Overworked and Exempt

Productivity Decline

Last week, the Bureau of Labor Statistics reported that productivity decreased at a 0.9 percent annual rate during the second quarter of 2010. As this decline follows five quarters of strong productivity growth, there has been a lot of discussion as to whether this is a good or bad sign for the economy.

Although it appears counterintuitive, a productivity decline could be positive. Many believe it’s a wake-up call for businesses — layoffs may reduce costs in the short-term, but productivity will catch up eventually. Businesses do, in fact, employ human beings who can only be pushed so far. If they want to continue growing, modest hiring is necessary.

However, there are others who see this as a bad sign. Businesses may choose to reduce wages as a further cost-cutting measure instead. Conservatives also point out that increased regulation and taxes are creating an uncertain environment that further inhibits business growth, particularly hiring.

Shareholders are King

I think the decline in productivity won’t have much impact unless it affects shareholder profits. If companies can still post a profit despite a reduction in overall output, I doubt that they will begin hiring. As this is the first quarter showing a decline, it may be too early to see an impact.

It’s a vicious cycle. If companies hire more people and create more output, they may not have any consumers out there to purchase their product since there is such high unemployment. Then the company’s stocks go down and…they layoff workers. So the status quo is best. Keep the bare minimum of employees and create just enough output to post solid profits.

A recent article from the New York Times entitled “Industries Find Surging Profits in Deeper Cuts,” illustrates how declines in productivity may not be enough to boost job creation. Companies are showing record profits despite their reduced workforces.  These profits are being distributed to shareholders rather than reinvested into company infrastructure or used to rebuild their workforce. As long as shareholders are appeased, there is no pressure to hire.

Danger to Exempt Employees

In this environment, there is even more danger to exempt employees. If keeping a “lean” workforce is an absolute necessity to making a profit, companies will be more inclined to take advantage of the exempt employees’ unfortunate lack of protection when it comes to overtime. “You’re lucky to have a job” seems to be the common retort when overwork is mentioned.

Amidst all of these discussions about productivity and output, we seem to lose the human component. These are people. Not just numbers. They deserve a certain level of protection regardless of how it impacts the company’s profits. It’s got to be a part of doing business. Not just for non-exempt employees, but for all employees.

Lay-offs hurt everyone – both the unemployed and those “lucky” enough to keep their job. In a poor economy, businesses make drastic job reductions – sometimes for good reason (and sometimes not). Often, they optimistically expect that their output will not decrease accordingly. Workers are forced to pick up the slack, for fear that their jobs will be next. 

I’ve read corporate-speak advice that tries to say “it’s an opportunity for you to step up and show senior management that you’re a team player and willing to go the extra mile in a difficult situation.” In reality, your efforts set a precedent for overwork. It also deflects the pain of the lay-off from the business onto the employee’s shoulders. Why should companies hire more workers when business objectives are being met? It’s a vicious cycle that results in overwork in the long run. It also gives companies the perception that lay-offs are always the answer.

HR 4135: Keep Americans Working Act: Could it help break the cycle?

This bill, introduced in November of 2009 (now in the House Committee of Ways and Means), has the following purpose:

To keep Americans working by strengthening and expanding short-time compensation programs that provide employers with an alternative to layoffs.

Seventeen states have enacted programs to encourage employers to reduce their workforce hours as a whole versus laying off a percentage of employees.  Although the programs vary, typically all employees are then eligible for unemployment compensation to make up for their reduced wages. In addition, participating in these programs does not affect health insurance. HR 4135 would encourage these programs by requiring the Secretary of Labor to:

(1) provide guidance to states in enacting short-term compensation programs; and (2) award start-up grants to state agencies in states that have enacted programs and meet certain requirements.

Keeping more jobs in place will avoid the scenario described above.  Businesses won’t be incentivized to reduce their workforce while continuing to drive worker production at pre-lay-off levels. If the government is going to pay unemployment anyway, why not distribute smaller amounts to all workers and avoid the longer term costs of re-training, mental health, etc?

The short-term compensation idea is based primarily on the successful Kurzarbeit program in Germany. However, it is worth noting that the success may not be completely replicable to the United States. In a policy brief from the New America Foundation, policy analyst Lauren Damme rightly points out:

U.S. employment situation is a result of our uniquely American market characteristics. From 2001-2007, almost half of all jobs created were in the bubble-inflated sectors of housing, consumer retail and finance. These are jobs that should not have been saved by short-time working programs. The U.S. does not need a short term-only fix built on the assumption that there will be future expansion in that sector or industry that will allow workers to become full time again.

My take-away from this is that the concept has value, but short-term compensation programs are not a panacea. They will not, in and of themselves, turn the economy around. For long-term impact, they need to be focused on sectors where there truly are sustainable jobs.

If short-term compensation programs won’t fix the economy, what is their value?

Even if this program doesn’t turn the economy around, it offers a level of employee protection which is sorely lacking in our current work environments. It prevents lay-offs for some employees and overwork for others. It also gets us talking about how we can still be productive without working overtime. In an insightful piece by Juliet Schor at the Center for a New American Dream, she explains:

Shorter hours are key to solving the unemployment crisis. In the US, it will require 11 million new jobs to return to pre-crash levels. That breaks down to 500,000 new jobs a month for almost two years. That’s an unrealistic number, unless we address hours of work. In comparison to Western European countries, where hours are much shorter, the U.S. has to generate between 6 and 20% more in Gross Domestic Production to create each new job.

In our rush to return to where our economy was before, we forget the faulty logic it was originally based upon – that working more is always better for the economy. Productivity for the sake of productivity is meaningless and doesn’t contribute to our sense of well-being or health.

Let’s share the jobs

In conclusion, I think the short-term compensation programs bring a new dimension to the unemployment discussion – maybe we don’t have to make employees work a certain amount of hours and create new jobs to accommodate the growing unemployed. Let’s only create jobs that matter (not fake bubble-bursting non-jobs) and spread the employment so everyone has a job and doesn’t need to work tons of overtime to keep it (unless they choose to). Ah, utopia… but I’ll keep dreaming…and writing.

What is a Results-Only Work Environment?

Imagine a workplace where you could be evaluated based upon the quality of your work, rather than the outward appearances of hard work. A workplace where you are given clear, reasonable expectations that are achievable for a competent employee.

This is the underlying concept of Results-Only Work Environment (ROWE), an idea formed in the depths of a corporate setting where the “manager as parent” culture prevailed. Amazingly, two HR professionals in Best Buy managed to construct and implement ROWE successfully — bringing it to senior leadership after the fact. Now embraced by their employer, Cali Ressler and Jody Thompson (the covert HR folks) have become consultants, creating CultureRx to help other companies make the transition. They define ROWE best on their website:

ROWE is not Flextime. ROWE is not Telecommuting. ROWE is not Job‐Sharing. In a Results-Only company or department, employees can do whatever they want whenever they want, as long as the work gets done. ROWE is all about results. No results, no job. Employees are paid for results, not their time.

But how will ROWE prevent overwork?

When I first read about ROWE, my immediate concern was the potential for overwork. It’s great to have the freedom to choose when and where you work, but what if your company is giving you responsibilities that are way beyond what can be completed in a reasonable amount of time? I worried that the “results” would be unattainable unless the employee worked tons of hours. I wrote to CultureRx, expressing this concern. Michael Barata, one of their team, responded:

You had inquired about “capacity” in a ROWE. This is something we discuss a lot – mostly because not many organizations/employees have this figured out in a traditional work environment.

In a ROWE, expectations are made crystal clear. Therefore, capacity is not only tied to goals and objectives, but performance as well. If performance struggles in a ROWE, everyone is privy to it. So, why? People underperforming? Inept resources? Capacity? In a ROWE, an employee’s ability to perform at a high level is key. So, an organization should be interested in providing support and resources to help this be achieved.

Essentially, a manager should not be the singular decision maker when discussing capacity. The work, the client, the employee, resources, value added, etc. must all be factored in.

After reading his response, the light bulb went on – it’s Results-only Work Environment. ROWE not only challenges the idea that time is the determinant of hard work, but most importantly, it forces companies to focus on the core objectives of each employee. 

In other words, there are two components to ROWE:

1. Letting go of traditional work expectations regarding time and location; treating employees like responsible adults

2. Setting reasonable work expectations that can be performed by a qualified employee and supporting them to do their job well

As Barata stated: “capacity is not only tied to goals and objectives, but performance as well.” I think many organizations either focus on the wrong goals and objectives or forget about quality in their rush to produce as much as possible.

So really…going 1/2 ROWE is counter-productive

After thinking about Michael’s remarks, it occurred to me that many so-called innovative companies (those offering telecommuting or flex time) are probably shooting themselves in the foot. 

If only the first component of ROWE is in place, employees are set up for burnout, especially in today’s technological environment. Companies give their employees flexibility to do work anywhere and then expect them to work all the time. This won’t add up to productivity and results.

For example –I am permitted to telecommute 95% of the time. While this gives me flexibility and I greatly appreciate having the option (again, the permission mentality), I also work unreasonable hours and am not supported in my position. My company is definitely not getting my best performance, even though I’m putting in a lot of hours.

On the flip side, there are also companies who give very clear expectations about responsibilities and keep their salaried employees’ overtime hours to a minimum. But if they treat their employees like children — lunch hours carefully parceled out, a minute late in the morning merits a reprimand, and lousy paid time off, it’s not going to work either. Stress and turnover will be high.

Last Thoughts

I am pleased to see that CultureRx is carefully keeping ROWE “pure” as much as possible. It could easily be adapted in part, as described above, and become a watered down equivalent of the sad “work-life balance” programs that corporations use for public relations versus actual employee health and well-being.

In a tough economy, we should continue to be wary of employers who claim to have flexible schedules. This could just be code for “we expect you to work all the time wherever you are.”  As great a concept as ROWE is, it is still dependent upon the employer’s will. Hence, my continuing belief that exempt employees need more protection under the law.

With the maddening pace of many workplaces, your boss or senior management may not realize how hard you’re working and how unreasonable your workload has become.  Although good managers ensure ongoing communication and advocate successfully for their team, there aren’t a lot of great managers out there. If your boss isn’t speaking up on your behalf, you can be your best advocate. Here are some tips on how to prepare for a discussion with your boss about your workload.

Step One: Collect Data

1. Track your time: Even though you are salaried, it is always smart to keep track of how many hours you’re putting in. Your boss may hear you say “I’ve been working a ton of extra hours,” but it becomes more real when you show him/her a chart with 70+ hours per week over the past two months.  A few easy ways to add this habit to your daily routine:

• Outlook: Add a meeting when you start your day and when you end your day titled simply “Start” and “End.” Mark it as “Free” so it doesn’t block out that time. You can tally everything up on a weekly or monthly basis.
• Day Planner: If you’re more of a pen & paper person, simply do the same thing in your day planner. Or stick a paper on the wall near your computer and jot down your hours at the end of each day.

2. Track your daily activities: If you can manage the extra effort, it’s also helpful to track your time per project/task/client. If you don’t already use a time tracking system required by your company, there are a number of great tools online that are easy to use. I recommend Toggl, but a quick internet search for free online time trackers turns up many options.

A less complicated option is to simply keep a notebook and jot down categories of your typical day. Each time you perform a task in that category, make a check mark. Add them up each day. Even though this doesn’t give you hours, it can help you communicate the percentage of time spent on particular categories of tasks. This can also bring to light if you are handling a lot of random tasks that are big time-eaters. Your boss might be surprised.

3. Update your job description: You may have received something from HR a long time ago, but if it doesn’t reflect what you’re currently doing, make sure you update it – clearly showing what’s been added.

4. Summarize recent external challenges: Your boss may not be intimately familiar with your day-to-day responsibilities and therefore cannot grasp how external changes impact your workload. (For example: he/she may know that due to recent legislation, more calls have been coming in regarding a particular product, but not understand that since the product has not been well defined by the product management department, it adds a level of complexity to your job.) Be clear, but concise. This change = this problem = this amount of extra work.

5. Highlight solutions: Show your problem-solving skills. Show how you’ve adapted to the changes above and tried to be as productive as possible. Tie them back to the external problems noted above. In this way, you can put a positive spin on your discussion. You’re not just bringing problems to management.

Step Two: Organize the Data

Now that you have detailed information about the work you do (not what the manager thinks you do), how many hours you’ve been putting in, external problems that are creating more work and solutions that may alleviate the problem, it’s time to pull them together into a brief executive summary for your manager.

I would recommend a one to two-page document with these sections:

• Introduction
• Challenges and Solutions
• Impact
• Conclusion

1. Introduction: This will set the stage for your discussion. For example:

“This memo describes the changing dynamics of our company over the past year and how this has specifically impacted my responsibilities. I respectfully request a review of Company X’s expectations so I can continue to meet my objectives within a reasonable work schedule.”

2.Challenges and Solutions: As stated above, you’ll want to concisely state the external changes that have impacted your position (whether external to the company or changes to other departments that have impacted you). I would recommend a table that has headings such as: Change/Challenge/Solution. For example:

• Change: Legislation has increased interest in Product X; Product Development Department has not defined this product yet.
• Challenge: I have to write content on the fly to respond to numerous requests.
• Solution: Meeting with Product Development to better understand their ETA for sales collateral. I need your backing to delegate this interim writing task to them.

3. Impact: This section will reiterate the data collected earlier. Charts and graphs are great to break up the content. You want your boss to immediately grasp the impact on your schedule that the previous sections detailed. For example:

As described in the section above, writing content for Product X has become a very time-intensive addition to my responsibilities. As you see below, writing content for Product X now takes up approximately 20% of my day on average (reporting for the last month).

or

Although the Project X has been completed and I was assured that my hours would go down once this high priority deal was closed, my hours have not dropped at all. In fact, as you’ll see below, they have increased due to the challenges noted above.

4. Conclusion: Bring all the points together. What do you want to really get across to your manager? Make sure it’s not too personal; keep it professional and focused on the company.  For example:

I hope that my analysis will serve as a springboard for a productive discussion about the number of responsibilities that I have and how I can best manage them.

Step Three: Time Your Discussion

Obviously, this preparation will require some time to compile if you haven’t been tracking all of these data points. However, use your best judgment. If you have some but not all of this information and still feel you have a good case, then go for it. A few tips on timing the meeting:

1. Schedule the meeting: Don’t just wander into your manager’s office. You want his/her complete attention. Send the memo along with a meeting request ahead of time.

2. Be in Good Graces: Did you just finish a super project way ahead of schedule and below cost? Is your boss in love with you right now? By all means, schedule that meeting!

3. Tie with your Performance Review: If possible, tie this discussion to a performance review meeting. It will show your initiative and clarify your goals going forward. You may also want to ask about a bonus for the amount of extra hours you’ve been putting in – or see if they’d be willing to give you some additional time off. That’s a whole other topic, but certainly relevant here.

I know not all employers are so nice. But hopefully, this article will help those with managers who are just not paying attention. If no one is advocating for you, it’s time for you to step up!

Although my intention for this blog was to champion the rights of exempt employees, many people are incorrectly classified and could be benefiting from the protections of the Federal Labor Standards Act (FLSA). If your employer is forcing you to work unpaid overtime, it is always best to make sure you are indeed exempt from FLSA. 
 

Terminology 

• Salary and Hourly: These are terms that refer to the way employees are paid.
• Exempt and Non-Exempt: These are terms that refer to whether or not the employee is protected under FLSA.

Here’s how this plays out: 

• A non-exempt employee can be paid by the hour OR receive a set salary, as long as they receive minimum wage and time and a half for any work over 40 hours.
• Exempt employees, on the other hand, must be paid on a salary basis. They can be paid overtime, but it is not required by law.

Some employers mistakenly believe that if they pay someone a salary,  they are magically exempt from FLSA. However, the method of payment is irrelevant. As detailed below, it is the job description and total compensation that matter. 
 

White Collar Exemption 

The most common exemption from FLSA is referred to as the “white collar” exemption because it refers to executive, administrative, professional, outside sales, and computer employees. I will focus on this exemption, but recommend visiting here to read the full list of exempt job types on the Department of Labor website. The entire system is hopelessly confusing because it caters to the employer’s best interests, but don’t let it stop you from getting paid for overtime if you are eligible. To be excluded from protection under FLSA, employees must meet three tests:  

• Salary Test – Minimum of $455 per week
• Salary Basis – An exempt employee must regularly receive a “predetermined amount” of compensation that cannot be reduced because of variations in the quality or quantity of work performed.
• Job Duties – Each type has a “duties test” to help clarify if the employee actually falls into that category. The duties tests for each type of position can be found here.

Once you review the duties test, you may need to better understand the terminology to see if your job responsibilities match. The language is purposefully vague. See the glossary on the Department of Labor website for help. If you’re still not sure if you should be considered executive, administrative, or professional (the most difficult to pin down), the occupational index is helpful. This provides a list of common job titles and which category they typically are found. However, job title alone shouldn’t be the determining factor; it’s what you actually do day to day. 

Other Resources

Lastly, to be absolutely positive that you are not non-exempt, check out your state’s laws. Some states have expanded protections under FLSA. Here is a page that provides links to each state’s labor website. 

If you think you’ve been denied overtime pay, visit FairPay, an initiative of the Department of Labor’s Wage and Hour Division. They provide resources to help you speak to your employer, file a complaint, and understand your rights. 

Although the system is not fair, there is no sense in denying yourself rights if you are entitled to them.

Why are we still talking about exempt/non-exempt?

Although attempts have been made to improve the Federal Labor Standards Act (FLSA), I believe FLSA is an outmoded system that misses the point. The distinction between exempt and non-exempt is impractical and muddies the entire discussion. No American worker should be “exempt” from protection by the law.

Laws that seek to modify FLSA (whether by state or federal reform) always focus their efforts on expanding the number of non-exempt employees and policing employers who categorize employees incorrectly. FairPay is a good example. This is a valiant effort to expand protections, but still leaves millions of employees with no legal recourse. In addition to the major reforms in 2004 and initiatives like Fair Pay, several states have specific laws that supplement or replace parts of FLSA. Let’s use California as an example of how these laws are beneficial, but don’t address the core issue.

How modifying FLSA is helpful, but only to a point

California labor laws, as defined in the Industrial Wage Orders, represent significant gains over the laws outlined in FLSA. Most notably, California’s Executive, Administrative and Professional exemption has a higher salary requirement. Per Article 4: The monthly salary should be equivalent to no less than two times the state minimum wage for full-time. California’s minimum wage is currently $8.00 per hour. This translates into $640 per week or a salary of $33,280.

In contrast, FLSA is not tied to the minimum wage. The amount is $455 per week, which translates into a salary of $23,600. Very simplistically, this means that in contrast to almost all other states, California employees in most positions earning between $23,600 – $33,280 are non-exempt – all FLSA laws apply to them. 

This is good, right?

From the perspective of California workers impacted by this state legislation, absolutely. And I certainly wouldn’t deny them that. However, the “cut-off” seems arbitrary. Where do you stop?

Arguments for the current system fall flat

A common argument is that exempt employees are paid more, so they should be expected to “do whatever it takes” to get the job done. But this is a fine line. Certainly there is no magical difference between $23,600 and $23,601. They are both low paying jobs. Do you think a salary of $23,601 is enough compensation to work 50, 60, 70 hours a week? In actuality, an employee could be required to work 24 hours a day. There are truly no protections for exempt employees.

White collar employees are particularly vulnerable. Unscrupulous employers in a competitive environment can force employees to work unreasonable hours because their positions are typically exempt. There is no incentive for them to hire more people when they can squeeze more out of a smaller staff. The only advice that can be given to an employee is simply ”get a new job.” But with an uncertain job market, this is not an easy leap. And sadly, the employee could be faced with the same scenario at a new job. 

I understand that employers with exempt employees need a way to plan for overtime without going bankrupt, but the current system is not ethical. We need to get creative and develop a system that protects both employers and employees equally.

I’ll keep thinking.

I was recently reading about how the “cap and trade” policy was very successful in addressing the acid rain problem in the 1990s. Due to the political negativity surrounding attempts to replicate this policy for climate change, perhaps it is a bad time to talk about cap and trade at all. Despite this, I’d like to use its underlying principles as a springboard for brainstorming.

What is Cap and Trade?

In very simple terms: Cap and trade is a system where a cap is placed on an something unacceptable/harmful. (In the case of acid rain, a cap was placed on sulfur dioxide emissions) Targeted companies are issued or sold permits for each measurable amount of identified “something” they produce (ton of sulfur dioxide). Companies that reduce the amount of “something” (emissions) can sell permits they don’t need to those who do. The idea is that the free marketplace will compete and innovate to reduce the number of permits they need.

According to the Environmental Defense Fund’s website, market-based approaches like this work well because:

• Markets turn pollution reductions into marketable assets. In doing so, this system creates tangible financial rewards for environmental performance.
• Because cap and trade gives pollution reductions a value in the marketplace, the system prompts technological and process innovations that reduce pollution down to or beyond required levels.

How could this be applied to exempt employees?

Let’s assume the unacceptable/harmful “something” is exempt employee overtime. For example, on an aggregate scale, any employer whose full-time exempt employees worked more than say, 10% more hours over 40 would need a permit. For each percentage point upward, another permit would need to be purchased.

There would have to be exceptions, of course. In some cases, exempt employees receive bonuses or commission commensurate with their extra hours. The idea would not be to limit their ability to do the job, but protect the majority of salaried employees who do not receive compensation for overtime.

Positives

This approach would put the burden of cost back on the employer. By requiring an exempt employee to work 50, 60, 70 hours, there are costs to the employee, community, environment, government, etc. If a company chooses to ask this of employees, they must pay for the consequences. This system would encourage employers to keep their salaried employees hours at 40. If they need more employees to get the job done, they would have to hire them. By keeping hours down and distributing them across more employees, the money earned from selling permits would off-set some of that cost. Taken one step further, this would reduce unemployment because more jobs would be needed. These individuals would theoretically stimulate the economy once their lives are stabilized.

Negatives

Of course, there are many drawbacks as well — There would have to be added regulation through the Department of Labor, which has a cost and is politically painful. From the employer’s point of view, recording and documenting exempt employee hours would be a new administrative burden that requires resources to implement and ensure compliance.  From the employee’s point of view, it doesn’t solve the problem of being underpaid, if that’s an issue for the individual employee. This solution seeks to keep hours at 40; it doesn’t force companies to pay exempt employees for overtime.

Most importantly, studies would have to be conducted to see what the impact would be to the economy — would a measure like this significantly increase prices across all financial sectors/industries? Since exempt employees aren’t required to record their hours, I have no idea what impact this could have in actual practice. In addition, the cost of adding lots of new employees might be too burdensome for employers to bear. The requirements would have to be phased in gradually, but this may not be feasible — either economically or politically. On the flip side, any financial hurt imposed by the permits may not be enough to force behavior change. If the cost is not great, companies may feel its in their best interest to continue forcing exempt employees to work overtime.

Closing Thoughts

While this may not be the solution, what I like the most about this idea is that it places real value on work-life balance. It becomes a vital part of doing business. Employees or “human resources” aren’t just a line item in the budget. It incentivizes companies to balance profit with their employee’s well-being.

Just an idea…