New Federal Overtime Rule

This Spring, the U.S Department of Labor (DOL) published new rules on overtime pay that have the potential to affect the costs and operations of nonprofit organizations. While not all aspects of the law have been made clear, the WVNPA, with help from the National Council of Nonprofits (NCN), will continue to keep you updated. Check back with us on this page and follow us on social media for the latest on these new rules.

What are the new regulations?  The Department of Labor’s (DOL) new overtime rule expands the number of employees who must be paid overtime under the federal wage and hour law by raising the salary threshold from below the poverty level to nearly $47,500 per year.

Is my nonprofit organization covered by this new rule? The answer is complicated and depends on where your employees perform their duties, the nature of your revenues, and the work that individual employees perform.

• In states like WV (where DOL regulations are not written into state law), nonprofit employers must calculate whether their commercial activities exceed $500,000. (“Commercial Activities” are defined as “activities such as operating a business, like a gift shop,” and do not count income used “in furtherance of charitable activities,” which might include contributions, donations, dues, etc.)
• If a nonprofit does breach this $500,000 threshold, they fall under “enterprise coverage,” meaning all of their employees will be covered by the new overtime rule. Important: Even if your organization does not exceed the threshold, some of your employees may still be entitled to “individual coverage” when their work activities cause them to engage in interstate commerce. Neither of these tests – for enterprise or individual coverage – is clear or well-understood as they apply to nonprofits. The Labor Department attempted to provide some insights by issuing Guidance for Nonprofits, but this remains a gray area in the law.

How will my organization pay for this? It is unknown where any extra money will come from to pay for increased costs.The Department has stated that it “is working to inform government and private funders of the Overtime Final Rule to encourage consideration of the changes effected by the rule and potential impact on non-profit grantees.” We do not yet know how foundations will respond.

So what should we do? It is the recommendation of the WVNPA, as well as the National Council of Nonprofits, that organizations should deal with the implications of this law sooner rather than later. The bottom line: chances of successfully fighting the law are slim, and the risks of ignoring the law could be perilous considering the DOL’s robust enforcement operation and the risk of private lawsuits.

Some tips from the National Council of Nonprofits (NCN) on dealing with the law:

• Consider your internal deadlines immediately rather than waiting for December 1. Nonprofits with budget years ending on June 30 will need to develop new budgets for the fiscal year beginning in six weeks that take these new changes into account. Nonprofits with budget years ending on December 31 have more time to adjust and plan for 2017.
• Determine whether your nonprofit is covered. We will continue to send out guidance as the law is made more clear, but in many cases, your nonprofit may need to consult local legal counsel in every state where it has employees. Be sure counsel is well versed not only in wage and hour law, but also in nonprofit law, culture, and operations.

Discover More Overtime Rule Resources here.