What Happened and What We Are Doing About It Action and a statement about the controversy over Penland’s past payroll system

Penland School of Crafts has recently been the subject of public discussion resulting from a past payroll problem. The board and staff are taking action at this time that we hope will bring the matter to a reasonable conclusion. We are also posting detailed responses to some of the issues that have been raised.

Prior to 2007 Penland’s payroll was managed in a way that unintentionally resulted in hourly employees not always being properly compensated when they worked overtime. Simply put, Penland paid employees every two weeks, and hours were recorded as a single number for the pay period. While hourly employees were paid time-and-a-half if they recorded more than 80 hours in a two-week time period, they should have been paid time-and-half if they worked more than 40 hours in a single workweek. Penland’s handling of overtime was not intentionally incorrect; the staff members administering the process believed it to be legal.

The problem was brought to light in 2007, it was fixed going forward, and, following the recommendation of the school’s lawyer specializing in labor law, a group of then-current employees were compensated for back wages for the previous two years. Also following our lawyer’s advice, we did not attempt to contact former employees who had worked during that time, but we paid one former employee who contacted us about back pay. The mistake in the system was not denied or hidden--it was corrected. However, a recent campaign against Penland, led by a community member who worked at the school during that time, has brought a lot of attention to the limited scope of the retroactive employee compensation.

While we have elected not to conduct an adversarial public conversation on multiple Internet platforms, the board and staff of the school have revisited the decisions made in 2007 and have decided that the choice not to go beyond the recommendations of our legal counsel does not reflect Penland’s values and aspirations. Although the mistake in the timekeeping system was not intentional, we regret this mistake and the way in which it was addressed, and we are sorry that hard-working staff members were not properly compensated for their work.

In light of this, the board of trustees has decided to do the following:
This week, we sent checks and a letter of explanation and apology to two other studio coordinators who were no longer working at Penland in August 2007 whose records show that they should have received overtime pay for hours worked between August 2005 and August 2007. We are able to do this despite the inadequate information in Penland’s timesheets from that period because, during those two years, the studio manager kept and saved time logs for coordinators, which makes it possible to reconstruct their hours on a weekly basis. This means that all coordinators whose records show they should have gotten extra compensation in that two-year period have been paid. Several other coordinators who worked during this time period and whose records do not show they are owed compensation will also be invited to contact Penland if they believe these records are incorrect.

We are also sending a letter of explanation and apology to every studio coordinator who worked between January 2000 and August 2005 inviting them to call deputy director Jerry Jackson if they believe that they worked overtime at Penland and were not properly paid. Because the timesheets from this period don’t give us a way to tell how much extra pay any of these coordinators should have received, Jerry will work with each individual to agree on a fair amount of compensation.
Many people have expressed disappointment that Penland did not handle this more generously in 2007. We agree that we should have, and that is why are taking these steps. We feel these actions will bring the matter under discussion to a conclusion.

Although the problem raised had to do with the school’s fiscal relationship with its employees, much of the public airing has been framed as a conflict between Penland and artists. This has been especially troubling because artists--whether they are professional, amateur, or aspiring--are the reason Penland exists. Every dollar we spend supports artistic growth.

Penland is a magical place that has changed the lives of thousands. But it is a complicated place to run; it is run by people, and people make mistakes. We are sorry for the mistakes that created this situation, and we are proud of our association with this school. We hope that we can now go back to the business of helping people live creative lives.

Glen Hardymon, chair, board of trustees
Rob Pulleyn, vice chair, board of trustees
This is posted on Penland's Website at :

What Happened and What We Are Doing About ItAction and a statement about the controversy over Penland’s past payroll system

Some Questions and Answers
In response to the recent controversy over Penland past payroll system

Read the Statement Here

The airing of this problem, on Facebook and other Internet platforms, has created confusion, raised questions, and spread a lot of misinformation. In an attempt to clear the air, we are presenting a list of questions that have been implied or asked directly along with detailed, accurate answers.

If you have further questions about this matter, please send an e-mail to

communications@penland.org

Does Penland pay time-and-a-half for overtime worked by its employees?
Absolutely. Since August 2007, Penland's payroll practices have conformed with all applicable state and federal laws. This was checked again and confirmed in 2011 by outside legal counsel. Any hourly employee who works more than 40 hours in one workweek is paid time-and-a-half for the time over 40 hours. North Carolina law does not set any limit on how many hours can be worked in a single day--only on the number of hours worked in a single workweek. This is carefully explained in Penland's employee handbook and all supervisors understand how the overtime policy works. It is not common for hourly employees to be required to work overtime, but when it happens, they are properly compensated.

Penland has said that it made a “technical violation” of the labor laws. What is meant by that?
This is the term our lawyer used to describe the following: Penland pays employees every two weeks. During the years in question, employees turned in a single number for the hours they had worked over a two-week pay period. They were not paid extra for overtime unless they worked more than 80 hours in a two-week period. What this meant in practice is that if someone worked more than 40 hours in one week of the pay period, they compensated for those hours by working less the other week. This was not set up maliciously or with an intent to deprive employees of proper pay. The staff members who were managing the payroll at that time believed that their system was legal. And despite charges that have been made, the fact is that all employees were paid using the same system.

Another problem with the way payroll was handled at that time was that timesheets were turned in before the end of the second week so that employees could get their checks on the last day of the pay period, but this meant that they had to estimate some hours before they were worked. This problem was also fixed in 2007.

How could you make a mistake like this?
It may be hard to understand in retrospect, but the two lawyers we have worked with on these matters told us that this is one of the most common payroll mistakes they find, particularly in small businesses and nonprofits. There was no intent to deprive anyone of their rightful pay. The staff administering it thought it was legal. We hope this can be understood as part of an ongoing evolution in Penland's business practices.

What exactly did Penland do when this mistake was brought to its attention?
The school hired a lawyer with experience in labor law. She reviewed Penland's payroll system and recommended changes to bring it into compliance with the law. Since that time, hours have been recorded for each week so that overtime compensation can be properly made on the 40-hour standard. The payday was moved from Friday at the end of the pay period to the following Friday so that timesheets could be turned in on Monday--after the end of the pay period.

Penland followed the recommendation of its legal counsel that it pay all of its then-current employees the additional amount they would have received--going back two years from August 2007--had overtime been calculated based on a 40-hour week rather than an 80-hour pay period. It was recommended that the school similarly compensate any former employees who came forward to say that they were also owed for overtime worked during those two years. The lawyer also told the school that it did not have to contact former employees who worked during that two-year period and Penland followed this advice as well. We understand now that this is the way this problem is commonly addressed in the business world, but clearly this was not an appropriate approach for Penland.

Because of the way the timesheets were structured, it was impossible to tell from those records how much, if any, overtime had been worked by a given employee. The former studio manager--the same person who has led the public campaign on this issue and also brought the violation to the school's attention--had kept, but not submitted, a second set of timesheets for studio coordinators. These were discovered after he resigned.

Those unofficial records show how many hours these employees worked each week during the two years prior to August 2007. The studio coordinators working at Penland at that time were paid additional overtime wages for the two-year period based on the information in these alternate timesheets. An employee working in the development office was paid based on her recollection. One former studio coordinator contacted the school at that time and requested compensation. His records were unclear, so he was also paid based on his recollection.

Penland's original statement referred to the "incomplete nature” of the older records. What does this mean? Were records lost or destroyed? 
No. There are timesheets for employees going back to 2000, although the school is only required to keep timesheets for two years. However, the system being used before August 2007 did not record the information needed to determine how much, if any, overtime was worked by any individual employee in any particular workweek. So the records exist; it's the information that’s incomplete.

Employees turned in a total number of hours for a two-week period. Whether time-and-a-half should have been paid for any of those hours can't be established without knowing how many hours were worked in each week. The only records dating before August 2007 that have this information are the alternate set of timesheets for coordinators kept--but not submitted--for several years by the studio manager.

It has been charged that during the time in question Penland’s facilities crew recorded their time differently than other employees and so they were properly compensated for overtime. Is this true? 
The timesheets and pay records from that time show no evidence that any employees were reporting their time or being paid using a different system than everyone else. We have no idea what is behind this charge and there is no information to support it.

Can't Penland just figure out how much people should have been paid and make up the difference?
No, it can't. Except for the studio coordinators who worked during the time period when the alternate timesheets were being kept (see above), it is impossible to determine which employees might have worked overtime unless they worked more than 80 hours in two weeks, in which case they would have been paid extra for those hours at the time. The records have been saved, but the information needed to figure out how much overtime was actually worked and how much extra money should have been paid simply does not exist.

Why has the response from Penland been so limited until now?
The tone of the public airing of this problem, which has been taking place on Facebook and other Internet platforms, has been hostile and characterized by inconsistent and often inaccurate information, and it has generated volumes of comments, some of which are ill-informed or based on assumptions that are not true--most notably that the problem being discussed is an ongoing one, which it is not.

We do not think it is productive to enter into discussions of this character. Our initial statement was meant to give a short and accurate description of what had transpired and to assure anyone reading it that the problem is not a current one. However, the controversy caused Penland’s board and staff to revisit and reassess how the problem was handled in 2007, and we decided that the choice not to go further than the recommendation made by our legal counsel does not reflect Penland’s values and aspirations.

A group of board and staff members then worked together to find a solution that would address the mistakes of the past without simply paying everyone a made-up, fixed amount of money, which would be arbitrary and unfair--coordinator work requirements have always varied considerably, and the former coordinators we are contacting all worked at Penland for different amounts of time, from a few months to several years.

The plan developed by this group required board approval and convening a board meeting requires proper notice. The plan couldn’t be implemented until it was approved, and making further public statements while the situation was in flux didn’t seem like a good idea.

So, we are trying to answer questions now. We regret the delay but it couldn’t be helped. Organizations can’t always move at the speed of the Internet.

How does Penland treat its employees?
Penland is committed to being a good place to work. In addition to their pay, employees have a benefits package that includes paid vacation, 10 paid holidays, sick leave, extended sick leave, health insurance (Penland pays 85% of the premium), a retirement account set up when they are hired (to which Penland makes contributions after two years), free meals while working when classes are in session, and a free class every two years. All employees have limited access to studios at no charge and can rent extended studio time during the winter months at a reduced rate. Studio coordinators have free access to studios whenever it does not interfere with classes. Penland also has a grievance policy that helps employees bring problems to the personnel committee of the board of trustees if they cannot be resolved at the staff level.

Penland conducts regular salary studies to compare its salaries with those paid for similar jobs at comparable institutions locally, regionally, or nationally, depending on the nature of each job. When significant discrepancies are found, the school takes steps to correct them. Penland employees have gotten merit increases every year for the past decade except for one (2009). There were no layoffs or pay cuts during the recent recession.

Employment at Penland is governed by a detailed personnel policy that is reviewed periodically by the board of trustees and legal counsel.

Penland values its talented and hard-working employees. It's no secret that many people who work for nonprofits could make more money elsewhere, and that’s true for Penland. Our employees are dedicated people who provide extraordinary creative experiences for others.

It sounds like the studio coordinators have a pretty hard job. Has Penland done anything to address this? 
Yes. Coordinators have received several raises in the past five years in addition to annual merit increases. The studio manager works closely with coordinators to help them plan their work and balance their workload. A new position was created for a studio technician to help studio coordinators with complex technical and mechanical issues. Two coordinators are now assisted in the summer by full-time interns.

Also worth noting is the fact that coordinators represent Penland at national conferences in their medium at the school’s expense. This is part of their job, but it also benefits them professionally. They have free access to their studios during the 22 weeks each year when classes are not in session and at other times if it does not interfere with classes. Most of them take advantage of this to pursue their own work. And of course, coordinators receive the same benefits package as other employees. This is detailed above.

But yes, these are demanding jobs requiring technical, managerial, and interpersonal skills, and we're proud of the talented people who choose to do them.

There have been references to people being "blacklisted" by Penland. Is this true?
No, there is no Penland blacklist. It is true that since 2007, the person who has led the public airing of the current problem has regularly sent hostile and inflammatory communications to staff and board members, and the school has chosen not to have a professional relationship with him, but neither he nor anyone else has been banned from campus, and there have been no activities that could be called “blacklisting.”

The financial statements for Penland available online make it seem that the school has a lot of money. Isn't Penland a nonprofit?
There have been several postings of a Penland listing on the Guidestar website, which publishes information about nonprofits. The financial statement posted for Penland's 2011 fiscal year has generated some misunderstanding, because it appears to show that the school had a large amount of excess income for that year. What this statement does not show is that Penland is involved in a multi-year capital campaign and that almost every bit of the excess income shown on that statement is donor-restricted for specific scholarships, endowments, buildings, and infrastructure improvements that will benefit generations of future Penland students.

Because that statement doesn’t distinguish between operating and capital funds, it doesn’t show that in fiscal year 2011, Penland's annual operating income--the money available to the school to pay for salaries, instructor stipends, food, utilities, etc.--only slightly exceeded its operating expenses. Some people have also seen reports of total assets and thought that this number is some indication of income. Total assets includes the value everything that belongs to the school: 420 acres of land, 56 buildings, furnishings, computers, studio equipment, etc.

It's worth noting that Penland's income from tuition, room, and board paid by students covers less than half the cost of running the school, with the balance coming primarily from annual fundraising and endowments. And last year, 49% of Penland’s students attended with some form of financial assistance.

Penland’s relationship with artists.
Although the problem under discussion had to do with the school’s fiscal relationship with its employees, much of the public airing of it has been framed as a conflict between Penland and artists. This has been especially troubling because artists--whether they are professional, amateur, or aspiring--are the reason Penland exists.

Penland provides artists with education, residencies, teaching opportunities, the unique Core Fellowship Program, exposure for their work through the Annual Benefit Auction, and promotion and sale of their work through the Penland Gallery. Last year, Penland provided 262 work-study scholarships, 60 full scholarships, 157 studio assistantships, and 82 stand-by discounts, and thirty more full scholarships were made possible through partnerships developed with other institutions. The Penland Gallery director advises artists on marketing and prices and frequently recommends artists to other galleries and institutions. The gallery attracts thousands of visitors each year and provides them with information about artists in the surrounding area, encouraaing traffic to local studios. Penland also provides training and support for teaching artists who use their talents to benefit children in local schools.

For their part, artists, through donations of work to our auctions, contributions to our annual fund and capital campaigns, volunteering, taking classes, being studio assistants, and, of course, the creative contributions they make as teachers, advisors, board members, and staff members, are Penland’s most important and passionate supporters.

Penland School’s relationship with artists is a mutually beneficial give and take: no artists, no Penland. It’s that simple