Following Overtime Lawsuit, IBM Cuts Technicians' Pay

January 24, 2008 ( - International Business Machines Corp. (IBM) is cutting the base pay of 7,600 computer technicians by 15%, the Wall Street Journal reports.

The move, effective February 1, follows a 2006 lawsuit that claimed IBM did not properly pay technicians, who typically worked 45 to 50 hours a week, overtime pay (See Suit: IBM Techs Didn’t Get Proper OT ). IBM said that s ince the lawsuit was settled, it has been analyzing its workforce to determine how many of the technicians were incorrectly classified as exempt, and those workers are now being converted from salary to hourly pay, according to the WSJ.

A company spokesman told the Journal that most of the affected employees will not suffer an overall cut in pay because they will work enough overtime to maintain their previous salary levels. However, a union representative working to organize IBM employees for the Communications Workers of America and an internal IBM presentation reviewed by The Wall Street Journal, indicated many of the workers will not work enough overtime to make up the difference and will suffer pay cuts.

In addition, 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, the presentation said, according to the Journal.

The union representative calls the move by IBM retaliation for the lawsuit, which IBM denies. The company also says the action is not a cost-cutting move. Fred McNeese, a spokesman for IBM, told the Journal “overall compensation will remain roughly the same,” but noted that if IBM paid the workers overtime based on their former salaries “those costs…would make IBM non-competitive.”

The IBM human resources presentation advised managers to redistribute hours to employees to equalize their pay with previous levels where possible, but conceded that demand for “hot skills and customer commitments may limit opportunity to redistribute overtime,” the newspaper said.