The Fair Labor Standards Act overtime regulation updates are fast approaching – going into effect December 2016. Because this is such an important topic for nonprofits, our Forward Together bloggers will give it extensive attention in a series of posts leading up to implementation. Part I is an overview.
In mid-May, the Department of Labor (DoL) released a much anticipated update to the Fair Labor Standards Act (FLSA) that will significantly affect the American employment landscape – with expected significant impact on the nonprofit sector.
The FLSA was enacted in the 1930s as arguably the most important “New Deal” program President Franklin Roosevelt and a Democratic congress passed during the Great Depression.
Now, as President Obama’s second term winds down, the updated FLSA offers a significant revised deal that may affect approximately 4 million Americans who’re exempted from receiving overtime in their salaried roles, but find themselves working beyond the standard 40-hour workweek.
This key revision seeks to boost middle class wages, much like President Roosevelt originally envisioned.
Initially, the act’s impact helped fuel the remarkable rise of the American middle class that started during the booming WWII era. According to the Department of Labor, approximately 62 percent of salaried workers in 1975 were eligible for overtime pay. Today, that number has plummeted to just 8 percent, because of the current low threshold of $23,660 (annual salary for a full-year employee).
The new FSLA rules, applicable starting in December 2016, will dramatically raise the annual threshold salary amount to $47,476 – more than double the current threshold.
So, what does all of this mean for nonprofits? The FLSA changes have been anticipated since 2015 when the DoL floated early proposals. At that time, the National Council of Nonprofits encouraged all NPOs to comment on the proposal, and they rallied with resounding force. The Nonprofit Quarterly asserted that many of the 270,000+ comments were written by nonprofits in opposition.
Although the new salary threshold is actually lower than the initial proposal, it’s clear the revised FLSA will have a tremendous impact on the nonprofit sector. NPOs are scrambling to measure the expected impact on their organizations. The DoL even admits the sector may be unprepared, which led to its specific creation of the 10-page “guidance document.”
Here’s a quick overview of some key issues likely to affect nonprofits:
Most organizations haven’t had to worry about the intricacies of the FLSA, because of the low percent of salaried employees it impacts today.
Clarity on employment mix today:
How many salaried employees today actually work more than 40 hours per week consistently? Many of these employees don’t clock in or officially record their time. Going forward, expect more time tracking of an employee’s hours.
- Heavy grant reliant organizations: The FLSA is being enacted this December – but, nonprofits may be reliant on previously awarded grants that don’t increase funding automatically for situations like this.
- NPOs that rely on commercial activities like selling items: The FLSA already recognizes that many charitable activities should be exempted.
The opportunity for the DoL to interpret certain employee activities as being projected by the FLSA. With the higher salary threshold, duties will now be in the crosshairs for examination – and interpretation.