Even as IBM Corp. reports record profits, thousands of its U.S. employees are staring at pay cuts.

It's the result of IBM's response to a lawsuit in which the company was accused of illegally withholding overtime pay from some technical employees. IBM settled the case for $65 million in 2006 and has now decided that it needs to reclassify 7,600 technical-support workers as eligible for overtime.

But their underlying salary — the base pay they earn for their first 40 hours of work each week — will be cut 15 percent to compensate.

The decision on overtime stems from the settlement of a federal class-action lawsuit in San Francisco in which 32,000 technical workers accused IBM of illegally withholding overtime pay.

IBM had considered the employees highly skilled professionals exempt from overtime rules as defined in the Fair Labor Standards Act. The plaintiffs alleged that they were not executive decision-makers or creative types who can be ineligible for overtime.

Though that case was settled late in 2006, McNeese said IBM needed until now to determine how to comply with federal overtime laws. "We still think it's ambiguous," he said.

IBM riles employees with base pay cuts - Yahoo News