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Exploring Overtime Expansion: Nonprofits

The information in this blog post refers to the proposed and final rules published by the U.S. Department of Labor in 2015-2016. To see the most recent information, click here.

The Department of Labor’s new overtime rule is likely to extend overtime protections to millions of white-collar workers beginning Dec. 1, 2016. How will it affect nonprofits?

Ultimately, the new rule did not change how the Fair Labor Standards Act (FLSA) applies to nonprofits, outside of the salary threshold.

What the FLSA says about nonprofits

Currently, the provisions of the FLSA cover some nonprofit employees, but not others. Employees of nonprofits are covered by the FLSA, and are likely to be affected by the new rule if:

  • The organization makes an “annual gross volume of sales made or business done of at least $500,000.” Note that income from contributions and donations, when used to further charitable activities, do not count toward that number.
  • The employee is “individually engaged in interstate commerce or the production of goods for interstate commerce,” which include tasks like making/receiving interstate telephone calls, shipping materials to another state and transporting persons or property across state lines.

Why your employees’ duties matter

If your organization has “an annual gross volume of sales made or business done of at least $500,000,” the law considers your nonprofit a “covered enterprise.” But that doesn’t necessarily mean that all of your employees are covered under the FLSA. Enterprise coverage applies only to duties employees perform for “a business purpose.”

For example, a nonprofit animal protection organization, with an annual gross volume of sales made or business done of at least $500,000, rescues abandoned pets and provides them shelter and veterinary care for free. The same organization sells pet products through an online store. The FLSA and the proposed rule would cover duties that supported the online store, not those duties related to the rescue and care of abandoned pets.

What about volunteers?

Typically, volunteers are not covered by the FLSA, and as a result, would not be subject to the proposed rule. But of course, the FLSA has specific guidance on the type of work bona fide volunteers can – and cannot – perform.

Generally, if a worker has “volunteered” to work in a commercial activity, or perform work that would otherwise be performed by regular employees, the law does not consider him or her as a volunteer, so the proposed rule would apply. If a paid employee volunteers to provide the same type of services to their nonprofit they’re employed to provide, that work must be included in the employees’ hours worked calculations.

What proposed overtime expansion looks like for nonprofits

If your organization is considered a covered enterprise, any employee who engages in “commercial activities for a business purpose” and makes less than $913 per week ($47,476 per year), would be eligible to receive overtime under the new rule.

Overtime expansion could represent substantial costs for your nonprofit. You might consider evaluating your workforce now to identify which employees are close to the new threshold and how many overtime hours those employees currently work.

A robust human capital management system makes it easy to gather such information, implement changes and protect your budget from increased labor costs and regulatory changes. This leaves you the time, energy and resources you need to achieve your organization’s true mission, regardless of the labor law climate.

The content of this blog is intended to keep interested parties informed of legal and industry developments for educational purposes only.  It is not intended as legal opinion or tax advice and should not be regarded as a substitute for legal or tax advice.


U.S. Department of Labor, Wage and Hour Division: Proposed Rule and Request for Comments: Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees

U.S. Department of Labor, Wage and Hour Division: Fact Sheet #14A: Non-Profit Organizations and the Fair Labor Standards Act (FLSA)

U.S. Department of Labor, Wage and Hour Division, Opinion Letters – FLSA: FLSA2005-33