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The Practice Management Knowledge Community (PMKC) identifies and develops information on the business of architecture for use by the profession to maintain and improve the quality of the professional and business environment.  The PMKC initiates programs, provides content and serves as a resource to other knowledge communities, and acts as experts on AIA Institute programs and policies that pertain to a wide variety of business practices and trends.

    

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New Overtime regulations

  • 1.  New Overtime regulations

    Posted 05-20-2016 05:29 PM

    The new overtime regulations from the Obama administration are brand new this week and many firms must be grappling with how to deal with this quantum change. I know the last firm for which I was an employee expected interns to be working a minimum of 50 hours a week. Our firm does not expect this but there are certainly weeks where interns put in more than 40 hours to help with a deadline. Historically we have rewarded this with additional holidays (July 4th is on Wednesday....we'll close Thursday/Friday) and very generous bonuses. Additionally, being salaried, not hourly allowed a flexibility of schedule.

    This coupled with the incredible increase we have seen in healthcare costs, for us more than 100% in two years for much less desirable insurance, puts the leadership of  our firm of 26 in a unexpected and untenable position. Fees are not increasing anywhere near the level salaries and expenses are. This new regulation is the cherry on top. Our firm has projected that doing less work with our most capable people would garner us more profit; so is that what we do, fire 15 because we are drowning in regulatory expenses?

    Our firm does multifamily, which is booming, but as I mentioned fees are not keeping up. I have no answer but would appreciate any thoughts others have.

    Thanks.

    ------------------------------
    Nea Poole AIA
    Principal
    Poole & Poole Architecture, LLC
    Midlothian VA
    ------------------------------


  • 2.  RE: New Overtime regulations

    Posted 05-23-2016 06:14 PM

    This goes back to the ever sore subject of intern pay.

     

    IRS has burned multiple firms over the years for putting interns on salary.  Employee filed a complaint about not being paid time and half over 40.  Wage and Hour Division investigated and the employee and their fellow employees all got back pay at time and half and the firms get a hefty fine.

     

    A typical intern does not meet the criteria for being on salary.  They do not manage other employees, they cannot exercise independent judgement (we had this conversation with members of our state licensing board who reminded us that only registered architects exercise independent judgement) and they do not manage aspects of the firm's business.

     

    Some perpetual interns can probably be assigned managing certain parts of the business but have to be careful and read the rules.

     

    We hire interns on an hourly basis and pay time and half over 40 hours.  We tell them to expect to work so many hours a week and over 40 is time and half.  Show them their weekly pay and what that means for a year.  Need to be realistic about the number of hours.  They will get upset if they do not get the number of hours so they are not getting the desired pay which they need to live on and pay off their debt.

     

    Fairest system I ever worked under was they paid us a salary and over a period of time we were supposed to average 44 hours a week.  So when we got busy and worked more hours those went into a bank so when the office slowed down – we took afternoons off.  When they knew we would stay busy for a while they paid us hourly for your hours over 44 at same rate as your salary.  As the lead principal explained they should not benefit by us working for free because they mismanaged the work load so we all had too much work.  It also leveled things out for them and us.

     






  • 3.  RE: New Overtime regulations

    Posted 05-24-2016 06:20 PM

    In 1971, we were paying straight time overtime by the hour, not time & 1/2. We never made money cebecause of all the overtime. An employee anonymously complained to US Labor Dept. We were investigated and they reached a "determination", which I was requested to sign and pay back wages to those employees that had had worked on "interstate commerce". The secretary opens the mail, that's interstate commerce. Any employee that worked on out of state projects was entitled to time and a half pay for time on those projects only. Never the less it came to a considerable amount. I asked the Labor Official "Please tell me all of the exceptions to this time and on half law, because I know my competitors are not pay time and one half.

    He GRINNED, and said of course there are exceptions, but you have to have written concurrence from the employee for them to be valid - you can'y apply them after the fact to work previously done. The exceptions were, and are up until about 3 years ago when I last checked (the new Obama garbage should be checked for the exceptions): Sliding Scales Hourly Rate, Belo Plan and Professional Pay. I refer the reader to the Labor Dept regs to get the most current.

    BTW, after I changed it to Sliding scale hourly Rate, we finally began to make MONEY with NO OVERTIME. Employees were playing on the job to make overtime necessary.

    ------------------------------
    Ladd Ehlinger AIA
    President
    Ehlinger & Associates PC
    Metairie LA



  • 4.  RE: New Overtime regulations

    Posted 05-25-2016 05:31 PM

    Get real folks - anyone making less that $47,000 today is at an intern or staff architect level. Assuming they put in an honest days work (which ours certainly do), they deserve overtime, at time and a half, for any extra hours. This gives them the incentive to put in the extra time if we need it, and it gives us an incentive not to ask for the extra time if we cannot support the cost.

    We set salaries for all staff, and then calculate an hourly rate based on dividing by 40 hours a week. Once we get above $52,000 annually (project manager level), overtime no longer applies, since they are truly managerial.

    It's time for us as a profession to properly compensate our staff, and to set fees accordingly.

    ------------------------------
    Jerry Roller AIA
    JKRP Architects
    Philadelphia PA



  • 5.  RE: New Overtime regulations

    Posted 05-25-2016 05:31 PM

    Ladd:

    Excellent point about employees gaming the overtime system. My husband put himself through college doing drafting that was on a government contract. He would tell us all the time that the older, full time employees would chastise him all the time that he was working too quickly and he would mess up overtime. At times it apparently got contentious since he has one speed....get it done!

    ------------------------------
    Nea Poole AIA
    Principal
    Poole & Poole Architecture, LLC
    Midlothian VA



  • 6.  RE: New Overtime regulations

    Posted 05-24-2016 06:45 PM

    Robert,

    Back in the days of pencil on vellum or plastic lead on mylar, the firms I worked for back then had two approaches:

    1.  At one, bonuses were based on hours worked.  So, get behind, get paid OT for the work on weekends to get the job done, and a bigger bonus for more hours, and more vacation time (earned on an 8 hours vacation per 160 hours worked basis).  The guys who got their jobs done on time and budget grumbled about this arrangement.

    2.  "Comp time", especially for salaried people, for the extra time.  Salary agreement included text about "target hours per year", and time beyond that was used in calculating bonuses; could be used to take longer vacations on a 1:1 basis, or paid (when firm had the cash in the bank) upon request at a 1.25:1 rate, in effect, time-and-a-quarter instead of time and a half.

    I think that comp time has a lot more rules about it now days.   IF you can make it work, it is a reasonable system; does assume that employees can set some savings aside from their normal wages, so that when you can take the time off, you have some money to spend on the vacation, or project, or whatever.

    At least one of the bigger firms just south of me in Seattle has, as I understand, a process of monitoring hours per week; for lower-level management and project architects, if you're working more than 45 hours a week, or so, they either a) reduce your work load by spreading it around to others, or b) politely tell you that you need to get your work done faster or find another place to work.

    On the other hand, I once heard a recent graduate say they had gotten an "intern" offer from a big firm in San Francisco - which they turned down.  It was a paid internship - not all are - but the answer to "this wage is too low to live on here" was "we know that, but think about how much you will learn here and how good it will look on your resume.  there are a lot of other candidates who would jump at the chance" (to be taken advantage of).

    ------------------------------
    Joel Niemi AIA
    Joel Niemi Architect
    Snohomish, WA



  • 7.  RE: New Overtime regulations

    Posted 05-24-2016 06:41 PM

    What's New with the FLSA Overtime Rule?
    On Wednesday, May 18, 2016, the U.S. Department of Labor (DOL) announced the release of their Final Rule to Update the Regulations Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees. The rule revises the federal overtime regulations and will be officially published in the Federal Register on May 23, 2016.

    When does the Final Rule take effect?
    December 1, 2016

    The Final Rule

    • Raises the annual salary threshold from $23,660 to $47,476, or from $455 to $913 per week for the executive, administrative and professional white collar exemptions from the overtime provisions under the Fair Labor Standards Act; equal to the 40th percentile of the earnings of full-time salaried workers in the lowest income Census region (currently the South).
    • Updates the new salary threshold every three years beginning January 1, 2020, to ensure the threshold is maintained at the 40th percentile of the earnings of full-time salaried workers in the lowest income region of the country. Based on projections of wage growth, the threshold is expected to rise to more than $51,000 with the first update on January 1, 2020.
    • Raises the “highly compensated employee” (HCE) exemption annual salary threshold from $100,000 to $134,004, equal to the 90th percentile of the earnings of full-time salaried workers nationwide; and provides for updates every three years.
    • Makes no changes to the “duties test” under the white collar exemptions; workers earning more than the salary threshold are still subject to the duties test to determine eligibility for overtime. No changes were made to the duties test for the Highly Compensated Employee exemption as well.
    • Allows bonuses and incentive payments to now count towards up to 10 percent of the new salary level for the executive, administrative and professional white collar exemptions, where such payments are paid at least quarterly; the DOL did not make changes to how employers may use bonuses to meet the salary level component of the HCE salary test.

    Resources
    In addition to the Final Rule the DOL released multiple resources designed to assist employers and employees on the DOL website.

    What Can You Do Now?
    If you haven’t already done so, you may wish to take time to identify impacted salaried, exempt employees who are currently paid a salary of less than $913 per week. To remain exempt, after ensuring these impacted individuals meet the appropriate duties text for the exemption, you will need to increase these employees’ weekly salary to at least $913.  Alternatively, such employees must be transitioned to non-exempt status.  Also, consider the need to update your timekeeping policies and training for non-exempt employees who must track all hours worked, including overtime hours. 

    ------------------------------
    Natalie Newman, SDA
    JENSEN HUGHES
    Anaheim CA



  • 8.  RE: New Overtime regulations

    Posted 05-25-2016 09:36 AM

    Robert, your view of interns is interestingly legalistic.

    "A typical intern does not meet the criteria for being on salary.  They do not manage other employees, they cannot exercise independent judgement (we had this conversation with members of our state licensing board who reminded us that only registered architects exercise independent judgement) and they do not manage aspects of the firm's business."

    Wow! I never viewed professional employees that way. I have always seen hourly versus salary as the difference between a guy flipping a burger and a professional. The employers pact with the burger flipper is simple: you are here, you do your job, I pay you. Stay longer than 40 hours, get overtime. Smoke break, lunch break, arrive late, sick kid....I don't pay you.

    I know legally the definition above is correct but with a salaried employee, at least in my eyes, there is much more complex contract, more adult. I pay you a base amount of money a year upon which we have agreed. On top of that I am paying 100% of your healthcare. I pay you over 30 days leave a year (vaca, sick, holiday). I pay you for bereavement leave. I pay for your AIA membership. I pay for your exam. Your kid gets sick, I say go home early. Christmas eve? Let's have brunch and go home. Good Friday? Leave at lunch. 4th of July is Tuesday? Make it a 4 day weekend. In at 8:45? I am not concerned. Longer lunch, that's ok. I treat my employees like professional adults, I alow them to use their independent judgement for their time management.

    Normally with us most people, especially junior people, work 40 to 43 hours a week. That time includes the  morning coffee klatch, birthday parties, personal phone calls etc.  The fundamental I expect in return is that when there is a deadline, when some client suddenly has an emergency, my people are there, willing to jump in and help, doing whatever it takes to get the job done. A more important benefit from treating people fairly and like adults is that I have unusually high employee retention. In the past 5 years the only employees who have quit did so because they were moving out of the area for family.

    What I deeply resent with myopic regulations like this is that it treats all employers like they are Simon LeGree. Ironically, in our case it is threatening to turn us into that sort of employer. I have no problem with people chatting in the kitchen for 15 minutes because I know it all balances out in the end. If I am forced to pay over time, suddenly I am hall monitor and at 8:30 one had better be in their seat working. This sort of monitoring crushes the spirit of a great office. I either have to suck it up and pay people overtime because they are use to an easy going management style or I have to be, as I have had an employer be, a time monitor. Making certain people are in their seats working, no personal calls, up at 12 for lunch back in their seat at 1. Breaks quick, efficient and back in your seat.

    Are there firms that abuse interns? Absolutely. I worked for one where my boss would literally scream at people who were unwilling to pull all nighters. Every week there were tears in the halls and restrooms. In my mind the solution to this is to vote with your feet. If someone works for a bad company, simple: leave. Instead, with a additional bureaucratic regulation the government is slowly choking small business out of business. As I mentioned above our health care costs are up well over 100% (100%!!!!!!!!!!!!) in just two years and every white page I read says this year is going to be worse. Interns coming out of school are asking for a base salary one third higher than pre-recession. Now we have the burden of tracking, monitoring and paying for overtime. Additionally fees are not going up anywhere near the same rate. Another irony is this is the same government that kicked our profession hard in the 1970's over fees which has led to most of us making much lower percentages than we did.

    My frustration with all this is that it is getting harder and harder to be the good employer. For us, the firm owners would definitely make more money if we fired a bunch of staff and did less work. I never wanted to be the employer who views employees as a line item on a spread sheet but the government is pushing us in that direction.

    ------------------------------
    Nea Poole AIA
    Principal
    Poole & Poole Architecture, LLC
    Midlothian VA



  • 9.  RE: New Overtime regulations

    Posted 05-27-2016 02:17 AM

    Nancy

    I agree with you but we have to work with the legal framework.

    As I said the best system i worked under was salary based on an agreed number of hours,  If work load required multiple weeks of extra time we got extra pay.  We took time off for golf or whatever when work slowed down.  Not allowed.

    Don't mistake interns working hourly for non professional.  No one punches a clock.  If they say they worked they get paid.  If you cannot trust someone why would you let them work for you.  They work from home when needed.  We take a couple days off each year with pay for fun days of their choice.  Hours are flexible,  Long lunches as an office.  Interns go to meetings, they are responsible for small projects soon after being hired, they are involved in design decisions and hopefully they learn from my 40 years.  When eligible I give them the choice of staying hourly or salary.  They all manage some part of the office;  I pay their health insurance but they meet with the agent to decide on the plan and they are more frugal than I am.  When there are profits we all get a share based on contribution to the office.

    ------------------------------
    Robert Carlson AIA
    Principal
    Carlson Design Team PC
    Iowa City IA



  • 10.  RE: New Overtime regulations

    Posted 08-23-2016 10:23 PM

    In California it has been a requirement for many years that overtime accrue for anything over 8 hours in one day. We use policy to control overtime costs. We require all non-exempt employees to gain approval before staying beyond 8 hours in any given day. By doing this, our project managers can monitor project related expenses.

    If you allow interns (or anyone else for that matter) to self-regulate the amount of overtime they work in any given week, you will find many people truly appreciate your generosity and the opportunity to give themselves a raise without having to ask for it! CAUTION: While such generosity may be a great employee retention tool, there will be very little retention of profits involved.

    Aside from a CBA, it is my understanding that most of the "loopholes" mentioned above will not fly in California.

    ------------------------------
    Gordon Rogers AIA
    EAS Department Executive
    Kitchell CEM, Inc.
    Phoenix AZ



  • 11.  RE: New Overtime regulations

    Posted 08-26-2016 10:57 AM
    I am not sure what all the hubbub about the new rule is about. It seems to me if we are following the rules as they currently exist there is very little substantive change. In our firm of 100 we have one person who is effected by the rule and that situation was easily rectified.
    Our philosophy on working overtime differs a bit from what has been posted and is based on the idea that what you get from people is what you expect. We treat everyone as a professional (after all, they are) and trust them to decide how much time they need to spend to complete a task. It isn't necessary to ask permission to work OT, if you feel you need to do it, we expect you to do it. Have we had some people take advantage of our policy? I am sure we have; but the benefits we get from treating people with respect far outweigh whatever we have paid out in unnecessary OT.

    Sent from my iPad




  • 12.  RE: New Overtime regulations

    Posted 10-05-2016 03:37 PM

    The hubbub is that the salary where overtime is applicable was somewhere around $21k and it is more than doubling to $47k. Beyond even the issue of money it becomes an instant salary differentiator.  In a firm of 100 the money and other implications might not be an issue but it certainly is for a smaller firm.

    ------------------------------
    Nea Poole AIA
    Principal
    Poole & Poole Architecture, LLC
    Midlothian VA



  • 13.  RE: New Overtime regulations

    Posted 10-07-2016 09:11 AM

    I am guessing that those in large cities will not see a big difference, as pay rates in larger cities will push even the entry pay rates beyond the new threshold.  For those who are not in large cities, this can affect many employees.  It is actually strange that this was not based on a sliding scale based on city density.

    ------------------------------
    Bridgett Wakefield AIA
    Gorski Reifsteck Architects, Inc.
    Champaign IL