IBM Responds to FLSA Suit by Cutting Base Pay for 6% of Workforce....

Here's an ugly one for you....

In 2006, IBM got hammered in a FLSA suit, and was ordered to pay 65 million in unpaid, overtime, back pay to workers included in the suit, who were deemed to be incorrectly classified as "exempt".

With that in mind, you expect a company like IBM to reclassify those employees as non-exempt and start making them OT eligible, right?   

As expected, the good news for those workers is that IBM now plans to grant them 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.

IBM's taking this path with 6% of its total workforce...

In a move that is legal but full of employee relations potholes, IBM apparently looked at the entire situation, and decided to remain cost neutral by cutting base pay of the workers upon the transition.  That way, if the expected amount of OT comes in, the workers will be earning the same total compensation.

That's hardball from a compensation perspective.  Glad I'm not the HR Manager handling those conversations - "Ricky, we're moving you to hourly/non-exempt status.  As a part of that, we've taken your salary and converted it to an hourly rate, then reduced it by 15%, since that's the average amount of compensation we project you'll earn through overtime this year".

Ugh.   

Here's an ugly one for you....

In 2006, IBM got hammered in a FLSA suit, and was ordered to pay 65 million in unpaid, overtime, back pay to workers included in the suit, who were deemed to be incorrectly classified as "exempt".

With that in mind, you expect a company like IBM to reclassify those employees as non-exempt and start making them OT eligible, right?   

As expected, the good news for those workers is that IBM now plans to grant them 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.

IBM's taking this path with 6% of its total workforce...

In a move that is legal but full of employee relations potholes, IBM apparently looked at the entire situation, and decided to remain cost neutral by cutting base pay of the workers upon the transition.  That way, if the expected amount of OT comes in, the workers will be earning the same total compensation.

That's hardball from a compensation perspective.  Glad I'm not the HR Manager handling those conversations - "Ricky, we're moving you to hourly/non-exempt status.  As a part of that, we've taken your salary and converted it to an hourly rate, then reduced it by 15%, since that's the average amount of compensation we project you'll earn through overtime this year".

Ugh.