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"IBM responds to overtime lawsuits with 15% salary cuts"



The fastest-growing area of employment litigation in recent years has been wage-and-hour class actions, perhaps the biggest subset of which are lawsuits charging that white-collar employees have been misclassified as exempt from hourly wage and overtime calculations. Like many big employers, IBM has been hit with such suits from lawyers seeking to represent thousands of its employees. Information 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, InformationWeek has learned.

The plan has been greeted with howls of protest from affected workers.

The payroll restructuring goes into effect Feb. 16 and applies to about 8,000 IBM employees classified as technical services and IT specialists, according to internal IBM documents reviewed by InformationWeek and sources at the computer maker.

The plan calls for a "15% base salary adjustment down across all units with eligibility for overtime," the documents state. The move is a direct response to the employee lawsuits -- at least one of which has apparently been settled.

"To avoid protracted litigation in an area of law widely seen as ambiguous, IBM chose to settle the case -- and to conduct a detailed review of the jobs in question," the documents state.

The giant tech company also intends to lobby for modernization of New Deal era wage-and-hour laws which might allow it to restore the previous compensation methods. Good luck with that -- even if it can show that most of the workers involved would themselves favor salaried rather than hourly status, the political clout of unions and trial lawyers has stymied efforts at legislative reform in the past. (Paul McDougall, Information Week/EETimes.com, Jan. 23)(cross-posted from Overlawyered).

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Rafael Mangual
Project Manager,
Legal Policy
rmangual@manhattan-institute.org

Katherine Lazarski
Manhattan Institute
klazarski@manhattan-institute.org

 

Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.