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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."
I used to work for a Accenture, a rival firm. While we officially got paid overtime, booking it could get you into a lot of trouble. Bosses would say, not in writing, to not book OT. Try confirming that by email and you get stern warnings to not be a smart-ass. One guy I knew booked OT anyway. Legally, they couldnt say no. Next thing he knew, he was staffed in St. Louis! Ouch. So the people *suing* IBM? Expect pain much worse than salary cuts. They will probably be executing 100,000 line test scripts soon.
When I started working, I heard from multiple sources that our company budgeted for exempt employees by treating them as hourly employees who worked 5 hours of overtime per week. Given that most overtime is paid at time and a half, that's the equivalent of being paid for 47.5 hours at at a straight hourly wage. 7.5/47.5 = .1579, or about 15.8% of salary. Now the real question is, how many of these folks will get 5 or more hours of overtime per week?
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Every job I've ever worked was salary based, and I've always understood that going a bit over 40 hours (and still being paid my regular salary) is in exchange for those slow weeks where I might only work 20 hours, and still collect 40 hours worth of salary. It's a pretty fair trade-off since some weeks (as an IT person) I'm twiddling my thumbs doing nothing and other weeks I'll be pulling 12 hour work days.
The fact that they were collecting commission on top of their salary, and still trying to demand OT pay is simply greedy IMO. Sales has always been a "You'll make as much as you want to" position.
Just because you disagree doesn't make it offtopic or flamebait.
I don't get it. If you are exempt and feel you are being worked too much, simply: don't. I'm exempt and I tell my management "I can't work on that right now" more often than I'd like to - I treat the exempt idea as if I'm simply "contracted" so to speak, for 40 hours a week. If I work more I work more, if I work less I work less.
Maybe the IBM folks (didn't rtfa much) aren't making par with their peers in other places. That would be an issue, I suspect.
But going to hourly is only going to get them "watched" more, and to boot, it got their pay cut. Why? Probably because management is the same at IBM as it is everywhere: Exempt people are paid more than nonexempt because they are "on call" 24/7, etc.
Which is the exact reason my management here tells us that when we *are* on call, we do not get differential pay, etc. It's "built into our salary."
Hourly and manual labor types usually have a union behind them to stop this kind of idiocy, but for reasons beyond me, my white collar cohorts refuse to stand up for themselves and unionize, so continue to have to accept crap like this, or worse, have their jobs summarily shipped overseas.
And before someone puts a political bent on it, it was like this even when the Democrats were in power.
"In Soviet Amerika, programmers don't have unions, and without unions, the company own YOU!"
However, knowing IBM, this is what they planned--with the current economic downturn, they probably want to decrease their payroll anyway and in so doing bolster their stock price. Still, it's critical (IMHO) that employees who quit know they can file for benefits so they don't get double-shafted by IBM.
"We can categorically state we have not released man-eating badgers into the area." - UK military spokesman, July 2007
I am an exempt employee and I do put in some overtime when required by a project schedule.
Even though the company doesn't have to pay us for our overtime they have "thanked" us
for our effort with some perks. Two years in a row they gave the software development team
a week's worth of "comp time" (extra vacation time) "under the table" as a reward for the extra time worked.
While this wasn't even close to a one-to-one payback for the overtime worked, it was the
thought that counted. Put it this way, if they HADN'T done SOMETHING, the next time a project
schedule was threatened fewer hours of overtime might have been available from the team.
The free market only works if everyone is on a level playing field. The employees of IBM and IBM itself are far from being on a level playing field.
This does sound like a slap in the face, but the first slap was by the employees -- suing your employer (or anyone) "means war".
No, the first slap was IBM breaking the law by classifying employees as exempt when they were not. The employees are totally in the right here, and IBM 100% on the wrong side.
Companies like to claim exempt vs. non-exempt is a "gray area." Its only gray when you're trying to screw your employees out of overtime pay.
My personal belief is that salary pay should be made illegal except for strickly management positions. That would solve this problem nicely.
I've been "exempt" for the past 10 years, and wouldn't trade it for hourly wages + overtime for anything. The fact I'm "exempt" pretty much assures that I have a strong salary and needn't worry about those extra 5 overtime hours per pay period to make rent. I realize that sounds snobbish, but TFA gives examples of jobs in the 80k per year range...hardly the types of jobs that worry about making the rent payments.
A better solution than the labor unions would be for these 80k/year salaried folks to take their skills elsewhere, like to a company that values their contributions. I've never understood how a union supporter could go back to work for the same pricks they were fighting with in the first place.
http://www.dol.gov/esa/regs/compliance/whd/whdfs23.pdf>U.S. Department of Labor Fact Sheet #23: Overtime Pay Requirements of the FLSA
29 CFR Part 541, Defining and delimiting the exemptions for executive, administrative, professional, outside sales and computer employees, final rule
IBM may very well have been legally justified to not reimburse these folks the overtime pay in the first place. However, since it was found otherwise, I think the 15% pay cut to compensate is just spitting in the face of their employees. How many good engineers and other employees will they lose as a result of this move? It seems to me that if you have good people working for you, willing to stay after hours to keep things moving, you should reward them for the extra effort. Too bad if it happens that computer employees rack up lots of overtime, but it's the nature of the business and should be considered cost of doing business.
You have obviously not thought that through to completion. You decide to form a union, and your employer does not like it. One of several things can happen:
1) Your employer takes it on the chin and suffers from a significant loss in net earnings (usually gets executive types all fired up, pun intended).
2) Your employer accepts it after fighting about it and is then undercut by union free competitors, typically using H1B labor, or worse yet simply outsourcing to another country altogether.
3) Your employer gets smart and simply outsources your job, thereby skipping all of the intermediate steps.
Our economy has become a service economy because those are the only jobs that cannot be outsourced easily, but a service economy can't survive indefinitely without outside support. Either way, unionization is not the answer, the only viable answer is to accept that you will suffer a significant drop in standard of living to adjust for the fact that you were way far above the median to start with. Don't like it? tough, welcome to the global economy, there isn't a damn thing you or I can do about it. If you shut down all foriegn trade, there goes your cheap goodies from china, and your standard of living plummets. Imagine if you had to pay $30,000 for a low end car, because it was made using exclusively american labor? How about $120 for a pair of jeans? What about $5,000 for an entry level PC? If you need proof, just look at the cost of housing. It is hideously expensive because there is no good way to offshore the labor needed to build the houses, and as such the cost of these things has been rising at many times the rate of inflation. It is a no-win situation. Americans are not going to enjoy their standard of living much longer, but there isn't anything we can do to stop it. Maybe slow it down a little, or speed it up, but there is no stopping it.
-=Geoskd
I wish I had a good sig, but all the good ones are copyrighted
The problem I've always had is that few employers seem to really grasp the concept of a salaried position. In a salaried position, I'm hired to get a job done, irrespective of how many hours it takes. If it takes me 40 hours a week, great. 50 hours a week, oh well. 30 hours a week? PARTY! But most employers don't get this. So they look on salaried as a minimum of 40 hours week. In my particular specialty (troubleshooting really big systems), that's just silly, because often there's nothing to do... so when I was really doing my specialty, I would often end up doing nothing, sitting at my computer just to keep the IM icon lit up, when I could have been resting up for the next 48 hour marathon problem. It's just annoying ... I mean, if I'm salaried, why do a timesheet? Yet they all want a timesheet. If they want me to work free overtime, then they need to g
"He who would learn astronomy, and other recondite arts, let him go elsewhere. " -- John Calvin, commenting on Genesis 1
Under most legislations there are limitations to the extent to which you can sign off your labour code rights. In fact, the labour code usually takes precedence over contract law. In addition to that in most legislations if a contract makes you sign off something which is your right the whole contract is null and void, not that particular clause.
So it looks like IBM has made employees sign an illegal contract. No real surprise here. I have yet to see a legal contract from an American company, dunno WTF are they paying their lawyers. The employees sued successfully to have their rights enforced. From there on IBM used the fact that their original contract has been declared null and void and changed the salary offer on the table.
Good Catbert move in a Dilbertian universe. It will be interesting to see how it pans out in the long run.
Baker's Law: Misery no longer loves company. Nowadays it insists on it
http://www.sigsegv.cx/
This was the truth for me too, more than once. The resident lead tech administrator abruptly quit... and my contract was nearly up so they put me into his job as they knew I had the skills. On average he would get called 2 times a day after hours. Me, as a contractor I had it in that after hours calls of not my own work are 1 hour minimum. After two weeks the boss looked at me and said lets talk. I grabbed my note book and went through each call one by one. I also cited it is probably like that for the rest of your staff and in part why they are so miserable during the day. BTW I got the extra pay.
But a new policy was drawn up. The reasons had to be good to wake you up at 2am. Every after hours call had to be individually reviewed by management the next day. Now, maybe 2 on a bad month and the reasons are good. There is a difference between service and abuse.
My experience has been that in an environment where you may be expected to put in extra hours the exempt employees are usually paid a little more than they normally would. In most cases if you are an exempt employee there is no need to fill out a time-sheet and while you may be expected to put in extra time on occasion the flip side is that no one will be looking for you if you take a long lunch or leave early on the "slow" days.
While non-exempt employees do get paid overtime you usually need to fill out a weekly time-sheet (or even punch a time-clock)-: and sign under penalty of perjury that you did in fact work the hours listed.
Give me exempt status anytime - if I don't like the hours I can always go elsewhere.
Disclaimer: I'm not aware of IBM's work policies having never worked there.
Personal Experience: I briefly worked for IBM when one of my employers "sold" my whole department to them (we went from being full time employees to being IBM contractors doing the same job). IBM looked like a pretty good deal at first -- same pay, same job, but better benefits and more time off. The catch is, they require a minimum of 2000 "billable hours" per year. 52 wks x 40hr/wk is 2080 hours, so that may sound reasonable at first, but the 12 holidays and 2 weeks of vacation you get and any sick days you need are not "billable". Nor is time spent at IBM company meetings. So in effect you get 2 weeks off and anything beyond that you are expected to make up for with unpaid overtime.
I left IBM after about a year. Many companies expect or pressure their employees to work unpaid overtime and have been getting away with it for years, but IBM actually made it an official policy - I suspect that's why they are getting in trouble. I'm a big free market proponent, and normally would say, "if a company's compensation plan is bad, then don't work there!". Well, I did leave, but you could say I didn't exactly choose to work for IBM in the first place.
Prov 9:8 Do not rebuke mockers or they will hate you; rebuke the wise and they will love you.
I actually hired on to IBM out of college as exempt (I'm not there any more). They pretty much made everyone who wasn't temporary or clerical staff "exempt". Didn't bother me because as far as I was able to find out, the salary grid for "associate programmer" (exempt) was better than that for "assistant programmer". (non-exempt). You could make more "non-exempt", but I'm both "lazy" and fast, so working a lot of extra hours didn't appeal to me. Of course if they re-classify a job with overtime potential from "exempt" to "non-exempt" they are going to reduce pay; what would you expect?
The people making 80k a year aren't worried about rent payments. They're worried about the mortgage payments on their McMansion, car payments on their 2 SUVs, making their credit card payments, etc. No matter what the salary, there are people who can spend it all and more.
All this sounds so very weird from overseas. Surely their wages are in the contract in the first place? How on Earth can IBM lower them? Is that legal? I'd think the worst they could do is not raise wages for a few years.
Same for overtime. My contract has a number of hours that I work for my boss. If there's nothing else in it about overtime, then good luck trying to force me to work more than that.
But I guess it has to do with at-will employment; if your boss can just decide to fire you, what's a contract worth?
I believe posters are recognized by their sig. So I made one.
That way, you get a good paycheck, you are in charge of your OWN money/retirment, and you NEVER work for free. You get paid for every hour you work.
I swear, if possible, I'd NEVER go back to working as a W2 employee again...
The only thing needed for a mass transition to this, is to make it easier for single person corps to be able to buy into a group insurance scheme, or make it easier for individuals to get insurance for themselves (it isn't THAT expensive, but, hard to get if you aren't in 100% top health).
Anyway, doing this would cut companies' HR expenses, cut all the overhead of benefits, and then they could easily pay the bill rates required.
I mean, in todays world of "at will" employment, and the lack of loyalty from either employer or employee, why not just get the formalities of W2 employment out of the way, and call the workforce of today, what it is, and pay for it that way.
Light travels faster than sound. This is why some people appear bright until you hear them speak.........
Well, announcing a 15% salary cut is essentially announcing a layoff. Hopefully, losing some percentage of their workforce was what IBM had in mind.
Being an independent contractor simply isn't suited for everyone, and I would not be surprised to hear that many people would prefer to keep their current salary than take a 100% raise as a contractor. Nothing in employment is certain, but in general an employee is going to keep a stable steady paycheck longer than a contractor. Yes, reasonable contractors take in more income overall, but they still go from contract to contract, with down time between. To some, that's a positive aspect (more money, lots of vacation time), but to others the downtimes can be scary.
And exactly whose fault is it that the employee is so overextended that losing their job will cause loss of house, car and going into bankruptcy? It's not IBM's responsibility to ensure their employees are financially responsible adults.
Wow, lots of assumptions in there. Is someone out of work for a year and runs out of savings "finicanlly irresponsible?" Or are you arguing that everyone should be paying cash for their homes? You're out of touch of reality either way it would seem.
To the point though, it IS IBM's responsiblity to pay their employees in accordence with the law. They don't have a right to cut someone's pay when they are caught and that person has planned things so that his salary DOES meet his finincal responsiblities.
That's the fundamental problem with today's society. People think it's someone else's job to feed them. Sorry, but it's your job to feed yourself by entering into agreements with others to exchange work for money.
Yes, and because I need to eat, those contracts are often unfair and unbalanced. I think the fundamentl problem with today's society are sociopaths like you that feel they can do whatever they want to employees, because its THEIR company. Sorry, but your right to swing your fist ends at other people's faces.
Lets get real here; weren't not talking about people sitting around getting handed money by IBM; the workers were WORKING, IBM was not paying them what they LEGALLY were entitled to and you think IBM has the right to hit back because they got caught? Bull.
Every single employee could leave if they wanted to. Exactly which ones can't? And if they can't find another job where they are, then they should move. That's how responsible adults act.
Moving in and of itself is a huge cost. All the employees could leave in theory. In practice they can't, because there aer only so many open jobs, and not all of them can move. You talk a lot about employees being responsible; how has IBM acted responsiblely in this? That's right, they don't have to, because the legal fiction doesn't force them to.
The biggest lesson in life that everyone seems to learn sooner or later is that NO ONE OWES YOU ANYTHING. And that's the way life should be. It's a better world when people take care of themselves.
Huh.. and here I thought having a job and working WAS taking care of yourself. I don't buy the idea that a company can decide they aren't making enough profit, and show someone the door. Ih other words, its not ok to screw someone over for your own benefit.
In any case, the reason IBM did the pay cut was so that the net pay would stay the same. So the employees are working the same number of hours for the same net amount of money (I'm sure there are some variations here and there). The only difference is in how the hours are counted. Some employees will probably make more money since they're working more hours.
Many will make less, because they weren't working overtime to begin with. Others now have to give more of their life to the company for less money. Sounds dangerously close to slavery to me.
In theory, the only reason why a W2 is superior to a 1099 is the legal backdrop and reduced responsibilities that go with it.
I'll leave the pros and cons to both out of the discussion here as I'm sure most folks have a clue what they are.
This. What I wanted to contribute is this may be one tipping point where contracting may come ahead of being an employee in the years to come. With "right to work" laws being what they are in most states, the notion of "job security" and "employer loyalty" is obviously being more spurious, with "layoffs" being the happy norm over outright firings. It would seem that "sue the pants off the bastards" is not as much of a deterrent to loosing one's job as we'd all like to believe, so you're left with about the same security as an independent contractor would have.
For that matter, putting your fiscal and professional future in the hands of an entity that things of nothing but the bottom line seems like rather spurious judgment. This is especially so when put in the cold light of the rash of IT layoffs ten years ago.
If you're working on an hourly consulting basis, sure, if you can get the job done in 20 hours when a slow person gets it done in 40 hours, the slow guy is actually going to get paid more for you to get the same job done slower. But once a company realizes you are reliable and efficient, you're going to get the jobs in the future--not the slow guy.
I used to think like you. Even as a consultant I'd try to spec a project and come up with a fixed-price bid. That way both the client and I could focus on getting the work done rather than stressing about counting hours. But last year I got burned by two projects that, through no fault of my own, ended up being significantly more complex than could be known in the quoting process--but since the complexity wasn't known, it wasn't specifically limited in the contract. So it wasn't specification creep (which would definitely be billable), it was just more complex to get the things done than either the client or I recognized. So I had a tough year.
Having learned from that, I have to protect my own rear end. I've come to the conclusion that billing on a strict hourly basis is in everyone's interest because:
So now I give clients a good-faith estimate of how long certain things will take, but the actual billing amount is based on the actual amount of time I spend on them. The estimate is just that: An estimate so they can have a reasonably accurate idea of what they're getting into. If it takes less time, they pay less. If it takes more time, they pay more. And they know that up front. And if, as I proceed, it's becoming clear that my estimate was low, I immediately let the client know why and how much more I think it will end up costing. Then they make the decision. Of course, I virtually always come in at or below the estimate so the client is actually pleased to pay less.
The only reason a per-hour arrangement might not be ideal is if 1)You are not honest about the hours you work--in which case you shouldn't be billing by the hour or, 2) The client is suspicio
Depends on the gigs. I know people that work 6 mos a year, and enjoy the other half of the year off. Or, you can find gigs, often with the govt. that are contract positions...but, pretty much permanet..at least in the contract sense. Gigs that last multiple years are out there. So, it is pretty much like a steady job.
There are all kinds of gigs out there to suit various tastes. There are a number of companies, that if you do the corp-to-corp thing...will take you over a salaried employee, just to bypass the HR and legal grief. I think more of this is to come in the future.
Light travels faster than sound. This is why some people appear bright until you hear them speak.........
Retribution against an employee for filing a lawsuit when the suit has merit is illegal. If someone takes them to court again and successfully argues that the pay cut is retribution for the suit, IBM could be in for a world of hurt.