Exposing How Employers Get Salaried Employees Work For Free [e232]

October 21, 2015

The guys close out the week by talking about Urban Outfitters asking salaried employees to volunteer their time on the weekend and how employers can get free work out of salaried employees.

Full Podcast Transcript

NASIR: Welcome to our podcast where we cover business in the news and add our legal twist. My name is Nasir Pasha and, again, we’re joined with our fashion guru, our aficionado. Some would say an expert, others would say my co-host.

MATT: And I’m Matt Staub. I guess it’s kind of fashion-related, I suppose.

NASIR: It’s not? Oh.

MATT: I guess, as much as we’ll ever get into it.

NASIR: Well, I mean, no, you’re the expert. You tell me.

MATT: They do sell more than clothes at these places, I believe.

NASIR: Oh, okay. Yeah, I mean, I don’t know much about this stuff so, yeah, please, tell us.

MATT: Well, I haven’t been to one in a long time – Urban Outfitters – which I guess they also own Anthropologie and Free People. I feel like I’ve been to Anthropologie before. I don’t know. It doesn’t matter.
Urban Outfitters, I don’t even know where they’re headquartered but this happened in Pennsylvania. Somebody sent an email out recently basically saying salaried employees were urged to work side by side with paid workers to pack and ship orders as a team-building activity. I was going to make it sound nicer than that but, I mean, it’s just kind of silly. The people are getting paid by the hour, okay, it makes sense for them. But what about these salaried employees who I’m assuming they aren’t working in the fulfilment center most of the time – or ever.

NASIR: Yeah.

MATT: These are people not even doing a job they normally do asked to volunteer and come in on the weekends – this weekend. Slightly better than being told they have to come.
Basically, what this amounts to is salary workers being asked to volunteer their time for free which could create a problem.

NASIR: But that is a little bit editorialized.

MATT: Yeah.

NASIR: Because the company would probably say, “Okay, they’re not coming in to work for free. These salaried employees are coming in voluntarily to work on this particular day,” because they’re still getting paid, right? I mean, they’re paid a salary whether they work 50 hours or 40 hours, they get paid the same amount.

MATT: Right. And so, people, I think a lot of times people think that, once they’re paid a salary, that the exempt/non-exempt issue doesn’t come into play. I think that’s probably a pretty common thought, wouldn’t you say so?

NASIR: Oh, yeah, and people don’t even realize, you can actually be a salary non-exempt. It’s not common. I don’t know why some people do it but I don’t particularly like it. Yeah, salary non-exempt employee.

MATT: Yeah, what that means is you can still get paid a salary and still get overtime pay which is really the best of both worlds, I guess.

NASIR: Yeah. Really, it can be problematic. That often happens, okay, “Look, I’m just going to pay you X amount for 40 hours a week and that’s it,” and there’s no expectation of overtime. But then, there’s that occasional week or two that goes over 40 hours and you’re like, you kind of just brush it to the side but it ends up being a problem down the line.

MATT: Yeah, and you still have to pay. If that’s the case, you have to pay it out regardless of whether you told them to leave or not. You know, why is that not being brought up in this instance? And so, the exempt/non-exempt issue that we’re just talking about, amongst other requirements, there is a minimum salary threshold. In Pennsylvania where this was, it’s only $23,660 annually.

NASIR: Yeah, and that’s actually a federal minimum – or $23,660 or $23,600?

MATT: $23,660 is what I have here.

NASIR: I thought the federal is $600 and maybe Pennsylvania is $60.00 more? I don’t know.

MATT: Well, no, according to what I’m reading here which I think was pulled from the state website earlier, Pennsylvania maintains a test to determine exemption, making a weekly salary of over $155 a week.

NASIR: Okay. If they calculate it based on a weekly salary, then their 52 weeks may be different, yeah.

MATT: Yeah. I mean, if it’s the same as federal or just slightly off, I mean, it’s still that bare bones minimum of $24,660 which, for this federal in Pennsylvania. In California, I think, I forget the exact number in California but it’s in the 30’s.

NASIR: It’s like double minimum wage, right?

MATT: Yeah, whatever that equates to. But this reminded me of when we talked about – probably a couple of months ago – Obama’s idea of what was he setting at? 50, right?

NASIR: Oh, yeah. I mean, it was $50,440 which is, of course, more than double, actually. That was back in July which, you know, hasn’t happened yet because I think that we’re going to head there but it’s such a huge thing and it might be too disruptive for the workforce and it might have too much of an impact so I understand why it may not have happened yet.

MATT: Yeah. I mean, that’s too high of a raise in my opinion as well, but what are we getting down to here with this issue? If you have someone who is exempt – which a lot of these people, you know, these managers for example, they’re going to be exempt, assuming it pays high enough which it will be in Pennsylvania – what we have is a situation where you do have disgruntled workers because this was a “volunteer” email but let’s say you do have a situation where you have a salaried worker that’s exempt and you tell them that they need to come in on the weekend to do some work for something, well, I don’t know if the guy from office space was exempt or not but it’s that idea, right? It’s him being told he has to come in on Saturday – in that case, Sunday as well – to do some work. I mean, as a salaried employee that’s exempt, you’re in a tough sort of situation there from that perspective.

NASIR: Well, he might fit that computer exemption.

MATT: Oh, yeah, computer professional.

NASIR: Yeah, I don’t remember exactly what his job duties were.

MATT: TPS report creator, basically.

NASIR: Yeah, basically. But this is an article from the Huffington Post that I think… I think my wife actually forwarded this to me. I think that’s where we came up with the idea. I kind of have a problem with the spin on it. I mean, maybe it’s because we represent employers and businesses and we’re constantly looking at it that way but it was voluntary and, even if it wasn’t voluntary, frankly, so long as they are being paid at least minimum wage and they fit that salary test and they’re fitted in a duty test – even the duty test, by the way, just because your job position is a managerial position doesn’t mean that you have to have 100 percent of your job duty to be exempt work. There’s different standards, depending on whether the federal standard or state standard but, look, if the majority of your work is such that it’s exempt and then, on one day of the week or one day a month, you go in and help out, you know, with packaging that is otherwise non-exempt duty, that’s not against the law. Frankly, I just don’t think this company should be shamed for doing something that is well within the bounds of law. Frankly, there’s other companies that do much, much worse than something like this. I mean, it seems a little too extreme.

MATT: Oh, yeah, no doubt with that. If you’re a manager in this situation, you’re going in and working on the weekend which is not fun but you’re also doing work that I think is pretty simple so you’re not exerting the work you might normally be doing as a manager. I mean, from a labor perspective, you’re doing I guess more labor-intensive work, but you don’t really have to use your mind too much – well, I’m assuming. But, still, they definitely did put a spin on this article that was written.

NASIR: But, to be fair, and just to kind of go back with what I just said, I think the bigger picture is that, what’s concerning is that you have these exempt employees that are so-called exempt yet they’re being paid very little. That’s kind of why Obama is considering raising that minimum level because someone who makes that $24,000 a year or less can still be exempt seems it doesn’t flow to reality and that number just hasn’t been updated in god knows how long.

MATT: I think that’s the ultimate problem here. That number needs to be bumped up. I don’t think it needs to go all the way to 50. It needs to be somewhere in-between because, like you said, it’s a way – at least in my opinion – it’s a way to take advantage of workers by fitting them into the requirements, making them salaried employees, and taking advantage of them, telling them they need to come in on the weekend or work late, et cetera. Once you get tons of the actual effective pay per hour, it doesn’t equate to what you were expecting maybe when you took the position.

NASIR: Absolutely.

MATT: But you could also work 100 hours a week, get paid good money, and your effective pay per hour could be pretty low, too.

NASIR: I don’t know if you read this but how much do you think an Urban Outfitters manager gets paid on average?

MATT: It could be like a high school kid, right?

NASIR: Yeah, it says “manager.” I mean, I don’t know if that means store manager.

MATT: $38,000.

NASIR: No way, seriously?

MATT: Yeah.

NASIR: That’s the exact amount.

MATT: Oh. Well, I also worked there.

NASIR: Oh, yeah, I forgot.

MATT: No, I didn’t.

NASIR: And you’re the fashion guru. That’s like a magic trick we just presented today – which, of course, is not that impressive in any way. But, actually, a store manager looks like their average is $56,000 – which, again, store manager definitely makes sense. I mean, out of 35 Urban Outfitters salaries, $56,000, that would be within the rules that Obama has and that makes sense exempt. Frankly, I mean, $38,000, that’s not that far from it. I mean, it’s about $12,000. No, actually, more than that. It’s actually about $18,000.

MATT: 38 to 50 is 12.

NASIR: 56.

MATT: Oh, 56? Well, proportionally…

NASIR: Just ignore my math. I don’t remember now.

MATT: Percentage-wise, it’s quite the difference, I think.

NASIR: No, it is, it is.

MATT: Yeah.

NASIR: My point is, okay, $38,000 a year, I mean, should that be an exempt employee?

MATT: Like I was saying, I think the number falls somewhere in-between. 38 seems pretty fair.

NASIR: It’s almost there. Maybe a little higher, right?

MATT: Yeah. Well, we need to look at what the national average is for salaries and family incomes, things like that.

NASIR: Yeah, you’re right, and this is Urban Outfitters. I’m sure it’s across east coast to west coast and maybe certain areas and I think that makes sense. I mean, states are free to obviously set their own minimums just like California did and so they can always set it higher. Going up to 50 on a federal level makes California even higher which that’s what kind of is concerning. California, being the state like it is, if they didn’t raise the minimum, then having it on a federal level raise the minimum beyond California seems too extreme.

MATT: Yeah, I think we even talked about that before.

NASIR: Did we mention that? Okay.

MATT: If you’re going past California, you know you’ve gone too far.

NASIR: Yeah, that’s the limit. We talked about last week, they just passed the Equal Pay Act and I think one of our writers actually wrote another article about that this week. California is a progressive state.

MATT: I think the takeaway here is, from the employer’s perspective, both sides, it’s a two-edged…

NASIR: Double-edged sword?

MATT: Double-edged sword. I would think most swords should be double-edged but I don’t know. I’ve never held a sword. Anyways, from an employer’s perspective, you could possibly use this sort of exempt salaried employee to your advantage but just understand the other side of the sword is your employees might not like you and might end up leaving because they feel like they’re getting taken advantage of. You have to find the right balance in-between the two, I think.

NASIR: Absolutely. I do want to add that there are some advantages to a single-edged sword and I’m reading about it and it’s where there’s only a taper on one side and, apparently, there are some advantages as far as being able to wield it a little bit more fluidly and things like that. Keep that in mind.

MATT: I guess. I don’t anticipate ever using a sword. If I do, I’m still going to opt for the double-edged.

NASIR: Since there’s a non-sharp edge, the thick back of a single-edge is also good to kind of be as a defensive side for enemies’ blows. It’s good for defense.

MATT: I mean, if you’re swinging back and forth, both sides are going to connect.

NASIR: Let’s agree to disagree on this. It’s something that people have been considering for hundreds of years, I’m sure.

MATT: Well, just like I’m the fashion expert, you’re the medieval sword expert.

NASIR: That’s right. Okay. Well, thanks for joining us, everyone.

MATT: Yeah, keep it sound and keep it smart.

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Legally Sound Smart Business

A business podcast with a legal twist

Legally Sound Smart Business is a podcast by Pasha Law PC covering different topics in business advice and news with a legal twist with attorneys Nasir Pasha and Matt Staub.
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