Overtime Pay Regulations

Nonprofit Operations

The Issue

On December 1, 2016, new Department of Labor (DOL) regulations were set to go into effect for overtime pay related to Fair Labor Standards Act (FLSA).

However, in November 2016, a federal judge ruled to block the implementation of these new rules. This ruling remains in effect and employers may choose to adopt the new regulations or continue operating under the prior system.

Impact of the 2016 Final Rules
The final rule increases the salary threshold from $23,660 to $47,476 per year, or from $455 to $913 per week (updated every three years). This is threshold is based on the 40th percentile of salaries in the lowest income Census region (south). The threshold for highly compensated employees will increase from $100,000 to $134,004 per year. The rule did not include any changes to the “duties” test, but bonus and incentive payments will count toward 10 percent of the new salary level. Learn more in the IS summary about the final rule.

DOL has provided a nonprofit specific fact sheet and guidance that includes more information on how the overtime changes will impact nonprofit employers. The White House also released their own fact sheet.

In 2015, Independent Sector joined 146 other nonprofit organizations to submit comments asking for substantial revisions to proposed regulations. While IS believes that employees should be paid a living wage and similarly supports an increase in the salary threshold for eligibility to receive overtime compensation, there were many concerns that IS and others in the nonprofit sector had regarding the rule. As expressed in the submitted comments, IS is troubled by the agency’s lack of engagement with nonprofit organizations in developing its proposed new overtime rule, and urged four specific revisions to the plan before it is implemented:

  • Moving to a phased-in implementation;
  • Revising the terms of federal grants and contracts with nonprofit organizations;
  • Allowing for regional market differences to the proposed salary threshold; and
  • Implementing an open process for any changes to the duties tests.

Independent Sector is actively working to educate the sector on compliance and will continue to do so when the new rules take effect.


Urgent Issue
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