Companies, including many PR firms, think they are not required to pay overtime to employees who have college degrees and who receive annual salaries. Think again.
Under federal law, a company is not required to pay overtime only if the employee's job duties and salary satisfy a specific exemption in the law. The mere fact an employee has a college degree or, for that matter, any educational training does not, by itself, satisfy an exemption.
Most employees at PR firms are classified as exempt from overtime pay based on the “administrative exemption” in the federal overtime law. There are three requirements for this exemption to apply:
• The employee must be compensated on a salary or fee basis at a rate not less than $455 per week;
• The employee's primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer's customers; and
• The employee's primary duty must include the exercise of discretion and independent judgment with respect to matters of significance.
The last requirement is particularly important. It should be easier than ever for PR firms to satisfy this criterion since employees are entering agencies with more experience – and getting more responsibility – than ever. This is true even for entry-level positions, such as account coordinators and AAEs. But it is critical for employers to ensure that these employees are actually exercising discretion and independent judgment on “matters of significance” – and that this is a part of their “primary duties” – if a PR firm wants to properly classify these employees as exempt from overtime pay.
There are other exemptions that would disqualify an employee from being entitled to overtime pay. One is called the “executive exemption,” but that exemption is only applicable to employees who have managerial roles and supervise other employees. Another exemption is called the “learned professional exemption.” This exemption is not commonly used by PR firms since it requires the employee to perform work requiring advanced knowledge in a field of science and learning (an engineer, for example).
In addition to the misclassification concern addressed above, there is another way in which PR firms are coming increasingly under attack for allegedly unpaid overtime. Even if employees are properly classified as overtime eligible, companies sometimes fail to pay them overtime for attending work-related events or regularly catching up on emails “after hours.”
One recent case involving Rogers & Cowan illustrates this concern. In Malakhov v. Rogers & Cowan, Inc., et al., a former employee, who was eligible for overtime, filed a proposed class action against Rogers & Cowan, claiming that he and other employees were required to attend after-hours client-related events without receiving overtime pay. If successful, the plaintiffs could recover damages of six or even seven figures since they would be entitled to seek damages going back four years, plus attorneys' fees.
It is critical for PR firms to evaluate their current HR practices and employee classifications to ensure that all staffers are properly classified as exempt (not entitled to overtime) or non-exempt (entitled to overtime) and that all entitled employees receive overtime pay for all hours worked. Here are five key steps that PR firms should discuss with specialized legal counsel to reduce the risks associated with failure to comply with the federal overtime laws:
• Review employee job descriptions to determine whether the duties described meet the administrative exemption test, especially the requirement that the employee's job include the exercise of discretion and judgment on matters of significance.
• Revise job descriptions, taking into account the greater degree of experience and discretion that certain jobs now have due to changes in the PR business, whether due to social media, promotions, video production, or a host of other innovations that changed the duties of many entry-level positions at PR firms.
• Conduct an internal audit of employee classifications and determine whether any employees should be re-classified.
• Analyze the pros and cons of reclassification to determine the best way to minimize potential exposure and to ensure that all employees are being paid properly.
• Keep proper time records for all hours worked by employees.
Wage and hour lawsuits for unpaid overtime are increasingly common. Because of this, PR firms should be proactive to prevent such lawsuits, or, at minimum, to place themselves in the best position to defend against claims.
Michael Lasky is a senior partner at the law firm of Davis & Gilbert LLP, where he heads the PR practice group and co-chairs the litigation department. He can be reached at email@example.com.