Ross Brand

Case Study: Compensation and Job Classification at The Northwest Independent

Overtime Pay and Exempt vs. Non-Exempt Status for Reporters at a Small-Market Newspaper

Ross Brand is a Master of Science Candidate in Human Resource

Management and Development at New York University. He previously worked as a journalist, newspaper staff writer and radio broadcaster. He earned his Bachelor of Arts degree in History at Lafayette College.

Ross Brand

Case Study: Compensation and Job Classification

iRossBrand@gmail.com

The Northwest Independent

Mary Williams is the owner and managing editor of The Northwest Independent, a weekly newspaper with a circulation of 110,000 in three New Jersey counties: Sussex, Warren and Hunterdon. The paper is free and delivered without charge to most of the homes in the counties listed above. A highly successful executive in the financial services industry for more than two decades, Ms. Williams retired at age 50 and started the newspaper, which she has financed and run for the past 10 years. In a good year, The Northwest Independent is lucky to break even, relying on advertising from local restaurants and shops to cover as much of the costs of the operation as possible. It is more of a labor of love for Ms. Williams, who works hard to keep the publication in business, including spending at least part of each weekend alone at the office handling her various responsibilities. In addition, Ms. Williams is proud of her civic involvement and editorial advocacy on behalf of the underdog, serving on the board of several non-profit and municipal organizations, giving generously to charity and publishing editorials in support of workers and unions, while criticizing business leaders and government officials who violate laws or fail to live up to her purported ethical standards. As the owner and managing editor, Ms. Williams has eight employees reporting to her directly, including the general manager, who oversees the day-to-day aspects of the various business departments of the paper, such as sales, accounting and circulation. Another manager who reports directly to Ms. Williams is the graphics manager, who supervises the staff responsible for the layout and design of the newspaper. The other six employees reporting to Ms. Williams are the staff writers, who are full-time employees responsible for most of the publications written content. Ms. Williams composes the weekly editorial and writes a column for each edition. Additional op-ed pieces and news analysis articles come from news services or members of the community who offer to write columns for small weekly fees. Altogether, the newspaper has 53 full-time employees, 11 part-time workers and several independent contractors (freelancers) who are paid by the assignment. Work Conditions and Environment Business hours at The Northwest Independent are from 8:30 A.M. to 5 P.M., Mondays through Fridays. All full-time staff writers are expected to be in the office during those hours with the exception of an unpaid lunch break of a half-hour and when they are on assignment, covering an event or interviewing someone for a story. In addition, the staff writers are required to put in extra time when necessary. They are always expected to remain at the office on the night before publication until all deadlines are met. The staff writers will sometimes stay as late as 10 or 11 P.M. on a Wednesday night as the next days edition is being prepared for printing.
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Ross Brand iRossBrand@gmail.com Case Study: Compensation and Job Classification September 2012

Ross Brand

Case Study: Compensation and Job Classification

iRossBrand@gmail.com

However, in the past several months, Ms. Williams has learned that some of her staff writers have been complaining about their long hours and feel that they are entitled to overtime pay. The paper has an unwritten comp time policy, which Ms. Williams has referred to when the occasional question about overtime pay arises, and she has instructed staff writers to track their extra hours for time off at a later date. However, her workers rarely, if ever, use that comp time, as the weekly cycle of preparing for the next deadline begins as soon as the previous paper hits the street. Ms. Williams can be very hard on employees who take vacation days, sick days or miss work for religious observance. While she will not deny employees paid vacation time (or sick time or religious observance), employees can expect to have several days of extra work, harsh criticism and borderline verbal abuse heaped upon them as their vacation approaches, though they are never directly told that it is punishment for taking time off. Instead, Ms. Williams will focus her pointed comments on the need to get more work done (before taking time off) as the department will be short-staffed. Often an employee will work late for several days prior to taking vacation to meet the increased demands placed upon him or her by Ms. Williams. An employee taking off for two days to spend time with relatives will end up working about the same time in extra hours leading up to the time off, so that paid time off given to employees really ends up being traded for extra time worked, above and beyond the overtime hours that the job routinely demands. Legal Concerns Given the emotional cost to a worker of taking their vacation days, sick days and religious holidays, most employees would rather not go through the same pain to take comp time. Moreover, with Ms. Williams having significant influence in the community (as well as a powerfully-connected husband who is a top executive at one of the biggest local employers), many of her staff writers hesitate to lodge complaints about their overtime hours, fearing that they may cut themselves off from future opportunities. However, when Ms. Williams demanded that an employee, James Warner, taking a Friday off for religious observance (utilizing a paid vacation day asked for several months in advance) work late on Monday through Thursday to make up for the hours missed at the end of the week, and called into question that employees commitment to the newspaper, Mr. Warner pointed out to Ms. Williams that he has already worked 180 hours of overtime so far this year for which he had not been compensated and was only taking paid time off to which all full-time employees at the newspaper were entitled, according to the employee handbook. Mr. Warner informed Ms. Williams that if she does not allow him to take off his religious holiday without incident, he will make an issue of the overtime pay to which he believes he and his fellow staff-writers are entitled. Later that day, Ms. Williams asked her general manager if he thought that the company was opening itself up to legal action by not paying overtime. The GM suggested that she consult with an HR firm specializing in employment law.
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Ross Brand iRossBrand@gmail.com Case Study: Compensation and Job Classification September 2012

Ross Brand

Case Study: Compensation and Job Classification

iRossBrand@gmail.com

Client Memo
To: Mary Williams, Owner/Managing Editor CC: Albert Simpson, General Manager Company: The Northwest Independent From: Stacey Best, Employment Law Consultant Date: September 18, 2012

Issue Are full-time staff writers (reporters/journalists) employed by The Northwest Independent newspaper entitled to overtime pay or are they exempt professionals under the Fair Labor Standards Act? Facts The Northwest Independent is a weekly newspaper, owned and operated by Mary Williams, with offices in Newton, New Jersey, a town of 8,244 people. Its circulation of 110,000 copies covers the majority of residences in the New Jersey counties of Sussex, Warren and Hunterdon, which have a combined population of approximately 375,000. The company receives about $300,000 annually in advertising sales, all of which Ms. Williams uses to cover the expenses incurred in running the business. Staff writers at The Northwest Independent generally write one or two extended pieces for each edition of the paper. Those articles take the form of features, profiles and news or sports stories. In the process of completing those assignments, the staff writers will leave the office to interview subjects, attend press conferences and observe events related to their stories. The majority of their time is spent in the office, rewriting press releases from local government, nonprofit, educational, social, business, religious and political organizations regarding upcoming events or recently achieved honors and accomplishments; taking information from birth, wedding and funeral announcements and writing it up for publication according to the newspapers preformatted structure; proofreading edited copy for mistakes; cutting stories to fit allotted space; writing headlines for completed articles; and handling any other assignments from the managing editor, who keeps close watch on the staff writers, including questioning them regarding the time they spend in the field researching stories. The six full-time staff writers at The Northwest Independent are paid on salary, receiving $24,000 annually, based on a 40-hour work week. Staff writers do not receive any bonuses or other additional pay, but do receive medical benefits paid entirely by the employer. They neither receive overtime pay for hours worked in excess of 40 nor suffer deductions from their biweekly paychecks for hours worked less than 40 in a week or less than 80 over two weeks. The organizations employee handbook states that all full-time employees are entitled to 10 paid
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Ross Brand iRossBrand@gmail.com Case Study: Compensation and Job Classification September 2012

Ross Brand

Case Study: Compensation and Job Classification

iRossBrand@gmail.com

vacation days and 10 paid sick days per year. All full-time employees take their allotted vacation days. Some employees ask to use their paid vacation days to take time off for religious observance, requesting specific days in advance. The owner, Ms. Williams, is equally hard on employees of all faiths when they have upcoming time off, whether for religious observance or vacation purposes. Staff writers work in excess of 40 hours most weeks, and are expected to stay until the newspaper is published on Wednesday nights. The newspaper has no written overtime policy for salaried employees. When asked about overtime compensation, Ms. Williams tells staff writers to track their overtime hours for comp time. The organization does not keep records of overtime hours worked by salaried employees. Once when asked by a staff writer about using comp time accrued the previous month (for three hours off for a doctors appointment), Ms. Williams told the employee that comp time must be used within the same pay period in which the overtime hours were worked. In her previous seven months at The Northwest Independent, that staff writer was not informed of the requirement to use comp time within a specific time period nor ever encouraged to take comp time by Ms. Williams. Analysis Staff writers at The Northwest Independent are covered under the Fair Labor Standards Act (FLSA), because the newspaper has a circulation over 4,000 and its staff writers are engaged in interstate commerce, which is defined broadly to include sending emails across state lines or making phone calls to someone in another state for information about a story. In addition, the staff writers are clearly employees rather than independent contractors, as their employment is intended to be ongoing; they receive benefits and paid time off from the employer; they are reimbursed for expenses; they do not realize a profit or loss from the operation of the business; they are not free to pursue other business opportunities; the services performed are key aspects of the business; and they are subject to the newspapers rules about how, where and when to work. The subject worthy of the most thorough investigation is whether the staff writers job duties fit the classification of exempt or non-exempt under the FLSA. Without question, they meet the salary requirements to be classified as exempt, receiving over $23,600 annually (and more than $455 weekly) and not incurring any deductions in pay that would contradict exempt status. The issue then becomes whether they can meet the criteria for the creative professional exemption, which is the most common exemption under which journalists and reporters fall. According to the Wage and Hour Division of the Department of Labor, the creative professional exemption applies if the employees primary duty is work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor (e.g. the fields of music, acting, writing and graphic arts), as opposed to routine mental, manual, mechanical or physical work. Work that can be produced by a person with general manual or intellectual ability and training is not exempt as creative. The requirement of creativity distinguishes the work of a creative professional from work that primarily depends on intelligence, diligence and accuracy. i While the staff writers journalistic work in producing the occasional original story based on
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Ross Brand

Case Study: Compensation and Job Classification

iRossBrand@gmail.com

investigative reporting may meet the test of invention, imagination, originality or talent, that type of reporting is not their primary duty, let alone the primary type of feature or news story they write. The majority of the staff writers time is spent rewriting press releases and community announcements, all of which require intelligence and accuracy to do well, but are largely formulaic and culled from already available information. In Reich v. Newspapers of New England, Inc. (1st Cir, 1995)ii and Reich v. Gateway Press Inc. (3rd Cir, 1994),iii both courts ruled that reporters at small community newspapers who wrote about local events using public information and press releases were non-exempt. Although those reporters also periodically wrote feature articles or editorials, the Court in the Gateway Press case found the reporters were non-exempt because they did not engage in the type of fact gathering that demands the skill or expertise of an investigative journalist for the Philadelphia Inquirer or Washington Post, or a bureau chief for the New York Times.iv The Court held that the creative exemption was applicable in Sherwood v. Washington Post (D.D.C. 1994),v finding that a Washington Post reporter whose job required him to organize his own story ideas, maintain a wide network of sources, write engaging, imaginative prose, and produce stories containing thoughtful analysis of complex issues was exempt.vi Only the rare article completed by one of the staff writers at The Northwest Independent would contain multiple elements listed in the Sherwood v. Washington Post case. Even feature stories were generally assigned, and the staff writers did not have the time to maintain a wide network of sources.vii The DOLs Fact Sheet 17Q (Journalists/Reporters and the Part 541-Exemption under the Fair Labor Standards Act) states, Relying upon federal case law, the final regulations clarify that employees of newspapers, magazines, television and other media are not exempt creative professionals if they only collect, organize and record information that is routine or already public, or if they do not contribute a unique interpretation or analysis to a news product. For example, reporters who rewrite press releases or who write standard recounts of public information by gathering facts on routine community events are not exempt creative professionals.viii Moreover, reporters whose work products are subject to substantial control by their employers are not considered exempt creative professionals. As is evident from the facts listed above, the staff writers at The Northwest Independent are required to be at their desks between 8:30 A.M and 5 P.M on weekdays with the exception of their half-hour unpaid lunch break and a few hours a couple times a week when they are out covering events or conducting interviews. Reporters need to receive permission from the managing editor to leave the office to work on a story and the managing editor closely monitors where they go and how long they are away. In Wang v. Chinese Daily News, Inc. (9th Cir, Sept. 27, 2010),ix the Court found the reporters workload prevented them from conducting detailed news analysis or investigative journalism tasks that were essential for the exemption to apply.x There is little doubt that the job duties of the staff writers at The Northwest Independent are closer to those of their colleagues at Chinese Daily News, Gateway Press and Newspapers of New England than to the journalists doing investigative reporting or writing complex news analysis articles at national newspapers like the
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Ross Brand iRossBrand@gmail.com Case Study: Compensation and Job Classification September 2012

Ross Brand

Case Study: Compensation and Job Classification

iRossBrand@gmail.com

Washington Post. According to the DOL, The less creativity and originality involved in their efforts, and the more control exercised by the employer, the less likely journalists are to be exempt.xi When it comes to the tests of primary duty, creativity and control, the staff writers at The Northwest Independent do not qualify for the creative professional exemption and must be paid overtime for any hours worked in excess of 40 during a workweek. Recommendation It is my opinion that should an investigation be conducted by the DOL or a case brought against The Northwest Independent by one or more staff writers, the company would be found to have violated the law and be held responsible for paying overtime to all six staff writers. The fact that the company has failed to keep records (itself an FLSA violation) on hours worked means that there is nothing to offer in rebuttal to the claims of the workers. The newspaper should expect to receive a judgment of liquidated (double) damages, in the event the matter ever reaches court. Fortunately, state and local law provides no additional protections to employees in these matters. The answer to this predicament is not to start paying overtime, which would be an admission of misclassification. Instead, I recommend that The Northwest Independent hire an additional employee for the editorial department to handle the least creative tasks, such as birth announcements and obituaries and help with proof reading and other routine tasks, freeing up staff writers to spend more time on their news and feature articles, making them more likely to finish assignments within normal business hours. The new employees hours could be set so that he or she would start later and thus be available to pick up work not completed during regular business hours as well as help in meeting Wednesday night deadlines. From this point forward, staff writers should not be given assignments that would require them to work overtime. If an employee stays two hours late one day, tell that employee to come in two hours late the following day. Let that become the way things are done so that overtime pay becomes a moot point in the editorial department. In addition, there needs to be a change in the organizational culture so that employees are not harassed or pressured to do more work just because they take paid vacation days offered to them by the company. Nor should any employee be made to feel that his or her religious holidays are a burden to the company. Lastly, I would never again mention comp time. It is illegal for private employers to offer an hour of comp time at a later date in exchange for an hour of overtime worked. Mentioning comp time only leads employees to believe they are entitled to some type of compensation for past overtime hours worked, and since you do not seem eager to grant them use of that time (which, in any case, does not legally protect you from a failure to pay for overtime work), you are further risking a DOL investigation or litigation by causing resentment among employees, by making what appears to be an employment agreement with staff writers for which you are unwilling to abide. The goal should be to create a positive work environment for your current staff writers, as
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Ross Brand iRossBrand@gmail.com Case Study: Compensation and Job Classification September 2012

Ross Brand

Case Study: Compensation and Job Classification

iRossBrand@gmail.com

it is generally workers who feel taken advantage of, mistreated or unappreciated who are most likely to take action against an employer. It is very likely that if you follow these recommendations, your staff writers will be so happy not to have to work overtime, not feel retaliated against for taking paid vacation and be free of some of their more routine tasks, that they will not consider a cause of action against The Northwest Independent. Please make it a habit to review job classifications based on job duties annually and to keep accurate records on all employees as required under the FLSA.
i

U.S. Department of Labor, Wage and Hour Division, Fact Sheet #17Q: Journalists/Reporters and the Part 541Exemption under the Fair Labor Standards Act (FLSA), accessed April 12, 2012, http://www.dol.gov/whd/regs/compliance/fairpay/fs17q_journalists.pdf. ii Reich v. Newspapers of New England, Inc., FindLaw.com, accessed on April 17, 2012, http://caselaw.findlaw.com/us-1st-circuit/1354262.html iii Reich v. Gateway Press, Inc., OpenJurist.com, accessed on April 17, 2012, http://openjurist.org/13/f3d/685/reich92-3746-v-gateway-press-inc iv Reich v. Gateway Press, Inc. v Sherwood v. Washington Post, Find A Case.com, accessed on April 17, 2012, http://dc.findacase.com/research/wfrmDocViewer.aspx/xq/fac.19880113_0000006.DDC.htm/qx vi Sherwood v. Washington Post vii Sherwood v. Washington Post viii DOL, Fact Sheet #17 ix Wang v. Chinese Daily News, Inc., United States Court of Appeals for the Ninth Circuit, accessed on April 17, 2012, http://www.ca9.uscourts.gov/datastore/opinions/2010/09/27/08-55483.pdf x Wang v. Chinese Daily News, Inc. xi DOL, Fact Sheet #17

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Ross Brand iRossBrand@gmail.com Case Study: Compensation and Job Classification September 2012

Ross Brand

Case Study: Compensation and Job Classification

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Bibliography Allen, Jamerson C., and Mark S. Askanas. Federal Appeals Court Finds Newspaper Reporters Not Exempt as FLSA Creative Professionals. Jackson Lewis LLP Workplace Resource Center. October 5, 2010. Accessed April 12, 2012. http://www.jacksonlewis.com/resources.php?NewsID=3415. The American Bar Association Guide to Workplace Law. 2nd ed. New York: Random House Reference, 2006. Chamberlain, Kaufman and Jones: Attorneys at Law. FLSA Homepage. 2006. Accessed April 12, 2012. http://www.flsa.com/index.html. Cihon, Patrick J., and James Ottavio Castagnera. Employment & Labor Law. 7th ed. United States: South-Western Cengage Learning, 2011. DelPo, Amy, and Lisa Guerin. The Managers Legal Handbook. 6th ed. United States: Nolo, 2011. Ellis, Steven M. Reporters Not Exempt From Overtime Pay RulesCourt. Metropolitan News-Enterprise. September 28, 2010. Accessed April 12, 2012. http://www.metnews.com/articles/2010/wang092810.htm. Kaufman, Thomas, and Michael Gallion. 9th Circuit: Wage and Hour Class Action Prevails. Society for Human Resource Management. October 22, 2010. Accessed April 12, 2012. http://www.shrm.org/LegalIssues/FederalResources/Pages/9thWageandHour.aspx. Lindeman, Devora L. Reporters are Not Creative Professionals. Greenwald Doherty Overtime Advisor. October 25, 2010. Accessed April 12, 2012. http://www.overtimeadvisor.com/2010/10/articles/overtime-pay/reporters-are-not-creativeprofessionals/. Mathis, Robert L., and John H. Jackson. Human Resource Management. 13th ed. United States: South-Western Cengage Learning, 2011. Miller, Ronald, and Lisa Milam-Perez. CCH Employment Law Briefing: White-Collar Exemption Revisions. CCH. April 21, 2004. Accessed April 12, 2012. http://www.cch.com/press/news/2004/EmploymentLawBriefing.pdf.

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Ross Brand

Case Study: Compensation and Job Classification

iRossBrand@gmail.com

Olson, Camille A., Noah A. Finkel, and Russell H. Gore. May-June 2004: Overtime Exemption Regulations for White-Collar Employees. SHRM Legal Report. June 1, 2004 (Last reviewed December 2006). Accessed April 12, 2012. http://www.shrm.org/publications/legalreport/pages/cms_008644.aspx. Society for Human Resource Management: SHRM Essentials of HR Management. United States: SHRM, 2010. Steingold, Fred S. The Employers Legal Handbook. 10th ed. United States: Nolo, 2011. U.S. Department of Labor, Wage and Hour Division. Fact Sheet #13: Employment Relationship Under the Fair Labor Standards Act (FLSA). Accessed April 12, 2012. http://www.dol.gov/whd/regs/compliance/whdfs13.pdf. U.S. Department of Labor, Wage and Hour Division. Fact Sheet #14: Coverage Under the Fair Labor Standards Act (FLSA). Accessed April 12, 2012. http://www.dol.gov/whd/regs/compliance/whdfs14.pdf. U.S. Department of Labor, Wage and Hour Division. Fact Sheet #17D: Exemption for Professional Employees Under the Fair Labor Standards Act (FLSA). Accessed April 12, 2012. http://www.dol.gov/whd/regs/compliance/fairpay/fs17d_professional.pdf. U.S. Department of Labor, Wage and Hour Division. Fact Sheet #17G: Salary Basis Requirement and the Part 541 Exemption Under the Fair Labor Standards Act (FLSA). Accessed April 12, 2012. http://www.dol.gov/whd/regs/compliance/fairpay/fs17g_salary.pdf. U.S. Department of Labor, Wage and Hour Division. Fact Sheet #17Q: Journalists/Reporters and the Part 541-Exemption under the Fair Labor Standards Act (FLSA). Accessed April 12, 2012. http://www.dol.gov/whd/regs/compliance/fairpay/fs17q_journalists.pdf. U.S. Department of Labor, Wage and Hour Division. Fact Sheet #17R: Administrative Duties Test: Court Decision. Accessed April 12, 2012. http://www.dol.gov/whd/regs/compliance/fairpay/fs17r_geico.pdf. U.S. Department of Labor, Wage and Hour Division. Fact Sheet #21: Record Keeping Requirements under the Fair Labor Standards Act (FLSA). Accessed April 12, 2012. http://www.dol.gov/whd/regs/compliance/whdfs21.pdf. U.S. Department of Labor, Wage and Hour Division. Fact Sheet #23: Overtime Pay Requirements of the FLSA. Accessed April 12, 2012. http://www.dol.gov/whd/regs/compliance/whdfs23.pdf.

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Ross Brand iRossBrand@gmail.com Case Study: Compensation and Job Classification September 2012

Ross Brand

Case Study: Compensation and Job Classification

iRossBrand@gmail.com

U.S. Department of Labor, Wage and Hour Division. Fact Sheet #71: Internship Programs Under the Fair Labor Standards Act. Accessed April 16, 2012. http://www.dol.gov/whd/regs/compliance/whdfs71.pdf. U.S. Department of Labor, Wage and Hour Division. Fact Sheet #73: Break Time for Nursing Mothers Under the FLSA. Accessed April 16, 2012. http://www.dol.gov/whd/regs/compliance/whdfs73.pdf.

Disclaimer The contents of this paper are not intended or offered as legal advice. The materials contained herein have been prepared for educational and informational purposes only. They are not legal advice or legal opinions on any specific matters. Transmission of the information is not intended to create, and receipt does not constitute, a lawyer-client relationship between this paper or its author, and you or any other user. Readers should not act, or fail to act, upon this information without seeking professional counsel. No person should act or fail to act on any legal matter based on the contents of this paper. Unless expressly stated otherwise, no contents contained herein should be assumed to be produced by an attorney licensed in your state. The author of this paper is not an attorney. All characters appearing in this work are fictitious. Any resemblance to real people, living or dead, is purely coincidental. The Northwest Independent newspaper portrayed in this work is a fictional entity. The legal issues and cases cited are real. This case has been developed to promote discussion regarding the issues contained herein. It is not intended to serve as endorsements, sources of primary data or illustrations of effective or ineffective management. Ross Brand is a Master of Science Candidate in Human Resource Management and Development at New York University. He previously worked as a journalist, newspaper staff writer and radio broadcaster. He earned his Bachelor of Arts in History at Lafayette College.

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Ross Brand iRossBrand@gmail.com Case Study: Compensation and Job Classification September 2012