The settlement was reached in a putative class action suit originally filed on April 17, 2008. The suit, Danieli et al. v. IBM Corp., alleged that IBM misclassified thousands of employees as exempt from the Fair Labor Standard Act’s (“FLSA”) overtime pay requirements. The plaintiffs claim that as a result of this misclassification, they were underpaid and failed to receive credit for overtime compensation for their retirement plan as required by the Employee Retirement Income Security Act. The settlement provides $7.5 million including up to $2.5 million going towards attorney’s fees and $150,000 for litigation expenses. The settlement also stipulated that employees in California will receive a higher share due to the stronger claims made under California state law.
According to the settlement agreement, the motivation for the settlement on both sides included the uncertainty in the duration of future litigation as well as amount recovered. Excess costs predicted and accounted for but not spent as well as un-cashed settlement checks will be donated to the Habitat for Humanity.