Navigating employment laws can be challenging for design and construction firms, particularly in today’s uncertain climate.  One concept that is surprisingly complex and requires careful attention is the classification of employees as exempt or non-exempt.  Most employers assume it’s an easy distinction, especially regarding seasoned career professionals, but what about unlicensed intern architects and engineers-in-training (ETIs)?

The Fair Labor Standards Act establishes compensation, record retention, and other employment regulations applicable in both the public and private sectors, and recognizes employees as either non-exempt or exempt.  Non-exempt employees are entitled to overtime pay, a minimum wage, and are generally, though not exclusively, paid by the hour.  Exempt employees are typically paid a salary that is not based on hours worked and are not eligible for overtime compensation. 

Most architects and engineers are included in the learned professional exemption contained in Section 13 of the FLSA.  However, many employers incorrectly believe that all salaried professionals are exempt.  For the professional exemption to apply, you must consider the following factors:

  • Does the employee’s salary equal or exceed $455 per week?
  • Is the employee’s primary duty work that requires advanced knowledge, which is defined as work that is intellectual and requires discretion and judgment?
  • Is the advanced knowledge in a field of science or learning?
  • Is the advanced knowledge typically acquired by a prolonged course of specialized intellectual instruction?

If all of these requirements are met, the employee qualifies for the professional exemption.  The learned professional exemption is restricted to professions in which academic training is typically required for employees, and the FLSA states that advanced knowledge cannot be attained at the high school level.  However, the FLSA does not dictate that a graduate degree or professional license is mandatory.  This allows junior employees with little to no experience or veteran employees with vast experience and but only a Bachelor’s degree to qualify for the learned professional exemption.

BUT, Keep an Eye on the Final Rule

In 2016, the Department of Labor unveiled an updated overtime regulation.  The Final Rule was intended to go into effect on December 1, 2016 and would increase the required weekly salary for exempt professional employees from $455 to $913.  It would also establish a mechanism for automatically updating the salary requirement every 3 years.  However, on November 22, 2016, a federal judge temporarily blocked the change, and the Department of Labor appealed.  The new Secretary of Labor, R. Alexander Acosta, is reviewing the Final Rule and the Department of Labor’s final reply brief is expected to be filed by June 30, 2017.   We will be closely monitoring the Department of Labor’s position on the Final Rule.

It is vital that design and construction firms regularly review federal and state labor laws. California and other states require both advanced education and a professional license for exemption, and adherence to the stricter regulations is essential.  Misclassification of employees can result in federal fines and lawsuits.  To maintain compliance with labor laws, your firm should have a clear set of job descriptions for all employees and regularly conduct performance reviews, especially for junior or inexperienced architects and engineers.

If you have any questions about exemption or other employment issues, we would be glad to help you. The attorneys of Gibbes Burton are passionate about helping professionals and businesses to minimize risk and build success.