1. David Heinen North Carolina Center for Nonprofits
Start Planning Now What Your Nonprofit Needs to Know About the New Overtime Rules
David Heinen
North Carolina Center for Nonprofits

2. Connect Learn Advocate
North Carolina Center for Nonprofits
Connect Learn Advocate

3. Important Disclaimers
North Carolina Center for Nonprofits
Important Disclaimers
If you can read this fine print, you are sitting too close to your screen!

4. Background information: Worker classification
North Carolina Center for Nonprofits
Background information: Worker classification

5. Employees vs. independent contractors
North Carolina Center for Nonprofits
Employees vs. independent contractors

6. Employees vs. independent contractors
North Carolina Center for Nonprofits
Employees vs. independent contractors
Behavioral control
Financial control
Relationship of the parties

7. Economic realities test
North Carolina Center for Nonprofits
Economic realities test
Is the work an integral part of the employer’s business?
Does the worker’s managerial skill affect the worker’s opportunity for profit or loss?

8. Economic realities test
North Carolina Center for Nonprofits
Economic realities test
How does the worker’s relative investment compare to the employer’s investment?
Does the work performed require special skill and initiative?

9. Economic realities test
North Carolina Center for Nonprofits
Economic realities test
Is the relationship between the worker and the employer permanent or indefinite?
What is the nature and degree of the employer’s control?

10. Fair Labor Standards Act
North Carolina Center for Nonprofits
Fair Labor Standards Act

11. Fair Labor Standards Act
North Carolina Center for Nonprofits
Fair Labor Standards Act
Minimum wage
Overtime pay for non-exempt employees
Travel time
Compensatory time
Equal pay for equal work

12. Fair Labor Standards Act
North Carolina Center for Nonprofits
Fair Labor Standards Act
Exemptions for executive, professional, and administrative staff
Paid on salary basis
Must be paid $455/week ($23,660 per year)
Must meet duties test
Exemption for highly-compensated employees

13. New overtime rules under FLSA
North Carolina Center for Nonprofits
New overtime rules under FLSA

14. New DOL overtime regulations – timeline
North Carolina Center for Nonprofits
New DOL overtime regulations – timeline
March 13, 2014
July 6, 2015
September 4, 2015
March 14, 2016
May 18, 2016
December 1, 2016

15. New DOL overtime regulations
North Carolina Center for Nonprofits
New DOL overtime regulations
Nonprofits’ typical feelings about the overtime rules are: Moral support But operational anxiety

16. New DOL overtime regulations
North Carolina Center for Nonprofits
New DOL overtime regulations
Raise salary threshold from $455 per week ($23,660 per year) to $913 per week ($47,476 per year)

17. New DOL overtime regulations
North Carolina Center for Nonprofits
New DOL overtime regulations
Raise salary threshold for highly-compensated employees from $100,000 per year to $134,004 per year

18. New DOL overtime regulations
North Carolina Center for Nonprofits
New DOL overtime regulations
Automatically adjust for inflation
Salary thresholds last adjusted in 2004
Will be adjusted every three years in the future
So salary threshold will be over $50,000 in 2020

19. New DOL overtime regulations
North Carolina Center for Nonprofits
New DOL overtime regulations
Effective date: December 1, 2016

20. New DOL overtime regulations
North Carolina Center for Nonprofits
New DOL overtime regulations
Duties test: Unchanged (More on that in a few minutes)

21. North Carolina law (and why it matters)
North Carolina Center for Nonprofits
North Carolina law (and why it matters)

22. Fair Labor Standards Act
North Carolina Center for Nonprofits
Fair Labor Standards Act
Basic question – Does FLSA apply?
Applies to employment that is for work in interstate commerce
Interstate commerce can be met by:
Enterprise coverage
Individual coverage

23. Fair Labor Standards Act
North Carolina Center for Nonprofits
Fair Labor Standards Act
Enterprise coverage
Applies to:
Annual sales or business of $500,000 or more
Hospitals, medical or nursing care for residents, schools and preschools
Recent case law suggests that many nonprofit activities don’t meet this test
DOL has said that nonprofit activities that aren’t business-like don’t count for the $500,000 threshold

24. Fair Labor Standards Act
North Carolina Center for Nonprofits
Fair Labor Standards Act
Individual coverage
Applies when an employee is regularly engaged in interstate commerce
Interstate commerce is defined broadly
Mailing, credit cards, sales, interstate phone calls or
Occasionally doing these activities for an insubstantial amount of time doesn’t count

25. Fair Labor Standards Act
North Carolina Center for Nonprofits
Fair Labor Standards Act
What if neither enterprise nor individual coverage applies?
N.C. Wage and Hour Act fills in this gap
Incorporates definitions for overtime exemptions from FLSA regulations
Limited exceptions for actors and for outdoor theatre production staff

26. North Carolina Center for Nonprofits
Duties tests

27. Fair Labor Standards Act
North Carolina Center for Nonprofits
Fair Labor Standards Act
Duties tests are unchanged by overtime rules . . .
. . . but be certain that exempt employees meet one of these tests
Warning: It appears that the regulations and fact sheets about the duties tests were written by lawyers!
Further clarification on how these apply to nonprofit employees would be welcome

28. Fair Labor Standards Act
North Carolina Center for Nonprofits
Fair Labor Standards Act
Administrative employees
Primary duty is non-manual work
Exercise discretion over work
Salary of $913/week or more ($47,476 per year)

29. Fair Labor Standards Act
North Carolina Center for Nonprofits
Fair Labor Standards Act
Administrative employees – some key quotes:
“Directly related to management or general business operations”
“Exercise of discretion and independent judgment with respect to matters of significance”

30. Fair Labor Standards Act
North Carolina Center for Nonprofits
Fair Labor Standards Act
Executive employees
Primary duties are managerial duties of organization
Supervision of 2+ FTE
Authority to hire/fire
Salary of $913/week or more ($47,476 per year)

31. Fair Labor Standards Act
North Carolina Center for Nonprofits
Fair Labor Standards Act
Professional employees
Primary duty is related to a learned profession or creative profession
Salary of $913/week or more ($47,476 per year)
With a few important exceptions, including teachers, doctors, and lawyers

32. Fair Labor Standards Act
North Carolina Center for Nonprofits
Fair Labor Standards Act
Professional employees – some key quotes:
“Learned professional”
Advanced knowledge that is predominantly intellectual in character . . .
. . . in a field of science or learning
. . . customarily acquired by a prolonged course of specialized intellectual instruction

33. Fair Labor Standards Act
North Carolina Center for Nonprofits
Fair Labor Standards Act
Professional employees – some key quotes:
“Creative professional”
Performance of work requiring invention, imagination, originality, or talent
In a recognized field of artistic or creative endeavor

34. Fair Labor Standards Act
North Carolina Center for Nonprofits
Fair Labor Standards Act
Professional employees – some key quotes:
“Teacher”
Regular classroom teachers
Pre-K teachers
Some specialized instructors
Some academic administrative personnel

35. Compliance options for nonprofits
North Carolina Center for Nonprofits
Compliance options for nonprofits

36. New DOL overtime regulations
North Carolina Center for Nonprofits
New DOL overtime regulations
Potential impact on N.C. nonprofits
More employees would be entitled to overtime if they work 40+ hours per week
New threshold is above annual average nonprofit wages in 94 of 100 counties in North Carolina
Could raise wages or reduce hours for many people served by nonprofits

37. New DOL overtime regulations
North Carolina Center for Nonprofits
New DOL overtime regulations
Options for nonprofits with affected employees (official DOL recommendations)
Raising salaries to remain above thresholds
Paying overtime above a salary
Consider the fluctuating workweek method
Reorganize workloads or adjust schedules
Adjust wages so you are paying the same amount after the rule changes

38. New DOL overtime regulations
North Carolina Center for Nonprofits
New DOL overtime regulations
Answers to some common nonprofit questions
If staff will be converted to non-exempt, do they need to be paid on an hourly basis?
No, it is permissible to pay salary to non-exempt staff (but you still need to track hours to pay overtime for hours worked over 40 per week)

39. New DOL overtime regulations
North Carolina Center for Nonprofits
New DOL overtime regulations
Answers to some common nonprofit questions
If our nonprofit’s workweek is 35 hours per week, do we need to pay overtime when non-exempt staff work 36+ hours in a week?
No, regardless of how you define your work week, you don’t need to pay overtime until workers have exceeded 40 hours in a work week

40. New DOL overtime regulations
North Carolina Center for Nonprofits
New DOL overtime regulations
Answers to some common nonprofit questions
Some of our nonprofits employees work two different jobs with two different rates of pay. How do we calculate overtime?
The regular rate of pay for each week is the weighted average of the rate of pay for each position. Overtime is calculated as 1 ½ times that weighted average.

41. New DOL overtime regulations
North Carolina Center for Nonprofits
New DOL overtime regulations
Answers to some common nonprofit questions
Isn’t Congress considering legislation to delay the implementation of the overtime rules?
Yes.
So how likely is that to be enacted?

42. New DOL overtime regulations
North Carolina Center for Nonprofits
New DOL overtime regulations
Options for nonprofits with affected employees (NOT the official DOL recommendations)
Limiting the number of hours staff can work
Considering how you define your work week
Expect exempt staff to work more
Make lunch breaks unpaid

43. New DOL overtime regulations
North Carolina Center for Nonprofits
New DOL overtime regulations
Less desirable options that some nonprofits are considering
Replacing some full-time workers with part-time staff or contractors
Limiting telecommuting
Reducing employee benefits
Eliminating or reducing some programs and services
Eliminating some fundraising events

44. New DOL overtime regulations
North Carolina Center for Nonprofits
New DOL overtime regulations
A possible better option for some nonprofits
Renegotiation government grants and contracts to pay more to additional labor costs
Short-term additional support from private funders
Why are you laughing?

45. New DOL overtime regulations
North Carolina Center for Nonprofits
New DOL overtime regulations
What you can do (math assignment)
Will your exempt employees still be exempt if and when the DOL proposed regulations take effect?
How many hours per week are they currently working?
Does it make more sense to raise wages or pay time- and-a-half? Or do something else?

46. New DOL overtime regulations
North Carolina Center for Nonprofits
New DOL overtime regulations
What you can do (reading and writing assignment)
Explain to affected employees the reason for changes in their classification, pay, or work hours.
Make necessary changes to your personnel policies.
Talk with your funders.
Let the Center know what actions you are taking.

47. New DOL overtime regulations
North Carolina Center for Nonprofits
New DOL overtime regulations
Nonprofits’ typical feelings about the overtime rules are: Moral support But operational anxiety

48. For more information North Carolina Center for Nonprofits
@ncnonprofits
David Heinen
Vice President for Public Policy and Advocacy
@drheinen