Posted on December 23, 2015

How Nonprofit Organizations Can Prepare for DOL-Proposed Overtime Regulations

The Department of Labor (DOL)’s proposed overtime regulations are causing quite the stir in workplaces across the country and the nonprofit community is no exception. While we’ve previously outlined the steps all businesses can take to prepare, let’s look more closely at how the proposed changes could impact nonprofit organizations and the steps nonprofits can take to overcome potential challenges.

The majority of nonprofits are lower-wage employers, and the proposed increase in the minimum salary level could move a significant amount of employees into the overtime-eligible category. Because many employees may fall well below the new proposed minimum salary level of $47,476 annually, nonprofits may be faced with difficult decisions that could impact their budgets and missions if the proposed regulations are implemented in their current form. For this reason, The National Council of Nonprofits encouraged all nonprofit organizations to conduct a mission-based analysis of the potential regulations and determine the implications the increase could have on their operations, resources, and staffing.

While there’s no question the proposed regulations will have an impact on the nonprofit community, they may not affect every nonprofit organization. Nonprofits can be covered if they make a certain amount of revenue, but even nonprofits who don’t meet the revenue threshold can still have individual employees who are covered by the FLSA. Nonprofit organizations with a sales or revenue volume below $500,000 annually (based only on activities performed for a business purpose) would not be covered by the proposed regulatory changes as an enterprise. But even if a nonprofit is not a covered enterprise, individual employees can still be covered under the FLSA and, by extension, the new proposed regulations, if the employees’ job duties require them to engage in interstate commerce (i.e, making out-of-state phone calls, mailing information or conducting business via U.S. mail, ordering or receiving goods from an out-of-state supplier, handling credit card transitions, or performing the accounting or bookkeeping for such activities). For a complete discussion of coverage issues related to nonprofits, visit the DOL's blog.

At the end of the day, until final regulations are implemented, nonprofits are faced with uncertainty and should begin to prepare for the impact the new regulations could have on their day-to-day operations. How should they prepare?

Utilize volunteers

Although nonprofits may not substitute “volunteers” for employees to perform the same work, it never hurts to form relationships with schools or volunteer organizations in your area to help your charitable mission by incorporating volunteers into your activities. Ensure that the work performed is truly volunteer work and not the work that would otherwise be performed by paid employees. To help develop your volunteer base, create an incentive program that recognizes top individuals for their service and commitment to your organization. Some examples include offering a recognition plaque at the end of the year for most hours volunteered or providing small rewards for their service. Finding individuals who have a common interest or appreciation for your mission is key. If there is any question, be sure to contact your legal counsel to ensure that your volunteers are not covered by federal and state wage and hour laws.

Prioritize tasks

Determine what areas of focus are most critical to your organization and prioritize the efforts of your staff. Setting the tone with strong leadership and clear direction will allow you and your staff to meet key objectives that help to achieve your mission.

Revamp your budgeting

To determine the financial impact the proposed regulations could have on your organization, develop an analysis based on increased labor costs. One potential way to help offset costs is to increase your fundraising efforts. Also consider that many grants are written for nonprofits with salaries included as costs. Discuss with grantors the possibility that your organization will be unable to accommodate increased labor costs. The sooner you can discuss potential hurdles, the more these individuals can prepare for increased funding.

Learn more tips to help your organization prepare by downloading Paycor’s 7 Step Guide to Mastering the Proposed White Collar Exemptions.

Sources: Nonprofit Quarterly and Helios HR

This content is intended for educational purposes only and should not be considered legal advice.

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