Employee Comp Time and DOL Rules

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#1
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I believe it's common for CPA firms to pay professional staff a salary based on a 2,080 hour annual time commitment.

During tax seasons, staff typically work 50+ hours per week for 8-10 weeks (February - April 15th). Many firms, including my own, acknowledge this additional time worked and allow the salaried employees to bank 80 hours of "comp time" with any excess / unbanked time being paid-out at straight time.

My firm recently hired a reputable law firm to review our employment agreements and the attorney told us our arrangement is not in compliance with DOL regs. He said that since our salary is tied to time, and that we recognize unpaid hours worked as "comp time", we should really being paying everyone hourly. We said "but they're exempt", and he said not if you're tying their compensation back to time. He said true salaried employees do not have a time commitment.

Can anyone help me out here? Is the attorney right? Are we out of compliance with DOL?
 

#2
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Some years ago, I suggested on this board that an exempt employee working any time at all on any regularly scheduled work-day must be paid for the day. Some of the responses were - how can I put this delicately? - undignified. That is the deal with exempt employees. So I think the attorney is correct.

With non-exempt employees (which some of the professional staff may be) you have plain time till 40 hours per week and time and a half after that.

With exempt employees, they are, essentially, paid by the day. Think of the salary as annual, paid in equal installments throughout the year. For that reason, salary rates are generally higher than someone on a wage.

It seems you are going to have to adjust your compensation plan. I am sure you can find options to make it work for all concerned.

I have only considered federal law. Your state may have stricter requirements.
 

#3
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SumwunLost wrote:I am sure you can find options to make it work for all concerned.

I have only considered federal law. Your state may have stricter requirements.


Thanks for the response. I'm in NC too but all I really care about at this point is federal DOL laws.

Do you mind expanding on options that can make it work which are in compliance with DOL? The attorney is saying it's black & white - either hourly or salary with no time commitment. If you start making exceptions you create a patchwork mess, which is where we are today.

We have full-time salaried staff (i.e., 2,080), we have "part-time / flex" salaried staff that are paid a percentage of the annual b/c they want to work less than 2,080, and we have admin and part-time seasonal help that are paid hourly.

The obvious rub is that if we make everyone hourly, we'll be paying time and a half. If we keep those on salary and take away comp time, most will work less and several will work the bare minimum to keep their job.
 

#4
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I was on my cellphone when I posted last night, so I didn't note you're from NC. I am not an attorney but I do recall that, for waged employees, the only employees who can receive comp time are state employees. I read that some years ago, so it may not be current. I may or may not have come to an arrangement with my employer at the time that may or may not have suited both of us.

My first thought is how stable your employees are. Do you expect them to be employed for years, or do they move on immediately after their second or third busy season? Do most employees bank their 80 hours? If you can expect most of them to stay for years, perhaps an increase in vacation entitlement, combined with a salary increase, would satisfy most people. The increased vacation time would simply replace the banked hours and an increased salary would seek to spread the excess over 80 hours across the whole year. Bit of a bugger if employees routinely leave immediately after tax season but, otherwise, you'd be pretty close to the current situation. Granted, there will be winners and losers. Some of the losers may be your best employees. In that case, I suppose you have to make a commercial decision.

My wife, an RN, is salaried and has worked for two major hospital systems in NC. Both of them require that salaried employees must work at least four hours to get paid for a day. I am unconvinced that is legal but, if it is, it might be worth thinking about. My wife's last position required her to be on 24-hour call for a week a month. She got $2 per hour in addition to her salary for being on call, whether she was wakened in the middle of the night or not. Mind you, she made up for it at weekends. Often, she did at least a full day on a Saturday. She was not a state employee and I wonder what your lawyer would say about that arrangement.

The problem is that we are dealing with wage and hour laws in the world's most capitalist country that were written eighty or ninety years ago. They were designed to stop exploitation of low-paid hourly workers. Time and a half for overtime is quite strict compared to, say, the EU (which prefers to put ceilings on working hours). Then they needed to deal with managerial and professional staff, who tend to get paid more and whose position requires that the work gets done, but who might experience peaks and troughs. The trouble with this profession is that we don't really have peaks and troughs. We've got a mad rush between late February and mid-April then a slow-down. That is what makes the federal rules unhelpful to this profession in current times.
 

#5
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We're a laid back firm and have relatively low staff turnover. On average we probably lose one staff accountant every 5 years.

Everyone is okay with the arrangement but I don't like being out of compliance. It seems fair but it only takes one upset employee to blow the whistle and it feels like it's only a matter of time before it happens.

I'm thinking the "it's an industry standard" defense won't work with the DOL.
 

#6
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Well, with such low turnover, it seems to me there is scope to relabel comp time and increase annual salaries to cover for the time they don't take. Hopefully, you get to the same broad position and everyone, including you, remains happy. Alternatively, is it worth the money to get a second opinion? If the law was easy with no grey areas, we wouldn't need lawyers. Or tax professionals *gulp*
 

#7
Wiles  
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We are in CA. All of our staff is hourly including the exempts. We pay time and half for OT during tax season including the exempts.

We also set their pay at a level where they will still earn a productivity bonus at year end. The OT pay then basically becomes an advance against that bonus.
 

#8
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Wiles wrote:We also set their pay at a level where they will still earn a productivity bonus at year end. The OT pay then basically becomes an advance against that bonus.


That’s interesting but I’m a little unclear.

So if someone is paid say $35 per hour and at year-end they’ve worked 2,230 hours (150 hours of overtime), you’ve paid them $80,675 to date. You then consider a bonus to give them more?
 

#9
Wiles  
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We give productivity bonuses based on 40%-45% of realized billings. So, yes, if they billed $200K (after write-offs) for the year and we did a 45% bonus calculation, then they would get a $9,325 productivity bonus to gross them up to $90K for the year.

One benefit of setting their pay at a % of billings (whether implicitly or explicitly) is that unproductive time or time off is on them. It doesn't cost the owner anything. No billings, no pay. However, too much of this does put a work burden on the rest of the team, usually the owner.

BTW, long gone are the days where anybody (at least in our area) is 'willing' to work 150 hours of OT. The only people that do that are the owners of the business.
 


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