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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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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.
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
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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
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.
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.........
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