IBM Responds to Overtime Lawsuits With 15% Salary Cut 620
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."
Typical. (Score:5, Insightful)
Free Market (Score:2, Insightful)
It's stories like this... (Score:5, Insightful)
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.
Seriously (Score:0, Insightful)
You work 35 hours one week, you get paid for 40 hours; you work 50 hours one week, you get paid for 40 hours. That's life.
Penny wise and pound foolish (Score:5, Insightful)
Re:Hmm (Score:3, Insightful)
Where did they think... (Score:4, Insightful)
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.
Re:Free market (Score:5, Insightful)
Re:Seriously (Score:1, Insightful)
Why computer workers haven't properly organised with a union is something I still don't understand. If you work for someone else: YOU'RE A SLAVE. So ORGANISE! If you employ others, you're a SLAVE OWNER so EXPECT ORGANISATION.
RS
Re:Free Market (Score:5, Insightful)
Cha - right! (Score:3, Insightful)
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?
Re:Again. (Score:5, Insightful)
The end result is exactly what IBM did. Suddenly starting to pay for overtime means IBM is raising effective salaries by 10-20% or more, so naturally IBM lowers base salaries. The end result is that we are exactly where we started - people work the same hours, and get the same pay.
Well, at least on average; for individuals who work more or who work less, there will be some change. There are also motivational issues - if you are paid for overtime, you have less incentive to work efficiently (one reason why hi-tech managers, and many workers, don't like paid overtime and prefer to raise the base pay). Overall, it is hard to say that the change is for the better. The old salaries and norms were already 'working' - they were comparable to industry norms, were arrived at after years of haggling, corrections, and so forth, and most importantly people knew what they were getting when they signed on.
Re:Typical. (Score:2, Insightful)
I work for a Union. They happily negotiated less than 3% for cost of living increase for the last contract. Unfortunately that was nearly erased by them raising the union dues 2.5%.
In addition, we don't get "paid" for overtime. We get comp-time instead. Because you're only allowed to use comp-time when your manager says that it's acceptable to do so, that means that you get fucked every single time.
Unions exist only to protect the institution of unions, not the employees. Fuck em.
Re:Penny wise and pound foolish (Score:4, Insightful)
Re:Salary + Commission + Overtime? (Score:4, Insightful)
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).
Re:Typical. (Score:5, Insightful)
Re:Hmm (Score:5, Insightful)
It's a short term monetary gain (in the form of a settlement), for a net loss in wage security
Depending on the job, wage security is often less of a concern than schedule security, ie the possibility that the boss will tell you you're working 80 hours next week. Now he has to account for extra overtime over the usual in his budget, and that's a heck of a deterrent.
Each may very well be more important to different people. As another respondent said, this probably is best for the quality employees who always find themselves overcommitted and working hard, and maybe less good for clockwatchers.
Re:Free market (Score:3, Insightful)
Agreed immediately. However, the story moved from the realm of "normal" relationship, when the employees tried to force IBM via lawsuits. That "meant war" and moved things into the legal realms. Now IBM is simply looking for legal ways to continue paying these people, what they have always been paid.
If that is making a mockery of the law, well, the laws, which attempt to regulate relationship between private parties, are largely idiotic to begin with...
Re:It's stories like this... (Score:5, Insightful)
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 worst day working for yourself is better than the best day I've ever had as an employee...ever. There is a lot of detail work necessary: Invoicing, collecting on the invoices, insurance, license fees, expense tracking, quarterly taxes. And there are liability issues to consider. But as more and more employers keep pushing responsibility and accounting issues down to the lower ranks, the amount of paperwork really isn't that different. Many employers expect you to process all that paperwork on your own time and travel on your own time. Plus a lot of them are getting dickishly intrusive monitoring and spying on their employees.
Besides, cubicles suck ass.
IBM gets caught breaking the rules and responds by cutting salaries. Nice. Just keep pulling stunts like that and your turn over will remain painfully high.
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.
Funny how that works, isn't it? Want me to work all weekend? No problemo! Just sign this invoice...right there...here's a pen.
Re:regulated in contract or law? (Score:2, Insightful)
There are ways to do this politically. Explain why you think you deserve a higher salary in terms of absolute values. Don't be smug or arrogant. Just make a business case for a higher salary.
It's worse than that (Score:3, Insightful)
Re:Some reference materials (Score:5, Insightful)
Previously, their annual salary would've been approximately 2000*x. It is now about 1700*x. Assume overtime is time and a half, they would get paid 1.275*x for each hour of OT. This means they would need to work about 236 hours of OT a year, or about 4.5 hours per week. If they were working so much OT that they were willing to sue, then this should be easy to make up and in the end they are making more money, since they weren't getting paid OT before.
Their only other option would've been to unionize; however, if these are programming and/or engineering jobs, you can bet IBM would've outsourced them in a second to save the money and the hassle of dealing with a workers union. Also, don't think there aren't plenty of engineers in the US who are willing to "scab". Most the engineers I know (myself included) absolutely abhor unions.
Re:Typical. (Score:2, Insightful)
Re:Typical. (Score:5, Insightful)
being a workaholic... (Score:1, Insightful)
* yes, I know, supposedly this was offset in their base pay. But for how many hours of overtime? 10/month? 20/month? what if you worked 40/month overtime? You were underpaid. What if you didn't work overtime at all? You got overpaid. At least, let's assume you got overpaid.. what if the base pay with this expected (assumed, really) overtime included is what would be base pay sans assumed overtime, in general, in the rest of the field? Then presumably you got the pay you deserved, and anybody working overtime was underpaid. Which would mean the base pay correction simply means that those who work overtime now get the pay they'd deserve -without- overtime to begin with, while everybody who doesn't work overtime will be underpaid.
Let's see some figures to determine which situation applies.
Re:Typical. (Score:3, Insightful)
Re:Typical. (Score:1, Insightful)
Then leave. Seriously... go do something else. Personally, I'm glad that they allow my father to receive time and a half on weekends while welding in sub-zero temperatures and that they keep an eye on safety standards on his site. Just because your union sucks doesn't mean they all do.
Comment removed (Score:3, Insightful)
Re:Typical. (Score:4, Insightful)
The union is only as good as the members that care enough to get involved. If all you do is sit back and complain you get the union you deserve.
Re:Hmm (Score:4, Insightful)
Re:They need a Union (Score:5, Insightful)
Re:Seriously (Score:5, Insightful)
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.
Re:Typical. (Score:2, Insightful)
Union keeps us well paid, well insured, and keeps him safe at his very dangerous job. He knows what his dues go towards, where his pension is, where his annuity is, who manages them, all that. If you're not involved, you don't get a say in the matter. Unions can only speak for the people that speak TO them.
Re:I don't understand (Score:3, Insightful)
Re:Hmm (Score:3, Insightful)
well 15% pay cut means 4 hours of OT to get your old pay (assuming standard OT pay rate of 1.5 X base, less if 2 X sunday). So I suspect that 4 Hours was a IBM average, so IBM's budget may not change, but probably 25% of the departments will have a deficit, and 25% *would* have a surplus.
Now for the managers of those who didn't work OT previously will likely have to decide, 1) fight for a pay raise 2) let them work the extra 30 minute after hours. 3) cut lunch hour to 30 minutes (probably not enforce it) 4) lose the most employable
I would guess in the short run many will cut the unpaid portion of lunch by 30 minutes, to be popular, and it will just be a loss for IBM.
Re:Hmm (Score:4, Insightful)
I have to disagree. The best employees may be the one who are smart, effective, and efficient, and can get their work done in forty hours. They'll get screwed.
The problem is that there are some jobs where time spent is the most important metric. Working the help desk, for example, or being a cashier. More productive employees (in theory) should make a better hourly wage, but there's a pretty close correlation between time spent and work accomplished. However, that's not the guideline for what makes an "exempt" employee. That has more to do with issues of self directedness. If the boss says "this week your setting up these servers", your probably not an exempt employee However, some people might take 8 hours, some might take all week. In that kind of work, the difference in efficiency between people can be enormous. It's a lot less if you're delivering packages.
If IBM hired these people with the understanding that this would be a forty hour a week job with "occasional" overtime, than this is an admission that they lied. Which stinks. It also smacks as a power play against people who complained. Which also stinks. My sympathies to everyone affected by this - I'd be mighty pissed if it was me.
Re:They need a Union (Score:4, Insightful)
The problem with Detroit is that they design and sell a shitty product. The line worker doesn't control the quality of the parts he/she bolts onto the car as it passes by. All he/she can do is his/her job to the best of his/her ability, but a poorly designed engine mated to a shit transmission inside an ugly-ass package can't be improved by paying the worker less. Detroit is a victim of their own mis-management.
Now I'm not saying that the UAW doesn't share some of the blame for Detroit's financial woes; I'm sure they protect incompetent workers all the time. The problem is, if they're going to protect the competent ones, they have to protect everyone.
Re:Hmm - OT Denied (Score:3, Insightful)
Re:It's stories like this... (Score:5, Insightful)
I'm sure someone will soon reply to this insisting that I'm a socialist and I'd like to see everyone's taxes go up as high as possible. Neither is true. IMHO we can provide every American with access to health care universally without increasing taxes. This might sound impossible, but work with me here: The unemployed/underemployed don't stop needing health care just because of their work situation. Hospitals can't refuse to treat people based on their insurance coverage (or lack thereof). The taxpayer is already paying for their health care through programs like Medicaid. Making health care universal only requires repurposing of tax revenue, not increasing it.
I'm sure someone will respond to that by pointing to the Canadian system, and how the quality of coverage is perceived as low as compared to the US system, where you get as much health care as you can afford. The rich don't need more health care than the poor; as much as they'd like to insist that it isn't the case, we're all the same on the inside, despite someone's bank acount being larger than someone else's. If we all receive the same level of care, and it's perceived as poor, then we can work to improve it for EVERYONE, not just the rich.
Re:Hmm (Score:5, Insightful)
Don't get me wrong, there are super-producers out there who get a ton done in a 40 hour week and then work another 40 hours every week. (Although I'd argue that this isn't really sustainable long term.) But for every one of those, there's at least one person who works a ton overtime and makes a lot of drama about what a hard worker they are, but doesn't actually get shit done, and there's also at least one person who works hard and busts out more than their fair weekly share of work but manages to do it within 40 hours.
A lot of company cultures reward the high hours low output employee over the 40 hours high output employee, and it's their loss when those people leave.
Re:Typical. (Score:1, Insightful)
Re:Hum (Score:1, Insightful)
One thing you need to understand is that IBM had illegally declared that these people were exempt in violation of federal labor laws that very specifically define who is and is not exempt. IBM had been doing this for more than a decade. That's why IBM has lost more than one lawsuit in the last year alone on this issue. And it's not as if the company is financially strapped. IBM has over $100 BILLION in liquid cash in addition to much more in assets (including real estate - not just office chairs), no corporate debt, and constant annual increases in new business. Add to IBM's stable financial footing the fact that it published strong earnings and profits for the last year higher than market expectations. All of this has been accomplished on the backs of thousands of US employees who have been illegally denied the compensation they are entitled to by federal labor law (you know, LAW - something people must obey but corporations can ignore - not just wishful thinking). These people work under constant threat of losing their job to outsourcing, something IBM is doing more and more, each year setting new goals for how much work needs to be done outside of the US. There's no internal job security, and now people are getting pay cuts. This is a banner financial year for IBM? This is how you reward hard work and loyalty? Oh, sorry, I forgot - this is business in America.
This argument would be very different if the individuals affected were truly exempt and were only bitching to get more money. But that's not the case. Laws were broken. Some people stood up for the larger community and demanded IBM obey the law. And now other people are being punished for it.
Re:Free Market (Score:3, Insightful)
More to the point, does it do the employee any good to leave if any other company knows they can break the law, lose a lawsuit but be able to cut everyone's base pay so everything evens out for them?
Kind of like it was before workers saftey rights; your employer doesn't make your workplace safe, so you're free to leave... except without force of law, no other employer bothers to ensure the saftey of their employees either. So what good does freedom to leave do you?
Re:They need a Union (Score:1, Insightful)
As for IBM not making anything that people want to buy, IBM doesn't make software for consumers...
IBM makes software for companies, and companies buy it by the truckload.
Or didn't you see that IBM posted record strong earning last quarter?
Re:sounds about fair (Score:5, Insightful)
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.
Re:Typical. (Score:4, Insightful)
More importantly, without knowing the weekly hours range as well. Personally, I would jump at the opportunity of taking a 15% paycut if I could get OT pay, because my take-home would go up considerably.
For everyone calling IBM evil bastards over this, consider - Working hourly rather than salaried, a 15% pay cut translates to a mere 4.7 hours of overtime. After that, you make more than you did before.
So, if this involves only an extra hour or two here and there, IBM sucks. If more like 10 hours, these people will make quite a chunk of extra change each week.
Re:Hmm (Score:3, Insightful)
Unfortunately, in most areas I've seen...this isn't the case. The exempt employees are expected to work OT, often on a regular basis, but, on the flip side, mgmt. gets kinda pissy if you leave early or take long lunches. I see this more and more out there.
That's why I think non-exempt/contracting is the way to go....the relationship is spelled out in writing, and you get paid for every hour your work. You're free to take a long lunch, but, if you don't make up that time, you don't get paid for it...
Recession (Score:2, Insightful)
When people start talking about a 'pending recession', it means that the recession started about three months earlier.
The formal definition of recession is "two or more successive quarters of GDP decline". You can't assign the first quarter to a recession until the second one arrives meaning that we're not technically in a recession, as of this writing. Wait for March 31st (end of 2nd US FY08), then we can comfortably claim that Jan 24th was part of it.
By the way:
since so many people look to the federal funds rate, it's easier to illustrate the overall attitude by looking at the changes to it and when they occurred [newyorkfed.org]. We see a minimal regular increase (+.25) in rate until September 18 when suddenly the rate drops by twice that interval (-.50).
September 18 also happens to be about one quarter ago.
Even though that is just one marker to a complex market, it is one that all participants use.Politicians will say anything, so disregard those comments. In this case, it's not just politicians talking about recession.
Re:Some reference materials (Score:2, Insightful)
Because most engineer types have massive egos and believe that their inherent brilliance places them above these filthy peasants who "must" collectively bargain to maintain their jobs.
They don't get paid for overtime in dollars, but in validation of their superiority complexes. That's worth more than money to these kind of people.
Re:Hmm - OT Denied (Score:3, Insightful)
Well, because there is an uncertainty in the level of work (especially since I'm in a small market - Alaska) and the bill rate to get me my current level of compensation would be uncompetitive. I worked for a consulting company that provided the same services I'd provide as a contractor. They charged less for my time than it would take to match my current salary, and I'd be competing against them (of course, they paid me much less at the time as well). So I'd have to charge 50% more than a direct competitor for service as a single individual when the competitor has a company of 10+ people they can throw at the same issue.
I swear, if possible, I'd NEVER go back to working as a W2 employee again...
Well, I get $10,000 per year retirement put into my account, not matching, even if I put in $0, they give me $10,000 per year. They paid for my masters degree. I have medical and dental and vision and all that, for a cost of $0. They pay about $15,000 per year for it. I can take off 4 weeks and 4 days per year at full pay. Starting in April, it goes to 6 weeks and 4 days per year. I'd have to charge an additional 15% above everything else just to cover the vacation. I get mileage, travel per diem that is above market rate, free training and time away from working for the training. I love being a W2 employee. My paycheck is the same every time. I've never been fired or laid off (well, except one time when I wanted it and got just under $30,000 severance after a merger). I have more job security than a contractor and greater income. Only if I thought I could be billed out at $250 an hour for 20+ hours a week would it make any sense for me to even consider contracting. The bill rate is much lower than that here, and I have no idea what my billed hours would be. For me (and the majority of people) being a W2 employee is vastly superior to contracting.
Re:Hmm - OT Denied (Score:2, Insightful)
You got that right. I get quite a few calls from companies that want to hire me on a W2/full-time basis. The only thing they can really offer me is paycheck security--twice a month I'd get a reliable paycheck. But that word "reliable" should definitely be in quotes because there is no loyalty from companies to employees which is why there is no loyalty from employees to companies. So why would I take a pay cut and give up my freedom (being able to work at 2am if I want, deciding when I'll take vacations, etc.) for a "reliable" paycheck that isn't really reliable? It just doesn't make sense.
It'd have to be an awfully juicy offer to get me to go back to W-2. I don't think anyone could afford what I'd have to ask for to accept a W-2 position.
Re:Hmm (Score:3, Insightful)
I work with a 61 year old guy that puts many of the 20 year olds at my company to shame.
And he knows the business rules so well that even if they worked the same hours he would smoke most of them.
And the quality of work he puts out is very high.
Re:They need a Union (Score:3, Insightful)
Union negotiations in this country boil down to two things: Management wants to pay nothing, give no benefits, and make people work 100 hours a week, and would do so if allowed to. The union wants to keep them from doing that. The two sides push and shove away from the extremes and meet somewhere in the middle.
You also assume that there's any incentive for a worker to work harder than they absolutely have to to keep from getting fired (see Office Space). Compensation is not tied to performance or productivity; compensation is simply kept as low as possible under all circumstances. The union makes it difficult to lower wages as much as management would like. Nowhere in this situation does quality become significant at all. In order to turn a profit, the product is made as cheaply as possible, quality be damned. (Which works in the domestic market, because the American consumer has proven again and again that given the choice between a good product and a cheap product, they'll buy the cheap one.) Management only concerns themselves with quality when their bonuses start getting smaller. They're only motivated by greed.
Re:Hmm (Score:4, Insightful)