Nonprofits and the New Overtime Rule

June 22, 2016

Nonprofits and the New Overtime Rule

If you are a CEO, CFO, or human resources professional, you have probably heard about the new overtime rule that was recently announced. Attorney Todd McKee of McKenzie Laird PLLC recently led a discussion of the new rule at CNM's June CEO Conversations.

Click here to view Todd's presentation, and find the read his template job description on the Links page here.


Below, Todd answers the questions CNM members asked at the CEO Conversations session, as well as other questions he has received:

1. Does receipt of federal grant dollars automatically render the nonprofit covered under the FLSA?

No, there is no such automatic rule. Furthermore, the funds received by the nonprofit should not count towards the $500,000 threshold of Enterprise Coverage. 

2. When calculating the salary level of the White Collar Exemption, do you consider the calendar year or nonprofit’s fiscal year?

Although we discussed the new salary level in terms of annual compensation of $47,476, the real issue is weekly compensation of $913. As long as an employee makes $913 a week, she meets the salary level. So the issue of which type of year to “use” is moot. Remember, however, that up to 10% of an employee’s compensation can come from nondiscretionary bonuses if paid at least quarterly. The “quarter” can be any three month period set by the employer. So if an employee falls below the $913 level for one week, if she receives a bonus for that quarter that takes her total compensation level above $11,869 for the quarter ($47,476 ÷ 4), then she should meet the salary level requirement. 

3. Do fringe benefits such as insurance count towards the salary level criterion?

No, the DOL has stated, “The salary level does not include payments for medical, disability, or life insurance, or contributions to retirement plans or other fringe benefits.” The value of board or lodging is also excluded.

4. If employees whose religious vow of poverty takes them below the salary level, would they be non-exempt (i.e., eligible for overtime)?

Assuming that the nonprofit is covered by the FLSA, I am confident that an employee who refuses compensation that would meet the salary level criterion can waive overtime based upon a vow of poverty that results from a sincerely held religious belief. 

5. Can an employer pro rate a part-time employee’s salary to meet the salary level criterion for exemption?

No, if the part-time employee is not paid $913 a week, she does not meet the criterion for exemption.

6. For purposes of the teacher exemption, what is an educational establishment?

The regulations define it as “an elementary or secondary school system, an institution of higher education or other educational institution.” 

7. Can other employees of a school fall under the “teacher exemption”?

Yes, school administrators can be exempt if they perform academic functions as opposed to business functions and meet the white collar salary level or be paid at least what an entry level teacher is paid. The DOL states as examples: “Department heads, academic counselors and advisors, intervention specialists who must be available to respond to student academic issues, and other employees with similar responsibilities. For example, academic counselors who perform work such as administering school testing programs, assisting students with academic problems, and advising students concerning degree requirements would satisfy the duties test for this exemption.” The key is the administrator has contact with students regarding academic matters.

8. Are outpatient clinics or health centers covered under FLSA in the same way as a hospital would be?

No, the DOL states “the term ‘hospital’ refers to those establishments commonly known as hospitals which primarily engaged in the offering of medical and surgical services to patients who generally remain at the establishments overnight, for several days, or for extended periods. Clinics and dispensaries are not included within the term ‘hospital’ unless operated by a hospital in the hospital establishment.”

9. An employee is on-call on weekends to receive calls from clients who may need our services during the weekend. Is this compensable time?

An employee who is required to remain on call on the employer's premises is working while "on call." An employee who is required to remain on call at home, or who is allowed to leave a message where he/she can be reached, is not working (in most cases) while on call. However, additional constraints on the employee's freedom could require this time to be compensated.

10. How is travel treated for trips out-of-state for projects and conferences?

Travel away from home is clearly work time when it cuts across the employee's workday. The time is not only hours worked on regular working days during normal working hours but also during corresponding hours on nonworking days. As an enforcement policy the DOL will not consider as work time that time spent in travel away from home outside of regular working hours as a passenger on an airplane, train, boat, bus, or automobile.

11. How should we treat time for employees who are going to be on duty 24/7 for one week a year?

An employee required to be on duty for 24 hours or more may agree with the employer to exclude from hours worked bona fide regularly scheduled sleeping periods of not more than 8 hours, provided adequate sleeping facilities are furnished by the employer and the employee can usually enjoy an uninterrupted night's sleep.

12. We pay employees bimonthly. Do we need to switch to weekly?

No, overtime is determined on a weekly basis, but it can be paid pursuant to a bimonthly or biweekly pay cycle.

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