How the Proposed Changes to Overtime Will Impact Non-Profits

A Quick Review of the DOL Proposed Overtime Regulations

President Barack Obama issued a memorandum in March 2014 directing the Department of Labor (DOL) to consider how the white-collar overtime exemption under the Fair Labor Standards Act (FLSA), the statute which prescribes standards for minimum wage and overtime pay, could be simplified and updated.

In response, the DOL proposed in June 2015 key changes to the provisions for determining exemption from overtime by:

• Raising the standard minimum level for salaried workers from $455 per week ($23,660 per year) to $970 per week ($50,440 annually).
• Raising the standard salary minimum for highly compensated employees from $100,000 to $122,148 annually. This category in the regulations exempts employees from overtime if their total annual compensation exceeds a salary threshold level and they customarily and regularly perform at least one of the exempt duties or responsibilities of an executive, administrative, or professional employee.
• Implementing a mechanism for automatically updating these two minimum salary levels to adjust for inflation.

While these rules are not yet final and are not expected to be in place until next year, it is clear the direction in which the DOL is going: overtime will be available to many more American workers than it is today and organizations should get ready. And, while these rule changes apply to most sectors, the industries that will be hit hardest financially are those where salaries are lower than the new threshold, such as retail, hospitality, and nonprofits.

How to Avoid Potential Problems Unique to Non-Profit Employers

Helios HR recently co-hosted a Nonprofit Strategic Growth Forum for nonprofit executives from the DC metro area to discuss the proposed rule changes, and it is clear that for already resource-constrained nonprofits, the proposed rule change to the standard minimum salary threshold will bring many more challenges. At the Forum, we heard our nonprofit partners talk about how they intend to tackle some of these problems. The most important actions we heard nonprofits are taking is to determine the overall impact on culture, operations, resources, staffing, and above all, service to communities or constituent groups in need.

Non-Profits Should Consider Actions To:

• Educate funders and grantors about the rising level of labor costs. Many grants are written with salaries included as cost. With these changes, funders and grantors need to be aware that the cost of labor is probably going up and that most nonprofits are unable to absorb those costs on their own. Start having these conversations now so that contingencies can be made.
• Use volunteers. We heard how one nonprofit worked with various sister organizations to pool volunteers from their staffs collectively to spread out tasks during external meetings. Consider ways to include volunteers from universities, student and member chapters, or other organizations to create a symbiotic relationship. As long as the work is truly “volunteer” and not the actual work of a full-time employee, this may be a way to add resources to a nonprofit’s meetings. And remember, employees should never be permitted to volunteer “off the clock”.
• Prioritize critical tasks most central to the mission. Now is the time to think about what work is most urgent. Often, not everything that an organization does is absolutely mission-critical and identifying the most crucial tasks now will spark a planning process to relentlessly focus resources based on the highest-priority needs.
• Review policies for needed change. Many organizations provide “compensatory time” for employees who work over a weekend during member or fundraising meetings. Now, any nonexempt employee is not eligible for comp time. Instead, focus on what you can do, such as allowing work from home following a long working weekend. Another example is having a policy that requires employees to request to work overtime before it is worked as a way to manage the cost.

We understand that these are just a few of the possible challenges coming down the pike. For now, many of our non-profit clients are having us review their positions for proper FLSA classification as a start. The key is to begin your analysis now, clearly understand the changes coming, and brainstorm on ways to maintain your organization’s mission in the face of additional resource constraints.