If you’re like most non-profit professionals, you weren’t paying attention earlier this month when the Department of Labor announced new rules that may soon apply to employees who are eligible for overtime pay. So what did they say and what does it mean for non-profit organizations? I’m so glad you asked! Here’s a quick overview.
The bottom line? Your organization should review its pay for exempt workers, and get ready to meet the new salary threshold that is 50% higher than current levels.
What’s the deal? There are many twists and turns to the story, but in short, there are two kinds of workers in the United States: those who are exempt from overtime pay, and those who are non-exempt. In 2016, the Department of Labor under President Obama proposed a major revision to the salary level that a worker must make to remain exempt from overtime pay. Although that proposal never took effect, the Department of Labor (now under President Trump, obvy) has issued its own rules to update the salary level involved. Same concept, but smaller proposed increase.
Exempt. What is that? Typically, people whose job descriptions are considered “white collar” (technically executive, administrative, and professional) are exempt from (and thus ineligible for) overtime pay. The assumption is that such people are highly compensated, and their salary is enough that they can be expected to work overtime without being paid 1.5 times their hourly rate. Since 2004, that minimum salary level has been $455/week or $23,660/year. There is general consensus that the level needed to be increased, and that’s what has been in process.
New salary level. As of today, the Department of Labor has officially published their proposed rule to update these salary levels. The public comment period will extend for 60 days, and then at some point thereafter the proposed rule may become a final rule, assuming of course that it’s not blocked by litigation. (The “final” rule issued by the Department of Labor in 2016 never took effect because it was blocked by court order.) The proposed rule would increase the minimum salary almost 50% to $679 per week or $35,308 per year.
Non-profit organizations. Some non-profits may feel the burden of complying with the Department of Labor rules, and so they may wonder if they apply at all? The short answer is likely to be yes. There is a legal test for whether companies are covered by these laws, and it can get somewhat complicated. Some non-profits that do their own analysis may even feel optimistic because they must have at least $500,000 in annual sales volume or business to be covered at the enterprise level, and any charitable activities or revenues do not count in the total. But there is another analysis that looks at the job activities of each individuals, and broadly, most individuals are covered. Anyone whose work involves “interstate commerce” will be covered by these overtime laws. And lately (last eighty years or so) courts have been extremely tolerant of any rational argument by the government that something is interstate commerce.
What to do? You could try arguing about the job description and activity of every employee on your team. And then you can try to build a system that provides eligible workers with the protections of the overtime pay rules, while leaving ineligible workers out of the mix. But you’d be creating an administrative nightmare while opening yourself up to legal challenges. Literally every time an employee picks up the phone to field an out-of-state call or helps with the processing of an out-of-state credit card transaction, they may have tipped into being covered by overtime rules. You’re far better off just accepting that these rules probably apply to everyone, and building a plan to comply with the rules.
Bonus point on volunteers. One more thing for non-profit professionals to keep in mind. It’s great to have volunteers, and they are generally not paid and thus also not regarded as being part of the overtime pay situation. But it’s important to keep your volunteer activities separate from work your paid employees are doing. Don’t assign volunteers to do work that your employees are doing so you can avoid paying your employees overtime. And definitely don’t ask your paid employees to “volunteer” their time to keep going after a full work week. Those strategies will not serve you well.
Still have questions? This stuff can be confusing. Let me know what’s on your mind, and we’ll work it through together.