NONPROFIT RESPONSE TO NEW OVERTIME RULE

By May 23, 2016Blog

Late last week the U.S. Department of Labor released its final rule updating the requirements for employees to qualify for exemptions from overtime under the Fair Labor Standards Act (FLSA). A quick synopsis of the rule can be found here. It is set to take effect December 1, 2016.

Industry and labor groups came down predictably for and against the update. Nonprofit advocacy groups, it seems, attempted to voice balanced praise and concerns. Many echoed that the updates could create difficulties for some employers while possibly improving the pay of struggling workers. But not all nonprofit comments on the DOL announcement took a “balanced” tone.

In an Op-Ed, Godfrey Wood, executive director of Habitat for Humanity for Greater Portland, Maine voiced major concerns about the DOL action.

As a nonprofit dedicating our resources to serving Maine families, we typically cannot afford to pay high salaries such as other large businesses in more urban parts of the country, but we do offer our employees competitive pay and benefits. Furthermore, our employees choose this line of work because they spend each day helping others to reach their fullest potential. And at the end of the day, they head home knowing that their work has made a difference.

Wood’s penned reaction to DOL was so strong that is caused Andy Schmidt to type-up a response in The Nonprofit Quarterly. (Schmidt is the founder of Towards Justice, a public interest law firm in Denver.)

But this makes no sense to me. All Habitat has to do is let their salaried employees go home after 40 hours in the week if they can’t pay them $47,500. They can continue to pay them a salary, and they can just adjust slightly in the weeks that emergencies cause them to work overtime.

This is great news for the very people the [nonprofit] sector is supposed to help. Those assistant managers at the fast food restaurant will either receive a higher salary, or be able to go home to their families sooner. It also means that they will have more regular schedules because the bosses have an incentive to avoid making those workers stay a little late.

The United States Public Interest Research Group also release a statement indicating they will have difficulty functioning under the DOL final rule.

Organizations like ours rely on small donations from individuals to pay the bills. We can’t expect those individuals to double the amount they donate. Rather, to cover higher staffing costs forced upon us under the rule, we will be forced to hire fewer staff and limit the hours those staff can work – all while the well-funded special interests that we’re up against will simply spend more.

Independent Sector released a statement that appears to indicate they see the need for overtime changes, but also believe the changes as published might cause nonprofits a lot of pain to implement.

While IS believes that employees should be paid a living wage and similarly supports an increase in the salary threshold for eligibility to receive overtime compensation, there are many concerns that IS and others in the nonprofit sector have regarding this rule. As expressed in [our] submitted comments, IS is troubled by the [DOL’s] lack of engagement with nonprofit organizations in developing its proposed new overtime rule, and urged four specific revisions to the plan before it is implemented: moving to a phased-in implementation; revising the terms of federal grants and contracts with nonprofit organizations; allowing for regional market differences to the proposed salary threshold; and implementing an open process for any changes to the duties tests.

So it appears many nonprofits are stuck in an uncomfortable reality that many of the constituencies they serve could use higher wages. However, they themselves – like some for-profit businesses – have limited resources to increase the pay of their own employees.

501(c) Services will conduct a free webcast on this issue Tuesday, July 19th. Register to attend here. We will break down what the new rule means to your nonprofit and offer guidance for measuring its possible impact.

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