Contractor payroll, overtime exemptions, and what Volkswagen’s scandal teaches us

 

Heads up: The way the production industry has traditionally approached contractor payroll just isn’t going to cut it anymore. Though currently stalled, new overtime regulations are questioning outdated payment practices—including day rates in the production industry.

Wherever you find new guidelines radically changing previously-accepted practices, you will also find someone trying to get around them. But it behooves companies to be ahead of the guidelines instead of trying to work around them. Just ask Volkswagen.

For its shady dealings (which the BBC broke down here), Volkswagen is paying the price to the tune of $20 billion—one of the most expensive corporate payouts in United States’ history. But it’s not all about the money. While the circumstances differ, the production industry can learn a few lessons from Volkswagen’s scandal about how to walk above board and avoid ending up in court.

 

Culture is everything, and it’s about to shift for the production industry

Martin Winterkorn, Volkswagen’s then CEO, implicated “the terrible mistakes of a few” in his apology. But a scandal so deep doesn’t happen without a company culture (hello, Supervisor B!), and a broader auto industry culture, that tolerates or encourages finding a way around the rules.

A New York Times article points to the cultural element in industries that traditionally require long hours—like video production—that has always made room for fudging paperwork. Companies negotiate a flat rate and contractors work as long as it takes, even up to 12 or more hours, to get the job done. Since it’s standard practice, submitting time sheets that read “9-5” when everyone knows it was actually 9-9 hasn’t necessarily seemed unethical or unfair to either party. That’s just the way it is. Or at least the way it has been.

The new proposed regulations make it clear that even when workers claim to be okay with not getting paid accurately, it’s not actually okay. Employers must be prepared for the culture to shift and for workers to start questioning their overtime eligibility.

 

When the press talks, the people talk…

There’s nothing that shifts culture more than attention. As laws change at the state level and contractors and workers start thinking “this relates to me,” there will be pushback against industry norms. And it’s not just the workers. The media love to find and expose wrongdoings. Nobody wants to be the center of the biggest scandal of the year. Once again, just ask Volkswagen.

A mutual expectation of a flat rate for an undetermined number of work hours doesn’t count as compliance. Duties and level of pay dictate whether or not someone is eligible for overtime, not tradition. The more the press highlights these points, the more the people talk. And the more the people talk, the more the wink and nod approach in the video production industry will come under scrutiny.

 

…and money always talks

The air is dirtier, the ozone is thinner, and consumer trust is shattered. Unfortunately, Volkswagen isn’t the only company bending the rules or blatantly cheating in order to make a buck. Theirs is a tale as old as time. They just got caught.

And it’s coming to our industry too—the same New York Times article states that Fox is in litigation with a former worker who alleges he was paid unfairly. Once a studio gets shut down with a class action lawsuit, everyone will suddenly tighten up their practices and fall in line. But why risk finding yourself at the defense table in a courtroom? It’s not the amount of money that makes it relevant to our industry, it’s the fact that people are paying attention to it.

Don’t be the Volkswagen of the media production industry. It’s going to happen to someone. Why gamble your business instead of just starting to recognize eventual changes to overtime regulations now?

 

About PayReel

Producing multimedia content and executing live events is chaotic. At PayReel, we make sure our clients are able to hire who they want, when they want and that everyone is paid properly. Leave the details up to the PayReel team so you can focus on pulling off a flawless production. Contact us anytime at 303-526-4900 or by emailing us here.

Relax. We got it.

 

Overtime exemptions are on hold. How will it affect you?

 

A ruling slated to put an additional $1.2 billion per year in workers’ pockets is now on ice. Here is the state of the Fair Labor Standards Act (FSLA) and what it means for your business.

 

What exactly is  the FSLA?

The Department of Labor’s (DOL) FSLA includes new overtime exemptions. If and when it goes into effect, the law will nearly double the salary threshold (from $455/week to $913), thereby making up to 4.2 million more people non-exempt and eligible to be paid overtime.

On November 22, 2016, a week before the ruling was to take effect, a judge in Texas won a preliminary injunction against it. While the twenty other states that fought to end the act breathed a sigh of relief, the DOL cried foul and filed an appeal.

As of this posting, the battle continues.

 

What do stalled overtime exemptions mean for businesses?

Like all things involving government and money, it’s complicated. And it’s likely to cause headaches for anyone digging in to the nitty gritty details.

With the issue in limbo at a federal level, states are trying to figure this thing out on their own—which makes room for a lot of gray areas. Gray areas are where lawsuits live. There are different labor laws at the federal and state levels. In most legal situations, federal trumps state. It’s different with labor laws, though, because states are only required to use federal guidelines as a baseline.

Another place with plenty of room for confusion is worker classification, which we cover in an ongoing blog series here. Often, workers fall into both exempt and non-exempt classification categories, which affects eligibility for a slew of benefits, including overtime. In these cases, classification depends on a weighted scale of the employees’ duties. It’s shockingly easy to misclassify workers and rack up legal fees and fines before you know it. Classifying workers correctly the first time around puts employers in a better position to adjust to changing laws in the future.

PayReel’s policy pros—in conjunction with our custom PayReel OnLine software—protect your sanity and your finances by sifting through the legal complexities and taking responsibility for your workers. As the employer of record for our clients, we are the ones on the hook if we get it wrong. The good news is, that rarely happens.

With PayReel, you can hire who you want, when you want, without worrying about overtime exemptions and worker classification. As the ones who are legally liable for our employees, and morally liable to our clients, we’re dedicated to understanding the ins and outs of both so we can make the right decisions.

 

What’s the bottom line?

The end of the year is a great time to review your payroll practices to be sure you are compliant or are in a position to stay compliant as laws change. If you don’t have the time, resources, or expertise to make sure you’re not trapped in a legal gray zone, get in touch with a team who does. PayReel’s policy pros are available around the clock at 303-526-4900, or you can shoot us an email by clicking here.

 


 
Nat's notes

About the author

PayReel Customer Experience Manager Natalie “The Go Getter” McGinnis recapped 2016’s biggest news in freelancer management to help you prepare for 2017. Nat’s experience in recruitment and customer service set her up for success in providing laser-focused attention and assistance to the PayReel employees and clients who need it the most. Click here to read more of Nat’s Notes and meet the rest of the PayReel team by clicking here!


Payrolling freelancers? Here are 4 ways to be ready for new overtime rules.

 

The Department of Labor’s Fair Labor Standards Act (FSLA) will make about 4 million more workers eligible for overtime on December 1st, 2016. With 21 states suing to end the act altogether, some businesses may be hoping it all just goes away before they have to make changes. But waiting is risky. Getting ready for upcoming changes now ensures companies stay in good standing with employees and the government, too.

 

Four ways to prepare for payrolling contract employees in light of new rules

 

1. Provide a daily guarantee for a pre-negotiated flat rate for contractors. Budget for overtime if applicable.

2. Start tracking time accurately. Businesses and contractors using obligatory, inaccurate timecards need time to adjust to new processes.

3. Classify workers correctly up front. This is a big one because it sets you up for success. In fact, you can read a whole slew of advice on the topic by clicking here.

4. Read our previous posts on what the Volkswagon scandal teaches us about the FSLA and payrolling and four ways to prepare for changes to contractor payroll.

 

The production industry must adapt to remain competitive. And it may wreak havoc on some budgets in the short term. But this whole thing goes beyond the numbers. Companies that treat people fairly attract high quality workers. And when people feel valued, they go above and beyond. Proactive compliance is good business.

 

About PayReel

Producing multimedia content and executing live events is chaotic. At PayReel, we make sure our clients are able to hire who they want, when they want and that everyone is paid properly. Leave the details up to the PayReel team so you can focus on pulling off a flawless production. Contact us anytime at 303-526-4900 or by emailing us here.

Relax. We got it.

 

Contractor payroll is changing. Here are four ways to be prepared.

Like it or not, upcoming overtime exemption rules will change the way the production industry engages with contractors and freelancers. In the past, we talked about where things have been. Here, we’ll talk about where they’re going and what you can do to stay ahead of the curve.

Be aware.

If you hire contractors, you need to be aware of the following in order to maintain trust and stay out of trouble:

  1. Industry standards such as hiring contract employees on a day rate aren’t always in compliance with the laws. Educate yourself so you can learn to bridge the gap between the two.
  2. Be up to date on the specific requirements where your project is located (California has different rules than Colorado, for example).
  3. Find an expert who can classify workers correctly and identify who is legally exempt from overtime.

Be proactive.

Productions are hectic enough. Do your homework ahead of time to squelch possible legal problems and avoid the pressure of trying to implement last-minute changes.

To start, determine who needs to be paid a flat rate and who is exempt. If you aren’t sure, engage someone with production-specific expertise in this area.

Be transparent.

In a previous post, we talked about Volkswagen’s trouble with shady, dishonest practices. In his post-scandal apology, Martin Winterkorn (Volkswagen’s since-resigned CEO) gave his word that they’d “proceed with the highest possible openness and transparency.” This shows he understands that people care about transparency, but can a company that size turn on a dime to become fully transparent? It’s a lot easier to trust a company that is proactively committed to transparency and has it’s employees’ and freelancers’ best interests at heart.

To demonstrate your commitment to transparency and earn trust:

  1. Make announcements about all your changes to both internal employees and all relevant external parties with as much advance notice as possible.
  2. Make your intentions and changes as clear as possible.
  3. If you make mistakes (which you likely will), share about that, too.

Be above board.

Just like so much in life, there are ways around the rules. But if you operate in the gray area, you’re gonna get caught—or at least earn a negative reputation.

To stay above board:

  1. Do the right thing up front. In this industry, most contractors probably make above the $47,476 yearly threshold if you annualize their day rate pay, but that’s not the point. At the heart of the law is President Obama’s goal of providing “a fair day’s pay for a fair day’s work.” Paying for overtime is the right thing to do and will make you a preferred client (which, by the way, means you’ll get better workers who do better work).
  2. Avoid backing-in to artificial hourly rates or employing the split-day plan to find ways around the rules.

Laws are ever-evolving at the state and local level and keeping up with them is a full time job. It takes a lot of time and expertise to stay on top of this many details, but it’s a worthwhile investment. If you don’t have the time, resources, or desire to pay attention to all the details, hire a team like PayReel. Our PayReel OnLine software is fully equipped to help you sort out the rules and execute processes while also balancing contractor expectations, legalities, and company budgets.

If you have any questions about how your company’s keeping up, call us at 303-526-4900, shoot us an email, or contact us here—any time, day or night.

About PayReel:

PayReel’s clients, who are some of the biggest companies in the world, are constantly immersed in the chaos of producing multimedia content or executing live events. PayReel makes sure they have the right contractors at the right time in the right place, and that everyone gets paid properly. And, most importantly, they handle every last detail—down to insurance for temporary employees—perfectly while making sure their clients think nothing of it, so they can get back to doing what they do best.