UPDATE (11.23.2016): One week before its anticipated implementation, a federal judge blocked the Department of Labor’s (DOL) updated overtime rules that were supposed to take effect on December 1, 2016.
On Tuesday, November 22, U.S. District Judge Amos Mazzant (Eastern District of Texas) issued a preliminary injunction that halts the DOL’s new regulation. This decision means the new overtime rules will not be implemented on Dec. 1.
Read our full statement on this important development. Please follow the National Council of Nonprofits (@NatlCouncilNPs) or 501 Commons on social media (@501Commons) for timely updates.
In May 2016, the U.S. Department of Labor (DOL) announced changes to rules regarding overtime compensation. The new Fair Labor Standards Act (FLSA) regulations will affect many nonprofits.
The new FLSA rules update the salary and compensation levels needed for executive, administrative, and professional workers to be considered “exempt" from overtime. The new regulations will:
- Set the minimum salary level for full-time salaried workers to be exempt to $913 per week or $47,476 annually for a full-time worker. (Employees still have to meet the duties test addressed below.)
- Increase the salary level for someone to be considered an exempt "highly compensated employee" to $134,004. Employees paid at least this amount are exempt from overtime if they regularly perform at least one of the exempt duties DOL defines for executive, administrative, or professional employees.
- Additionally, the final rule allows employers to use nondiscretionary bonuses and incentive payments to satisfy up to 10 percent of the new standard salary level.
The new rule, which become effective December 1, 2016, also establishes a mechanism for automatically updating the salary and compensation levels every three years.
How your organization can adjust to the new overtime rules
Watch our FLSA webinar | How to decide if an employee meets the duties test | What options do you have to comply? | Are all nonprofits covered under FLSA? | How does the rule impact part-time workers? | Consulting and legal services | Additional resources | Need help?
Watch this webinar hosted by Nancy Kasmar at Compensation Connections LLC (a partner of our Statewide Nonprofit Resource Directory) discussing these new regulations in further detail. You can download the slides from the presentation.
Workers can only be considered exempt if they are paid a salary that meets the minimum level of $47,476 and they are engaged in duties of an executive, administrative or professional employee. (Professional includes creative and learned professional categories. There are some rules for computer professionals as well.)
You need to evaluate the duties of each employee you think should be exempt from overtime. For more information refer to Classifying Employees Correctly or reach out to us at firstname.lastname@example.org for help in evaluating your job positions.
If you have an employee who meets the exempt duties test and is paid a salary but is not currently paid $47,476 annually, you can:
- Increase their salary to at least the minimum level of $47,476 annually
- Keep them at their current salary (you do not have to make them hourly employees) but pay them overtime (time and a half) for any work they do beyond 40 hours a week.
If you are going to incur a lot of overtime costs, you may want to add staff to reduce your costs. You have to pay employees overtime when they work more than 40 hours a week even if you have told them not to work overtime.
Employees can still work flexible hours so an employee could, for example, work 40 hours in 4 days, or have a different start and end time every day, but any hours over 40 are paid as overtime.
You cannot use compensatory time for salaried employees instead of paying overtime. Only public agencies, such as state and local governments, are permitted to use compensatory time.
See Part III of the DOL special guidance for nonprofits for more information.
Watch this video to learn how Friends of the Children has adjusted for these new regulations.
Let's deal with application of FLSA to your organization (enterprise coverage) first.
- Providing temporary shelter;
- Providing clothing or food to homeless persons;
- Providing sexual assault, domestic violence, or other hotline counseling services; and
- Providing disaster relief provisions.
Now, determining if FLSA applies to your staff.
Please refer to Guidance for Non-Profit Organizations on Paying Overtime Under the Fair Labor Standards Act for more details or seek legal advice.
Click to download a helpful checklist that can help your nonprofit’s administrative team start planning for changes to the FLSA laws. You can also download an infographic that illustrates this process.
Download this workbook that can help you determine which employees are eligible for overtime pay.
Refer to this list of Frequently Asked Questions from our FLSA webinar.
The DOL created a video explaining the new overtime rules.
Contact us for an HR Quick Consult by sending your questions to email@example.com or filling out a Request for Assistance to get help in planning to implement the new rules. 501 Commons’ HR consultant will respond promptly.
Note that it may be important to seek legal counsel on this issue. Low budget organizations can contact Wayfind for assistance.