, wages everywhere would plummet and working conditions would worsen. And it's important to look at just how cynically America Online managed its volunteers. The company made money by manipulating the needs of lonely, isolated people in much the same way earlier robber barons exploited the needs of their era's social outcasts.


Consider David Ball, 34, a wheelchair-bound Riverside, Calif., resident who lives off disability checks. Ball moved to California from Arkansas after his marriage of 13 years failed, and he began logging on ever more frequently to AOL.

"I got into it shortly after my breakup," Ball says. "I needed some advice. I started looking into some of the chat rooms. I was looking for relationship chat advice. I found one chat that had barely opened -- it was only one or two days old, and there were some real nice people in there. The host who was working it took a liking to me and asked if I could help run the room."

So Ball signed on to be a host for some of AOL's relationship-oriented chat rooms, took the required training, and agreed to work a minimum of five hours a week. At first Ball's new job seemed akin to working for a benevolent nonprofit.

"They want you to help people use AOL. In this room I was in the position of being a counselor. People would come in who broke up with their girlfriend, and we would talk to them," Ball says. "It kind of hit a chord because I had some courses in college in psychology," he recalls. After a few months he had counseled dozens of isolated homemakers, despondent boyfriends, jilted wives.

"I had one girl that came in, and she was adamant that she was going to commit suicide. She had been dumped by her husband for another woman. She was just shattered. She had kids she couldn't take care of. I stayed online five hours talking with that girl. She just wanted to talk. After the first 20 or 30 minutes, she stopped saying over and over again that she was going to commit suicide. But it took five hours for her to stop feeling like she was in such a hopeless place. I gave her contacts and suicide resources, places she could go in her community to look for help. She came back a month later and asked if I remembered her. I asked her how she was doing. She said she'd got a job, got a place. Her husband was going to get the house and everything, but she felt like she was going to make it.

"There's lots of those that happen," Ball says. "It happens all the time."

After Ball had been doing this for a few months, working as many as 80 hours a week, AOL began instituting some unpleasant changes. Volunteers were prohibited from giving advice online. Instead, they were to refer users to advertising-laden AOL sites whenever those users typed pertinent keywords. The company's old policy regarding suicide threats, which stated that volunteers should insert an official AOL statement telling members to immediately go offline and call 911, was discontinued. The new policy required volunteers to immediately disconnect anyone using the word "suicide" from the service.

"If they say they're going to commit suicide, 'Gag them!' is what we were told," Ball recalls.

Then there was the issue of the AOL software. Volunteers were required, as part of their job, always to use the latest America Online software version, even if it wasn't ready for release. One version was so buggy it crashed Ball's hard disk.

"When AOL 6.0 came out, a lot of the hosts' computers crashed. It wiped out my hard drive, and I tried reformatting and everything. But it was beyond repair. So I went and bought a new computer," Ball says. "If your computer bites the dust because of their program, their attitude is, 'Buy a new computer and tell us when you're ready to start hosting again.'"

Ball and the other volunteers were eventually relegated to the role of AOL traveling salesmen, surfing from chat room to chat room, advertising AOL sites as appropriate keywords arose.

Ball is one of the volunteers suing AOL. As litigants always do, Ball insists he's not in it for the money. But in this case, his indignation carries a ring of truth.

"I'm hoping to see AOL admit that it was volunteers who created this place. I'm not so much into it for the money than [for the] credit. If they had to admit that 'Hosts were what did it for us,' that would be enough," he says. "AOL, in my opinion, is like being in an unpaid sweatshop."


In running an "unpaid sweatshop," the company was able to consummate a $111 billion merger and take over the media world.

There was nothing touchy-feely, wholesome, or churchlike in the way AOL exploited and abused its volunteers. This is true for myriad technology companies, whether it's Microsoft misusing employees' part-time contractor status to avoid paying benefits or tech assembly plants paying miserable wages.

Technology Age companies, just like their automobile- and bluejeans-manufacturing brethren, must be subject to scrupulous government regulation or they will abuse people. The Securities and Exhange Commission should have scrutinized America Online's system of volunteer serfdom before approving the company's purchase of Time Warner. The Labor Department should sift through the operations of other tech-industry enterprises to see if they are illegally using volunteers in the way AOL Time Warner appears to have.

Unfortunately, the Silicon Valley anti-regulatory bias continues to this day, despite the fact that the current recession's high unemployment levels are sure to result in corner-cutting by unscrupulous employers. When it becomes increasingly clear that retaining employees doesn't require nurturing them, or even treating them fairly, corporations are going to look less and less like churches, and more like AOL.

About The Author

Matt Smith

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