Creatives and FLSA – Edgardo Santana

Posted by Edgar Santana on November 12, 2016November 12, 2016

Designer at work

Creative firms and ad agencies need to take FLSA seriously.

With the Fair Labor Standards Act’s rule update taking effect this December 1, 2016, creative firms and ad agencies will be facing a tough challenge. Young, ambitious creatives making less than $47,476 per year (or $913 per week) will be subject to overtime pay if they work more than 40 hours per week.

This means that many junior designers, graphic designers, associate art directors and the like will need to be managed differently unless the firm or agency wants to risk a legal fight with the United States Department of Labor. DOL has more lawyers, more time and more attitude than any creative firm out there! Fines and back wages could cripple a firm whose profit margins are likely thin to begin with – not to mention the cost of negative publicity in the market. Visit DOL to learn more.

Let’s be real: Most firms and agencies (i.e. enterprises) that earn more than $500,000 in receipts or engage in interstate commerce have to abide by FLSA. Agency principals and partners need to accept that fact and develop a strategy very quickly. See more here.

One option would be to assign rigid work schedules for your junior creatives that do not total more than 40 hours per week. Most mid-size and large firms already have good time-keeping procedures. This could be an extension of the current billing system. Traffic managers or more senior art directors / creative directors could ensure that junior staff members do not go over 40 hours per week.

More flexible schedules could be a solid second option. Junior staff could be scheduled to work a four day, 10-hour per day workweek. The 4 x 10-hours/day workweek will work well for most agencies. They can stagger the junior designers to ensure there is coverage when the firm needs it. Employees will also like 3-day weekends!

A third option, which already is utilized frequently, is to use freelancers for junior designer-type of work. Agencies already use trusted independent contractors for photography, illustration, video production, web design/development and graphic design. This FLSA rule may force more agencies to rethink whether they need to hire junior designers as full time employees. Firms may decide to hire them as freelancers instead. Bonus here is that agencies and firms could also save on fringe benefits costs which nowadays can be very high. Firms need to be careful how they set up these freelancers. If they work in your office, they could be considered FTEs. More on independent contractors here.

Creative firms and ad agencies need to take FLSA seriously and implement a smart strategy for employing and managing junior creative staff to prevent serious problems in the future. If you are a partner, CEO, COO or VP of Finance Management at a mid to large firm, you should immediately look further into FLSA and how it could affect the firm you are responsible for. At minimum consult with your firm’s legal counsel and personnel office to assess your situation. There are lawsuits working their way through the courts trying to block or stagger the salary threshold increase for overtime pay, but I would not hold my breath for an eleventh-hour injunction by a federal court.