Update on Overtime Rules
The Fair Labor Standards Act (FLSA) overtime rule is a federal rule that applies to most nonporfits. In 2016 the Department of Labor (DOL) issued new rules for overtime pay. These rules were challenged in court and an injunction is currently in place that blocks implementation of the new wage levels and eligibility provisions of the 2016 rules. If the courts rule that the 2016 rules should stand they could be reinstated with a requirement that they be implemented immediately. Please follow the National Council of Nonprofits (@NatlCouncilNPs) and 501 Commons on social media (@501Commons) for timely updates.
While the court case has been going on, the Trump Administration's DOL published a Request for Information (RFI), Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees. The RFI solicited feedback on questions related to the salary level test, the duties test, inclusion of non-discretionary bonuses and incentive payment, and automatic updating of the salary level tests. During the 60-day comment period that ended on September 25, 2017 over 140,500 comments were made to the RFI.
It is anticipated that the DOL will be proposing changes that would lower the pay thresholds so that employees could be exempt at a salary level lower than the $47,476 standard in the 2016 rules. There may be other changes introduced to the rules. Read our blog statement on the effort to overturn the overtime rules.
Your Current Obligations to Pay Overtime
While the rules are up in the air due to the court challenge, all organizations are required to determine if an employee is eligible for overtime based on the duties test and current salary levels. The Department of Labor Employment Law Guide-Minimum Wage and Overtime Pay provides an overview of these laws. Also visit Overtime Laws in the States to learn about the current rules in your state.
Workers can only be considered exempt if they are paid a salary above the required minimum level 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 email@example.com for help in evaluating your job positions.
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.
Need HR help?
Visit the Consultant Listings for recommended HR consultants and law firms in Northwest. Organizations anywhere can also contact 501 Commons for an HR Quick Consult by sending your questions to firstname.lastname@example.org or filling out a Request for Assistance to get help. A 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.
Resources related to the 2016 rule
Since we do not know if or when provisions of the 2016 rule might be implemented, we are keeping the resources 501 Commons and others created available below.
The 2016 FLSA rules (currently block by a court injunction) updated the salary and compensation levels needed for executive, administrative, and professional workers to be considered “exempt" from overtime. Provisions of the new regulation include:
- 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.
Note: Reports indicate that the Department of Labor will issue new rules that lower the thresholds so that employees could be exempt at a salary level lower than $47,476. There may be other changes to the rules at that time.
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.
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.
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.