The Wall Street Journal-20080124-IBM Cuts Technicians- Base Pay After Lawsuit
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IBM Cuts Technicians' Base Pay After Lawsuit
International Business Machines Corp. is cutting the base pay of 7,600 computer technicians by 15%, a move that follows a 2006 lawsuit over overtime pay claims.
A company spokesman says that most of the employees, who are switching from a salary to an hourly pay basis effective Feb. 1, will not suffer an overall cut in pay because they will work enough overtime to maintain their previous salary levels.
But a union representative working to organize IBM employees for the Communications Workers of America said that many of the technicians will not get enough overtime, and will suffer net pay cuts -- a point acknowledged in an internal IBM presentation reviewed by The Wall Street Journal.
The representative, Lee Conrad, termed the IBM pay actions "retaliation" for the 2006 lawsuit, which IBM settled by paying $65 million. "IBM got caught breaking the law and now they're punishing the workers," Mr. Conrad said. IBM denies it is retaliating.
This week, according to the internal presentation, IBM managers started informing the workers of their 15% base pay cut. It said most could expect to make up the difference with overtime pay and some might make more. About one-third "are not generating overtime compensation that offsets the 15% change to base salary," according to the presentation.
Wage and hour laws are a hot area of labor law. Even at nonunion companies like IBM, the federal Fair Labor Standards Act requires that hourly employees be paid time-and-a-half for every hour worked beyond a 40-hour work week. But many technology companies regard most of their workers as professionals who are exempt from overtime. The previously salaried IBM technicians averaged 45 hours of work weekly installing and fixing computers and software.
Since the lawsuit was settled, IBM said it has been analyzing its work force to determine how many of the technicians were incorrectly classified as "exempt" under the legal standard. Those are the workers now being converted from salary to hourly pay.
In its PowerPoint presentation, IBM showed an example of a technician making an $80,000 salary who will now receive $68,000 a year in base pay and $12,000 in overtime wages, based on five hours per week of overtime.
The human resources document advised managers to redistribute hours to employees to equalize their pay with previous levels where possible. But it conceded that demand for "hot skills and customer commitments may limit opportunity to redistribute overtime." Because IBM bases certain benefits on base pay rather than overtime, the workers will get lower holiday and vacation pay and less group life insurance, according to the documents.
The IBM action was earlier reported by the Associated Press.
IBM says the action isn't a cost-cutting move. Fred McNeese, a spokesman for IBM in Armonk, N.Y., said "overall compensation will remain roughly the same." He said that if IBM paid the workers overtime based on their former salaries, "those costs . . . would make IBM non-competitive."
