How the new overtime law could affect nonprofit organizations

The Department of Labor’s new proposed overtime law that will increase the overtime salary threshold from $23,660 to $50,440 is raising some eyebrows in the nonprofit community. Here’s some things your organization should know and some steps you can take to prepare.

Working overtime

Navigating the murky waters of exemption

Before determining how the law might affect nonprofits, it’s important to understand where they fall under the new rule. Plowing through the legal jargon to discover the nonprofit’s classification within FLSA’s proposed tenet is a little daunting so here’s the long and short of it ...

... According to the Department of Labor, “there are no exemptions for non-profit organizations under the FLSA or in the proposed rule.” And the rule “may impact non-profit organizations having an annual dollar volume of sales or business done of at least $500,000.”

What's being said

In a Chicago Tribune article, The Society for Human Resource Management had a few thoughts on the new proposed law, saying it would “affect nearly every employer in every industry and sector as well as disproportionately affect the non-profit and service sector industries…”

Some fear the new proposal will cause many nonprofit employers to cut workers or benefits to compensate for higher overtime costs. Michael Eastman, an employment lawyer with Norris, Tysse, Lampley & Lakis, LLP spoke out about the rule in the Wall Street Journal saying, “It will have a pretty tremendous impact, especially on smaller businesses and nonprofits”. He also believes it could discourage employers from offering flexible working arrangements.

Many NPOs fear the effects won’t stop at cutbacks and stricter working schedules. In a letter to Congressional Leaders Reid and Peilosi, Union Presidents of The International Brotherhood of Teamsters, UFCW, and UNITE-HERE expressed deep concern over the proposal indicating that the new overtime law could cause the Affordable Care Act to crumble since many employers are cutting back salaried employees’ hours and moving them to hourly status to save money. Union Leaders fear this action could cause employees to lose full-time benefits such as health care, impacting nonprofit health care companies who may choose to reduce subsidies and staff positions.

The debate & next steps

The battle over the positive and negative effects of the new overtime law continues to wage. While some feel it will cause employers to shift salaried workers to hourly status, essentially lowering their income and cutting their benefits, others feel it will create more jobs and higher paychecks for already hard working underpaid employees.

So, what should your nonprofit do to emerge unscathed on the other side of the overtime war?

  1. Know the law

There are several non-profit legal events, workshops, and webinars that can help your organization navigate through the legal maze of the new proposal and find out where you stand.

  1. Revamp your budgeting 

Adjusting your old budgeting procedures may help to compensate for any effects of the new ruling. It's important to have a solid financial plan in place, but remember that your nonprofit’s success will be driven more by good leadership rather than budgeting alone.

  1. Scale your fundraising efforts

Just because you’re adding to one area of your budget, it doesn’t mean you have to subtract quality from another. In the wake of laws like these, nonprofits should consider how they can bring balance to their fundraising efforts. It’s always important to audit the technology you use to fundraise. Be sure to search for overlaps in your software and services, eliminate them, and find more comprehensive solutions.

While many of the concerns about the new law are still hypothetical, one thing is clear, nonprofits should keep an eye on the news to determine how (or if!) the changes will affect their organization.

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