The DOL's Final Overtime Rule: Survival Strategies For Nonprofit Organizations

Under the Department of Labor's final overtime rule, the threshold salary level for white collar exempt employees will increase from the current $455 per week to $913 per week ($47,476 per annum) on December 1, 2016. The new rule also increases the exempt annual salary threshold for highly compensated employees from $100,000 to $134,004. These salary thresholds will automatically adjust every three years, making it likely that the white collar exempt employee salary threshold will rise above $50,000 in a few short years.

Although there had been speculation that the final rule might exempt higher education and nonprofit employers from the full impact of these changes, the new rule contains no such relief. Nonprofit organizations, particularly those with government contracts that require them to provide services at a fixed cost, will face difficult choices in managing their workforce under the new framework. It is critical that nonprofit organizations start planning now for the December 1 deadline.

Such planning should include: (1) an analysis of your organization and workforce to confirm which employees are subject to FLSA requirements; (2) an evaluation of the current job duties, workload and hours worked for covered employees; and (3) the development and implementation of a compliance plan.

FSLA Coverage

A nonprofit employer is a covered employer under the FLSA if it is an enterprise engaged in commerce or if its employees are individually engaged in commerce.

Enterprise coverage. A nonprofit organization is a not covered enterprise under the FLSA unless its annual gross volume of sales made or business done is at least $500,000. The FLSA defines an "enterprise" as "the related activities performed . . . by any person or persons for a common business purpose." 29 U.S.C. § 203(r)(1). For nonprofit organizations, enterprise coverage only applies to the activities performed for a commercial business purpose (e.g., operating a gift shop) and income from contributions, membership fees, many dues, and donations are not counted toward the $500,000 threshold. Nonprofit organizations that do not "engage in ordinary commercial activities" or "serve the general public in competition with ordinary commercial enterprises" do not typically qualify as enterprises under the FLSA. See Tony & Susan Alamo Found. v. Sec'y of Labor, 471 U.S. 290, 297-99 (1985).

Certain categories of entities, however, are specifically identified as covered enterprises under...