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."

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:

[that this is not und]

It also doesn't account for the possibility that the staff who work overtime will now be paid more than the clockwatchers who participate in the stampede to the parking lot at 4:30.

Re:Hmm

[CastrTroy]

What's wrong with not working overtime?

Re:Hmm - OT Denied

[Mr Pippin]

Being allowed to. The re-classification does not guarantee the workers that 5 hours of overtime. In fact, going forward, you can bet they will push back on allowing overtime that HAD been done before as "exempt" work. Even worse, there are plenty of people affected by this that will not qualify for overtime to begin with (they work a standard 9-5 position). Those are the ones that are really screwed in this.

Re:Hmm - OT Denied

[cayenne8]

I think all of this makes me even MORE happy to be a contractor. Why not have everyone do it and be done with it? Form your own corp....got corp to corp, figure your bill rate to cover your paying your own insurance, vacation time, etc....and be done with it.

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.

Re:

[AK Marc]

Form your own corp....got corp to corp, figure your bill rate to cover your paying your own insurance, vacation time, etc....and be done with it.

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 salar

Re:

[pragma_x]

Insightful.

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. :)

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.

This. What I want

Re:Hmm - OT Denied

[sumdumass]

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).

Look into becoming a member of your chamber of commerce. The insurance discounts from mine seem to be larger then the cost of membership plus it allows some simple networking and advertisement. I would say the becoming a CoC member was pitched as how it would grow my business but ended up being more about saving me money. I even got discounts on my car insurance and a lot of other things. Your CoC might be different then mine, but it is worth a look to see.

Re:Hmm - OT Denied

[letxa2000]

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:

1. I am never working for free. And with a good client, they don't want you to work free. They're looking for quality work, not slave labor. If you have a client that actively tries to get you to work for free, ditch that client. There's a difference between them looking for a good deal and them trying to exploit you.
2. There is no motivation whatsoever to do anything less than an excellent job. Not that I ever did a bad job. But if you have a fixed bid, you're going to make sure you meet the specs but there's no reason to go above and beyond. You're going to get it done ASAP. It'll work, but it might not be pretty. Whereas if you're paid by the hour there's a little more leeway for you to give the client not just something that meets the spec, but does so with style. Sure, that might cost the client a little more than doing the bare minimum, but most clients would rather have it exceed expectations and look good than save a few dollars. You can't go overboard, of course, it's not a matter of milking the clock. But you do have the ability to spend the extra time necessary to make a better product.
3. It's the best financial deal for the client. If you do a fixed-price bid, you have to plan for the worst case scenario to avoid being burned (and even then you can underestimate, like what happened to me). But the worst case scenario usually doesn't happen. Which means you've actually charged the client more than he would have paid because you were planning for the worst but the project didn't actually end up as a worst-case. So you, as a consultant, have a windfall... but is that any more ethical than the client expecting you to work for free? It's just a matter of who's getting ripped off.
4. Essentially the customer is paying you for all your time but isn't paying you for time you don't spend on their project (which is the case in a fixed price bid where you've bidded based on the worst case scenario).

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

Re:

[cayenne8]

"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"

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 multip

Re:Hmm

[Sen.NullProcPntr]

What's wrong with not working overtime?

Nothing, but don't expect to take home as much pay as someone who does.

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.

Re:

[cayenne8]

"f 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."

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'

Re:Hmm

[Mongoose Disciple]

You seem to have come to the erroneous conclusion that the people who work the most hours are the most valuable to the company or accomplish the most in a week. You're not alone in this, but it's still not correct.

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:

[Bryansix]

That's not really the point of the wage laws. Not all people work in jobs where they are there to be productive all the time. Some positions are there to monitor things so when things go wrong they can respond and fix them. Like in a helpdesk call center or any head of an IT department in charge of say email. When email goes down the employee is expected to stay and work overtime and they should be compensated for that. In addition if a department just needs extra coverage JUST IN CASE something goes wrong

Re:Hmm

[Mr. Underbridge]

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:

[Builder]

This is one of the main reasons I always negotiate overtime into my contracts (and recently into my permanent role contract). If it doesn't cost the company anything, they have no reason NOT to work me as hard as they can.

Getting paid overtime also protects against incompetent bosses to an extent. They can't hide the amount of extra work they're pushing you for from their own management or the financial crew, so at least even if you can't get through to them, there is a chance of someone else slapping them.

Re:

[RoverDaddy]

Exactly (your last statement). In the US, if you're a full-time employee not covered by a union, you probably aren't working under a contract but an employment agreement. Either you or the employer can walk away at any time. You can ask for more money, they can drop your pay, etc. Then you both get to decide whether you want to continue the relationship. Now, if they don't pay you what they already agreed for work already completed, that's a different story. Then legal issues enter into the picture.

Re:Hmm

[FuzzyDaddy]

this probably is best for the quality employees who always find themselves overcommitted and working hard

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:

[Maxo-Texas]

Younger harder-working.

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:

[Dare nMc]

The boss hardly has to account for overtime in his budget if the end result of having his employees working overtime is that he pays them what he has always paid them.

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 previo

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.

Re:Hmm

[Daniel Dvorkin]

Jesus Christ, you don't get it, do you? IBM broke the law by wrongfully classifying these employees as exempt. They sued to force IBM to comply with the law. And now they're being punished for it. Tell me, when a cop arrests a criminal, should we throw the cop in jail?

Stapler

[gmyerxa]

This is the last straw....

Re:Stapler

[Kamokazi]

Woah woah woah. It's not last straw until you a) stop getting a paycheck, b) get moved down to storage B, and c) find a hundred grand laying on the floor.

Typical.

[beavis88]

This, folks, is a good example of why labor unions are still around. Not that it's going to help any in this case...

Re:Typical.

[beavis88]

What are you, a fucking Presidential candidate? That's not remotely close what I said.

Re:Typical.

[beavis88]

Condescending attitude? Check No mention of the original topic at hand in the "rebuttal"? Check Ad hominem attack? Check

By golly, I think you really are a Presidential candidate!

Re:

[beavis88]

How very odd - an AC had replied to my original post, and I retorted. The AC's reply now seems utterly absent, making me look like I'm insane.

Or maybe I am just insane. But I really don't think so. Seriously...

Re:

[EastCoastSurfer]

Why? Did these employees original contract say they would get salary + OT pay?

Some reference materials

[Eggplant62]

http://www.dol.gov/esa/regs/compliance/whd/whdfs23.pdf [slashdot.org]>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 [dol.gov]

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.

Re:Some reference materials

[Anonymous Coward]

No, this is great business and I love it. I am considered an exempt employee, so I am salaried with no OT; however, I love seeing corporations telling their employees to fuck off when they pull shit like this. IBM said, "You want to be hourly, fine here is your old pay minus 15%." Now, do not cry too much for these people. Assume their old salary was equivalent to a rate of $x per hour. Their new rate would be about $(x * .85).

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:

[arivanov]

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

Re:

[gEvil (beta)]

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.

Minor nitpick, but the article says that one of those lawsuits was settled. This means that it didn't go to court and was not "declared null and void." It's possible that that might have happened had the case actually gone to trial, but it didn't, so we'll never know.

Re:Typical.

[mattwarden]

How can you make the assessment that IBM is in the wrong by introducing the 15% reduction without knowing the salary range in question?

Re:Typical.

[pla]

How can you make the assessment that IBM is in the wrong by introducing the 15% reduction without knowing the salary range in question?

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:Typical.

[stewbacca]

Well, to be fair, the labor unions are the reason we have people who demand to be paid 1.5x their pay if they work a minute over 8 hours per day or 40 hours per week, or don't get their two smoke breaks per 4 hours.

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.

Re:

[russotto]

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.

I actually hired on to IBM out of college as exempt (I'm not there any more). They pretty much

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 jo

Re:

[Bryansix]

I agree with all of your points except the last one (point 2.)

People don't seem to understand that IBM has a gross income in the Billions of dollars (that's with a B) because they succesfully transistioned from a company that produced products to a company that sells services and has a major R&D pipeline which creates patentable and then licensable products and ideas. How do I know this? Because I was a stock holder and I got the annual report every year.

People now outsource major projects to IBM

"something good that people wanted to buy?" Huh?

[sirwired]

When is the last time IBM produced something good that people wanted to buy?

What planet are you living on? IBM is, and has been since the day it was founded as the Tabulating Machine Company by Herman Hollerith in the 1880's, the largest provider of electronic IT to the businesses of the world.

For the $98.8 Billion they made in revenue last year, somebody must think they have something worth buying; like:

Mainframes: The world's largest IT systems still run on IBM Mainframes because they simply pretty much

Re:They need a Union

[ktappe]

Unions provide practically nothing of value to companies

They aren't meant to provide value to companies, they are meant to provide value to employees. They HURT companies but they tend to hurt companies that deserve hurting because they've already hurt the employees so much the workers chose to unionize. Perhaps it's not the original poster who doesn't know what the fsck he's talking about....

Re:They need a Union

[BVis]

Detroit isn't a good example of this. The foreign car brands that produce their vehicles domestically have proven that the American auto worker, despite being unionized, can produce a good product at a price point that is both affordable to the consumer and profitable to the company.

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:

[BVis]

I think where we're differing is that you're operating under the assumption that anyone gives a flying fuck about productivity or quality when it comes to labor negotiations over here. The union wants no part of helping someone get fired, whether they're competent or not. The reason for this is that management could conceivably make it look like a particular worker were incompetent, if they found that said worker were becoming 'inconvenient' for management (for example, kept complaining about broken equip

Re:

[Anonymous Coward]

I'm in my own private union. I'm the only union member. On the downside, dues are 100% of net takehome pay. On the upside, most of that gets spent on beer for "union meetings".

Re:Typical.

[GNU(slash)Nickname]

I work for a Union.

You work for the union, or you are just a union member?

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%.

Your union dues went up by 2.5% of your gross salary? Really?

Re:

[sorak]

So you're complaining that they gave you comp time, but not enough. And they got you a raise but not one large enough. Yeah. who needs any of that shit!

Re:Typical.

[captbob2002]

Not happy with how your union is run - then you should volunteer to lead it or run for union office. Not happy with the contract? Then get on the negotiating team for the next contract. Not happy about how comp-time is being used - get it changed in the next contract.

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.

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:Again.

[kripkenstein]

Radioshack settled a similar lawsuit with their store managers several years ago, and lowered their base salaries to offset the new overtime payouts.

I've heard about lots of this sort of thing going on in smaller corporations, that you wouldn't hear about in the news. Fact is, the 'industry norm' is in many cases to not pay overtime for these sorts of jobs, even though people constantly work beyond the normal hours (these aren't 9 to 5 jobs!). As compensation, the base salaries are typically quite high. But it turns out that this norm is somewhat at odds with certain laws regarding overtime, and employees in many cases demand what they think they deserve.

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.

Free Market

[jockeys]

if the free market responds correctly, i would expect ibm to lose quite a few employees over this. i know if i was working there i'd be shopping my resume around after a slap in the face like this.

Re:

[montyzooooma]

According to Cringely ( http://www.pbs.org/cringely/pulpit/2007/pulpit_20071228_003726.html [pbs.org] ) that would be a good thing since if they quit there's no severance package.

Re:Free Market

[navygeek]

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.

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.

Re:Free Market

[plague3106]

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.

Re:

[plague3106]

Yes, they are free to leave. It has nothing to do with that. It has everything to do with the fact that the employee still needs to eat. If they can find another job, great. But you can't argue that a sudden 15% paycut won't have an effect on the employees, and may put them in danger of losing their house, depending on individual situation. One employee leaving IBM won't have any effect whatsoever. That's where the power divide lies.

More to the point, does it do the employee any good to leave if any o

Re:

[plague3106]

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

Re:

[ciggieposeur]

It was doing perfectly fine.

No it wasn't. In the early 1900's some workplaces had a 12 percent mortality rate.

Let me repeat that: 12 PERCENT MORTALITY RATE.

Let me repeat that again: There was statistically a 12% chance that you would DIE for every 1 YEAR you worked.

In 1908 US Steel began to record safety incidents and worked to minimize the accident rate in a "safety first" program; in 1913 the Department of Labor was formed to coordinate a federal response; by 1915 the National Safety Council was establi

Lawsuit? Prepare for Other Pain...

[Anonymous Coward]

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.

Sounds about right, actually

[Fortunato_NC]

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?

Re:Sounds about right, actually

[xplenumx]

Now the real question is, how many of these folks will get 5 or more hours of overtime per week?

In my experience, the biggest drawback to being an hourly employee is that the company tells you when you can't work. If you're really enjoying a project or on a roll, it's extremely frustrating to be told that you have to stop for the day/week. You can't just not record any extra hours worked either as it's a liability for the company.

It's stories like this...

[The Famous Druid]

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.

Re:It's stories like this...

[HangingChad]

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:

[canuck57]

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.

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 bo

Re:It's stories like this...

[BVis]

Agreed, the US situation is different than in a lot of others because we stubbornly insist on coupling access to health care with employment. For some reason, the prevailing attitude seems to be that the unemployed deserve whatever they get, even if that 'whatever' is a slow agonizing death from a treatable cancer.

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.

Penny wise and pound foolish

[schwit1]

15%? That's cheap compared to the damage from the loss of morale and confidence in management.

Cha - right!

[Foolicious]

15%? That's cheap compared to the damage from the loss of morale and confidence in management.

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 o

Re:Penny wise and pound foolish

[avandesande]

We are entering a hard recession. By next year the employees morale will be high because they have a job.

Salary + Commission + Overtime?

[poptix_work]

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.

Re:Salary + Commission + Overtime?

[ccguy]

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.

On those slow weeks, are you expected to be at the office for 40 hours anyway, or they actually let you go home once you are done?

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:

[account_deleted]

Comment removed based on user account deletion

Where did they think...

[Aladrin]

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.

Re:

[yorugua]

Well, funny as it is, usually if you contract IBM services, and you buy say 30 hs a week of a certain skill at a certain rate, they would have another rate if case you overshot that 30hs/week timeframe. Do you think they are going to lower services contract by 15, 10, or 5% now?

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[account_deleted]

Comment removed based on user account deletion

Re:

[EtoilePB]

There are a lot of places where if you refuse to work the unpaid overtime, or whatever, the management says, "That's great. We've hired a replacement for you. Bye now!" I don't know if IBM is one of those places or not.

But even though technically the employee has the freedom to leave, let's face it -- workers NEED salaries in their hands, and you can't usually realisitcally leave one job until after you've got another lined up. (And when you're working 50+ hours a week, it's harder to line a new one

I don't understand

[chord.wav]

Somebody please explain me why engaging in war with your own employees, specially on such delicate matters as payment, is going to affect the stocks of the company in a positive way.

Wouldn't they ensure employee happiness so they perform better so the company earns more and be more productive etc etc?

Re:I don't understand

[Ihlosi]

Wouldn't they ensure employee happiness so they perform better so the company earns more and be more productive etc etc?

With an attitude like that, you'll never make it into management. Read more Dilbert cartoons.

Re:

[Oktober Sunset]

to increase employee happiness, simply fire all the miserable people. Although you wouldn't want to, because unhappy people are easier to manage than happy ones.

They get unemployment if they quit

[ktappe]

In most states if your employer cuts your pay and you quit, you get unemployment. A cut in pay is considered breach of contract on the employer's part and your rejection of the new terms is tantamount to you being fired. Hopefully enough IBM employees know of or learn of this and walk out, causing IBM to pay out substantial unemployment compensation.

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.

Re:

[Registered Coward v2]

In most states if your employer cuts your pay and you quit, you get unemployment. A cut in pay is considered breach of contract on the employer's part and your rejection of the new terms is tantamount to you being fired. Hopefully enough IBM employees know of or learn of this and walk out, causing IBM to pay out substantial unemployment compensation.

That would be a rather short sighted and stupid thing to do, because:

1- unemployment doesn't make up for all of your salary and is often limited in duration; yo

A company can reward for overtime ...

[scharkalvin]

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.

It's worse than that

[Ranger]

Considering how much the dollar has dropped. Employees have already received a %15 pay cut through inflation alone. Another %15 percent cut is adding insult to injury.

What about "undertime"?

[Fished]

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

Re:

[dubbreak]

If they want me to work free overtime, then they need to g

Need to what? You totally left me hanging there.

Re:

[TheCage]

If they want me to work free overtime, then they need to g

See you in 48 hours.

IBM had this coming

[Bob-taro]

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.

Layoffs

[graphicsguy]

Well, announcing a 15% salary cut is essentially announcing a layoff. Hopefully, losing some percentage of their workforce was what IBM had in mind.

Re:sounds about fair

[ArsenneLupin]

No harm done -- the employees just have to keep doing regular overtime and they get the same salary they used to. If they do less, they get less money and if the boss deamnds more, they get more pay.

... and if they show up for their normal time, but spend all day on Slashdot or on personal projects, they still get their regular pay...

Sounds fair to me.

indeed...

Re:sounds about fair

[Anonymous Coward]

No harm done -- the employees just have to keep doing regular overtime and they get the same salary they used to. If they do less, they get less money and if the boss deamnds more, they get more pay.

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:Free market

[Anonymous Coward]

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.

Re:

[eugene ts wong]

I live in Canada, and I have a friend who works for our tax collectors. He says that Canada won't take your land. You won't be able to sell it, and they can make life miserable for you in other ways, but you can keep on living under your roof and on your property.

That seems fair to me, by today's standards.

Re:

[TheRaven64]

And how exactly do you live if you don't work?

I don't know about where you live, but in the UK you can claim unemployment benefit (possibly known as jobseekers' allowance) while unemployed. You may also be exempt from council tax (property tax) and you don't pay income tax on your first £5000/year of income (then only 10% for the next few K). You can live without working, you just don't enjoy a particularly high standard of living.

Re:

[Fujisawa Sensei]

Unemployment is taxed in the US; the government just doesn't take the taxes out up front. Unemployment is only good for a certain number of weeks, it is not pertetual.

Re:

[the grace of R'hllor]

If you want to keep your employees, or keep them motivated, showing them a modicum of respect and some common goddamn decency goes a long way, though.

Re:

[mi]

If you want to keep your employees, or keep them motivated, showing them a modicum of respect and some common goddamn decency goes a long way, though.

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, w

Re:

[Cerberus7]

Sounds good in theory, but that's not what really happens to exempt employees: You never work less than 45, and you average something in the 50s. Ask to leave early, and you get yelled at.

As for me, I've proudly held onto my non-exempt status as long as I can. I might have to give it up to get the next promotion I'm looking for, but I'll be damned sure to make up for the extra hours while negotiating my new salary.

Comment removed

[account_deleted]

Comment removed based on user account deletion

Re:Seriously

[paulbd]

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: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:

[Remloc]

Don't they have their salary regulated in contract? Or is it accept-or-be-fired (article doesn't tell)? I am not really familiar with US labour market. Is this legal? In many countries, you can only be fired for misconduct or lack of availible work. (The discussion about race-to-the-bottom and trying or not take part in it will probably take place somewhere else in the threads ...)

I've rarely seen the salary of an IT or programmer level person (which these apparently are) in a contract. Larger companies