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The Fair Labor Standards Act (FLSA) – Are Nonprofits Required to Pay Overtime?

New Overtime Rule Needs Your Attention

You may have seen or read about the ruling by the Department of Labor regarding minimum salaries for exemptions from overtime going into effect on December 1, 2016. This ruling may or may not affect you, your center, or your employees; we thought it would be a good idea to give you some information and a link to learn more.

First, let’s define our terms:

Exempt – If you are paying an employee a set amount, no matter how many hours in a week they work, they have been classified as exempt by someone at some point in time (or their job has been). The link at the end of this article will lead you to the “tests” to help you make sure your exempt employees are truly eligible to be exempt or if they should be non-exempt, hourly wage earners.

Non-exempt – This refers to a wage-earning employee. They are paid X dollars per hour and, if they work more than 40 hours per week, they must be paid overtime. Please note that minimum wage varies from state to state; please be sure you are meeting the required minimum wage for your area.

There is no nonprofit exception to the new rule. This means nonprofits are subject to the same regulations as any other business.

The new rule is this:
 
As of December 1, 2016, the minimum salary for exempt employees goes up to $47,476 from $23,660, and there will be an automatic increase every three years. This means that if you have exempt, salaried employees, they must make at least $47,476 per year starting December 1.

There are a few possibilities out there to change this however, do not count on them happening in time to stop the December 1st deadline:

The House passed the Regulatory Relief for Small Businesses, Schools, and Non-profits Act, delaying the change until June 1, 2017. It has not yet gone to the Senate for a vote.

The Overtime Reform and Enhancement Act (OREA) is in committee. It would incrementally phase in the new salary threshold over the next three years; $35,948 on December 1 and eliminate automatic updates to the salary threshold every three years.

The Congressional Review Act (depends on the outcome of the November elections).
Lawsuits filed on September 20, 2016 in 21 states stating that the new overtime rule is unconstitutional, is contrary to Congressional intent, and automatic increases violate the Administrative procedures Act.

The bottom line is that each business, each employer, must look at the criteria for possible exemption from FLSA regulations (both for minimum wage and exempt/non-exempt status). The burden of proof lies with the employer for determining and defending employee status. Make sure your job descriptions reflect “exempt” or “non-exempt” status for the position and include words used in exemption tests for your exempt employees.

Click here to learn more.

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