Changing Overtime Rule Could Impact Budgets

August 10, 2015       The NonProfit Times      

Nonprofit managers might need to budget more for salaried employees if a proposed rule to extend overtime eligibility is finalized. The new rule, announced recently by the U.S. Department of Labor (DoL), would amend the Fair Labor Standards Act (FLSA) to allow more salaried employees to be paid for work done beyond the standard 40-hour week.

 

This could potentially help nearly 5 million white-collar employees. Some nonprofit leaders are worried about the potential effect. “Organizations don’t have a lot of money. They have tight budgets,” said Jim Clarke, senior vice president for public policy at ASAE/The Center for Association Leadership. “This would be a significant change.”

 

The DoL is accepting public comment on the rule change until Sept. 4. The DoL might make modifications and then announce a final rule, taking effect 30 to 90 days from issuance in the Federal Register. The rule would take effect in 2016.

Christine Owens, director of the National Employment Law Project, she said that the rule could be adopted by the end of the year, for implementation by January 2016. However, others believe that is an aggressive timeline.

 

The current overtime rule allows any employee earning up to $23,660 or $455 per week and working more than 40 hours a week to be paid time-and-a-half. Created as part of the FLSA, the current rule was put in place to guarantee a minimum wage and limit the number of hours an employee would work without additional compensation. Part of the rule was to exclude white-collar employees since it was believed they were already reaping the benefits from a salaried position — such as job security, opportunities for advancement and more.

The new rule would more than double the threshold to $50,440 or $970 per week for salaried employees. This would also include yearly automatic increases. Hourly workers would still receive the same overtime benefits. The amendment to the rule would now guarantee salaried workers to make overtime pay if they earn less than the new salary threshold.

“For example, a convenience store manager, fast food assistant manager, or some office workers may be expected to work 50 or 60 hours a week or more, making less than the poverty level for a family of four, and not receive a dime of overtime pay,” according to a DoL statement explaining the rule. “Today’s proposed regulation is a critical first step toward ensuring that hard-working Americans are compensated fairly and have a chance to get ahead.”

To keep the rule current and eliminate the need to continually revisit this issue, the DoL is suggesting the implementation of yearly automated updates and increases. Previous to last month, the DoL had increased the salary level only seven times – in 1940, 1949, 1958, 1963, 1970, 1975, and 2004.

“The lapses between rulemakings have resulted in salary levels that are based on outdated salary data and thus ill-equipped to help employers assess which employees are unlikely to meet the duties tests for the exemptions,” according to the DoL statement.

A new way to keep the threshold updated has not been ironed out yet and the Department is still looking at options.

All employees are currently non-exempt unless they qualify for one of the few exemptions, which include being paid on a salary basis, being paid at least a fixed minimum salary per week, and meeting certain requirements as to their job duties.

The first criteria of salary basis will increase with the proposed threshold ($50,440 or $970 per week), increasing the number of people eligible for the exemptions.

“I think the exempt versus non-exempt and the change in the salary threshold will be a real problem for a number of organizations,” said Clarke.

ASAE represents 22,000 members and 11,000 organizations, many of which have already voiced concerns about the new rule. “The real change would be in the sense of potentially moving folks from exempt to non-exempt in terms of various times they are working,” Clarke said.

For example, employees at non-profits may not be able to attend an annual meeting, travel to conferences, work on government affairs, or many other things where they could gain more experience. “It’s about the experience and the work they learn,” Clarke said of employees. “What if they put an email curfew on organizations? If they are non-exempt, they couldn’t work after hours.”

For more information on the Labor Department’s Notice of Proposed Rulemaking, visit www.dol.gov/whd/overtime/NPRM2015.