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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."
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...
This is the last straw....
This, folks, is a good example of why labor unions are still around. Not that it's going to help any in this case...
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.
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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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That remind me why I stopped being an employee, and became a contractor.
The bad thing about being a contractor is I only get paid for the time I work (no sick leave, public holidays, annual leave etc)
The good thing about being a contractor is I get paid for _every_ hour I work.
Strangely enough, once I was working on a strictly per-hour basis, the boss found far fewer 'emergencies' that required me to work all weekend.
Quidquid Latine dictum sit, altum videtur (anything said in Latin sounds important)
15%? That's cheap compared to the damage from the loss of morale and confidence in management.
Where did they think that money was going to come from? That IBM would suddenly have that much extra money to throw around?
Personally, if it were me, I'd be happy about the change. Less guaranteed money, but for quite a while I've wished I could work -less- than 40 hours a week, even if it meant a pay cut. SO much other stuff I want to experiment with and no time to do it. So to have that overtime on the books instead of just being expected...
I'd guess many of these people will find newhires in their departments and 40hr/wk jobs again, too.
There are some who only lose in this story, though... The 1/3 of the affected workers who were -not- working overtime and were not involved in this lawsuit. They get paycuts anyhow. I can imagine how nice the workplace will be for the next year... Assuming any of those 1/3 stay. I sure wouldn't in their shoes.
"If you make people think they're thinking, they'll love you; But if you really make them think, they'll hate you." - DM
And how exactly do you live if you don't work? Property is owned by the government so you must always pay taxes or you loose "your" land. Food, power, transportation? Yes, why don't you show us all how you can live without working aside from taking up residence in a shopping cart on the corner. Also, don't the employees who do the work deserve some of the benefit? It seems corporate executives want to make multi-million dollar bonuses based on the work of others without sharing. Work hard so the boss can buy his 16 year old daughter a $65,000 car! Look at the striking writers guild in Hollywood. Are they wrong for wanting a piece of what they create or should they allow the executives who do nothing to take all the money for themselves? How about all these mergers? Can anyone compete against a mega-corp that owns politicians and writes the laws themselves? If you think the market is "free" then you are living in another world.
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.
I wouldn't be surprised to see a (relative) handful of people quit over this, but I'd bet good money the majority will stay put - despite the 'insult' the paycut hands out. The reason - take a good look at the US economy. There isn't a lot of upward mobility it the numbers, economists are worried about a recession - and that fear usually turns into a self-fulfilling prophecy; at least to a point. Things aren't looking so good right now, people are worried. The Housing sector is the number one place not to be stuck working right now, tech isn't far behind.
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!"
With an attitude like that, you'll never make it into management. Read more Dilbert cartoons.
Do you honestly think they (IBM) care? Seriously. The whole idea of (mostly big) companies caring about "engagement" and "morale" is a bunch of trash. Lip-service. Hypocrisy. Whatever you want to call it. Know this: they only care just enough to keep you around. You can argue that this is the way it should be or "free-market" or "just doing business" and you'd probably have a good argument, but please don't fool yourself or anyone else into thinking that companies preemptively care about the loss of morale. They don't. They always react, never plan ahead.
Wow. I really sound bitter! Can you tell what size company I work for?
Please don't use "umm" or "err" or "erm".
It's fine that for you the slow weeks compensate for the crunch ones, but if you are at your desk for at least 40 hours a week (working or not) then there's no compensation whatever, you are still giving away your free time.
I must say that I'm also willing to work more than 40 hours (any reasonable number of hours) when needed, but I'm actually getting my time back (in time, not in cash - which I actually prefer).
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.
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.
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.
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:
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.
Beware of bugs in the above code; I have only proved it correct, not tried it.
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
Not bad. Not bad until you got to the part about housing.
US housing costs are dramatically cheaper (on average) than those in western Europe. The primary reason for the difference is that housing costs in the US reflect the fact that land on which to build is cheap, so the cost of buying an existing house has to compete with the fact that you could, if you were willing, simply build a new one. This option is generally unimaginable for inhabitants of most of Europe, where land prices make this option absurd. As a result, house/apartment/rental costs there are not competing with the "i'll do it myself" option, and can climb to levels contained only by median salaries.
Your inevitablity stance on a global economy is also a little sad. Things like the "global economy" don't just happen. They happen because a specific (if large) set of vested interests arrange/push for it to happen. In this case, owners of capital who stand to see huge benefits from the free flow of their property, have pushed hard for it while telling everyone that the whole world will benefit from it. They have resisted similarly free flow of labor, while relying on the fact that moving labor around is much harder than moving capital. It was never inevitable - its the result of power and money seeking more power and more money, just like so much of human history has been.
Wrong. Harm done. Sure, you keep working overtime and your take-home remains about the same. Except when you take a vacation or go on maternity or other medical leave, and suddenly your income drops 15% for the duration. Also, the company's annual pension payout to you drops 15% because that amount is based on your base salary, not overtime.
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