Our continued work with thousands of 501(c)(3) nonprofits has put us on the front lines of the recent changes to the Fair Labor Standards Act (FLSA) which exempt executive, administrative, and professional employees from its minimum wage and overtime requirements. The new rule goes into effect on December 1, 2016.
Read our complete coverage:
- FLSA Overtime Rule Set to Update December 1, 2016
- Nonprofit Response to New Overtime Rule
- More Thoughts on Nonprofits and the New Overtime Rule
- WEBCAST: Nonprofit Options to New Overtime Rule (Now On-Demand)
The final rule focuses primarily on updating the salary and compensation levels needed for executive, administrative, and professional employees to be exempt. Here are the key provisions:
- Sets the standard salary level at $913 per week or $47,476 annually;
- Sets the total annual compensation requirement for highly compensated employees subject to a minimal duties test to $134,004;
- Establishes a mechanism for automatically updating the salary compensation levels every three years; and
- Allows employers to use non-discretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the new standard salary level.
The release of the overtime rule change has caused our Nonprofit HR Hotline (a resource free to participants of the 501(c) Agencies Trust) to ring and ring. And our recent webcast, Nonprofit Options to New Overtime Rule (watch it on-demand), had hundreds of questions submitted during its 60 minutes.
Using all of this interaction with our nonprofit clients and associates, we have compiled an FLSA White Collar Overtime Rule Nonprofit FAQ.
You can download that FAQ here. Below is a sample of its contents.
Question: What is the new rule and when does it go into effect?
Answer: The “new rule” is simply the same rule with an increase in one part (minimum salary) of a three-part test to determine which positions qualify as exempt (excluded) from overtime and other protections under the Federal Labor Standards Act (FLSA). The increase in the minimum salary has more than doubled, from $23,600 to $47,476 nationwide. This is often referred to as the “white collar” exemption. This rule goes into effect December 1, 2016.
Question: Do nonprofits have an exemption from the increased salary threshold?
Answer: Don’t bet on it! Neither the FLSA nor the Department of Labor’s (DOL) regulations provide an exemption from overtime requirements for nonprofit organizations. According to the DOL, nonprofit charitable organizations are not covered enterprises under the FLSA unless they engage in ordinary commercial activities that result in a sufficient amount of sales made or business done, such as operating a gift shop or providing veterinary services for a fee. However, employees of employers that are not covered by the FLSA on an enterprise basis may still be entitled to its protections if they are individually engaged in interstate commerce.
Question: If we pay an employee more than $47,476 a year, can we automatically assume they are exempt from overtime?
Answer: No. In order for a position to qualify for an exemption, three test areas must be met. (ALL of the tests!)
- The position must be paid a salary.
- The position must be paid at least the minimum salary per federal or state law (whichever is most beneficial to the employee).
- The position must meet the job duties test (each exemption has different duties to qualify).
Participants of the 501(c) Agencies Trust can contact HR Services for further assistance.