IBM Responds to Overtime Lawsuits With 15% Salary Cut

bcmbyte writes "IBM in recent months has been hit with lawsuits filed on behalf of thousands of U.S. employees who claim the company illegally classified them as exempt from federal and state overtime statutes in order to avoid paying them extra whenever they worked more than 40 hours per week. The good news for those workers is that IBM now plans to grant them so-called "non-exempt" status so they can collect overtime pay. The bad news: IBM will cut their base salaries by 15% to make up the difference."

Comments

Hmm

[Tesen]

Maybe I am confused, now that they are classified non-excempt, does that mean the OT pay is retroactive? If so, grab money, cue job search...

Re:Hmm

[nesabishii]

Typically the settlement includes retroactive overtime pay for a limited amount of time, maybe a year or possibly even more. The new pay scheme is probably exactly equivalent to the old, but substitutes overtime hours for base pay, meaning wages stay the same. However, this doesn't account for the possibility that now, if their hours are reduced to below overtime, they are compensated much more poorly. It's a short term monetary gain (in the form of a settlement), for a net loss in wage security (as fewer hours now means lower wages, compared to under the "exempt" pay plans). So, jumping ship could be a smart move here, or at least an easier one with the settlement.

Re:Hmm

[Amiga Trombone]

I agree with what you are saying. In fact, you have a good point about how the salary method can be actually advantageous.

It may be advantageous in a few cases, but the effected employees know that in this case, it won't be.

First, while we're allegedly going to be making up the loss in overtime, we've been here long enough to know the other shoe will eventually drop. When management wants to make cuts, they'll start with cutting OT hours. They do that with contractors already. This effectively means you aren't going to be seeing that 15% again.

Second, consider your vacation pay, bonuses, and other bennies, are figured on your base salary, not on what you earn with overtime.

Any way you look at it, this is a pay cut.

Again.

[nesabishii]

I wonder how many times this will work, before large companies adjust their payrolls. Radioshack settled a similar lawsuit with their store managers several years ago, and lowered their base salaries to offset the new overtime payouts. I'd think they'd want to act preemptively, to avoid a lawsuit--I'm somewhat surprised IBM had succumbed to this practice.

Re:regulated in contract or law?

[DoofusOfDeath]

Don't they have their salary regulated in contract? Or is it accept-or-be-fired (article doesn't tell)?

When I used to work for IBM (10 - 8 years ago), it was standard U.S. practice: each year, your manager calls you into a meeting and tells you what your new pay level is. You can accept it, or quit your job, or treat it like the beginning of a negotiation, which will in most cases get you labeled as a difficult employee.

It's pretty laissez faire, except that they can't base your pay level / pay level changes on race, religion, etc.

Re:Free Market

[rherbert]

Exempt employees get paid more because it's anticipated that they will work some uncompensated overtime. If you change from exempt to non-exempt, then your pay SHOULD be cut. You can't get the best of both worlds - unless you're a contractor. This is especially important for government contracts - you negotiate rates for certain job categories, and you're stuck with them. Your profit is limited by law, so you can't just absorb a 15% hit like this. So you've got to cut the salaries.

They need a Union

[Crazy Taco]

Let me start by saying that I am a very strong Republican conservative, and I normally hate labor unions, especially since most of them don't do much but collect money from workers and use it to buy politicians. That said, in this instance I absolutely think those workers should immediately unionize and walk off the job. IT workers are already treated as slaves just about everywhere, and it's about time they got paid for their overtime AND STILL recieved a salary commensurate with the difficulty of their jobs and the level of their education.

Furthermore, this move by IBM is complete garbage. Google spends a heck of a lot more money on its employees than this, and it doesn't have any trouble with the "competitive pressures" cited by IBM. The reason it doesn't have any trouble is twofold:

1. By treating its employees fairly, it attracts much of the best IT talent around, and this talent in turn is very productive. Their employees probably produce more per hour than the employees most anywhere else through raw skill alone.
2. The really big reason Google doesn't have these competitive pressures forcing them to pay their workers nothing is because Google has good management and actually produces worthwhile, marketable products. When is the last time IBM produced something good that people wanted to buy? PCs? Gone... IBM completely lost out in that market. Operating Systems? OS/2 is dead. Lotus Notes/other office software? Horribly ugly, clunky, and not even close to as good as Microsoft products. IDEs? They have some, but they are horribly overpriced things like Rational Apex (an ADA IDE) that cost 30,000 dollars a license and are vastly inferior to Microsoft's Visual Studio. And while IBM helped birth Eclipse and still funds it to some degree, that is an OSS IDE, and a lot of it (plus a lot of the add-ons) were built by volunteers.
   Honestly, the only things they seem to produce anymore are a few supercomputers (and the market for those is clearly limited), some mainframes (again, limited and shrinking market), and some stupid "software development processes" like the Rational Unified Process (RUP). (News Flash for IBM: a process isn't a product. I can go out and make my own process that suits my work (which is what most people do), or use one of many free and well known process like Agile or UP). IBM also produces a lot of marketing speak and vague references to "services" that they can offer to companies (not sure what those actually are or why I would want them), they produce a lot of commercials about servers spiraling out of control, and they spend a lot of time on clearly stupid strategies like building a corporate office in Second Life and having a director of Internet and Virtual Worlds.
   With all that sort of vaporware and garbage products, it's no wonder that they are facing big competitive price pressures. They deserve the problems they are having. But the regular employees shouldn't be the ones penalized. The problems (and pay cuts) should be directly placed in the laps of their management, especially their top executives. IBM has repeatedly had the chance to conquer the world, and they blow it on stupid ideas every time.