Why the new overtime rules are good for nonprofits and thus for our community


chihuahua-820085_960_720If you work in nonprofit in the US, you have heard that new federal overtime laws/rules are coming. They affect how we categorize the professionals in our sector—“Exempt” or “Non-Exempt”—and how we pay them, whether through set salaries or through hourly wages that include overtime for hours worked over 40. If reading that sentence makes you want to hyperventilate into a paper bag for a few minutes, you’re not alone. Many people are freaking out about these new laws and how to comply with them, because they take effect this coming December!

By the way, since this post may be long and kind of dry, I’m going to insert more pictures of baby animals than normal to motivate you to keep reading. The baby animals have nothing to do with the content of this post.

The Basics

Basically, to be considered Exempt starting in December, an employee must now be paid $47,476, which is double the current level of $23,660. If an employee is paid less than $47,476, they cannot be considered Exempt and must be paid overtime for any extra hours worked.  

Since I am not an expert on this subject, I checked in with colleagues and organizations who are better versed and will be quoting them heavily. I highly recommend you spend some time on this page, Adjusting to New Overtime Rules, by 501 Commons. It has work duties tests, a workbook to help you calculate whether to pay overtime or increase someone’s salary, a free recorded webinar training hosted by a compensation expert, a list of other resources, and FAQs.

The key points, says Nancy Long of 501 Commons, are:

  • “Most employees who are paid either hourly or on a salary below the threshold of $47,476 alpaca-1531980__340are eligible for overtime even if the organization does not have eligible revenues over $500,000.
  • “If you are not following the law, an employee can report you and you will have to pay fines and back wages. Not paying what someone legally deserves is wage theft and being a nonprofit is no excuse for stealing from your employees!
  • “Do the math! Raising someone’s salary above $47,476 if they are in a management role and are typically working overtime may save you money in the long run. (Use the overtime calculator and workbook.)”


The new requirements are going to present some challenges for many nonprofits. The ones that we can anticipate include:

  • Many people, including executive directors, are not making anywhere near $47,476. They often work way more than 40 hours a week. Now organizations must increase their salary to the new exemption level, or pay them overtime, which will be a significant financial burden on many nonprofits.
  • It may pose a challenge for many nonprofits who have programs in the evenings and weekends and overnight (foodbanks, shelters, taking kids camping, a fundraising event, etc.), which will incur overtime.
  • There will be less flexibility in how and when we do our work, as staff who were formerly piglet-1332259_960_720exempt but now non-exempt must keep track of their hours to avoid going overtime and over-budget. Many of us like our flexibility, as it compensates for the often low pay.
  • The re-categorization of status may affect team morale, as people may wonder why their position is not exempt whereas another position is. As one colleague puts it, “I am learning that there is some perceived status in having a salaried job as opposed to an hourly job.”
  • It may increase the burden on exempt staff, who may now have to take on duties of hourly staff to avoid paying overtime.

Funders’ responsibilities

Because we nonprofits cannot pass on these additional expenses on our clients, the way for-profits may be able to, it is critical that funders and donors understand these upcoming challenges and increase their support. And we nonprofits must be vocal advocates for additional funding and reasonable accommodations, such as writing letters to funders and lawmakers (here’s a letter template for you to customize and use). Funders in particular, we need your support in the following ways, as recommended by many of my colleagues, especially James Hong of the Vietnamese Friendship Association:

  • Check in with your grantees to see how they anticipate the laws will affect them and chihuahua-820087_960_720how they are doing. It’ll be nice to hear from you. Everyone is stressed, so maybe consider bringing grantees some mini-muffins.
  • Provide emergency funds. By mini-muffins, I mean cold, hard cash. Emergency funds will help nonprofits be able to buffer themselves as the new laws take effect.
  • Increase the level of funding in general. We need you to increase the level of investment, moving forward. Many nonprofit leaders are having even more night terrors than normal, thinking our budgets and all the upcoming challenges. Increase your pay-out rate, and increase your giving amount.
  • Work with grantees to re-calibrate expectations on services and outcomes. If you cannot, or will not, increase financial support, then you must understand that it is unrealistic to expect the same level of services and outcomes, given that most of us will have to cut down staff hours to keep our budgets in line. Help nonprofits figure out if they need to cut back a day of programming, or serve fewer clients, or both. This is not something any of us want, but we may have to do it if there are no additional revenues.
  • Prepare for sticker shock. As James says, “Funders should have internal discussions and prepare grant reviewers for these changes, particularly when evaluating budgets and budget proposals from organizations. We should prepare reviewers to be ready to see salaries for exempt staff at the $47,476 level and above, and not be shocked and give the applicant a lower score. We should create a dialogue where this becomes the new normal.”
  • Consider small, grassroots orgs led by people of color, women, communities of disabilities, rural communities, LGBTQ communities, and other marginalized people. Laws of this nature always disproportionately affect these communities, who will struggle even more than larger organizations that may have more reserve to weather the coming changes.
  • Convene meetings with other funders and with nonprofits. When there are serious changes, such as this one, funders can play an important role by serving as conveners and advocates. Get other funders to be aware of this issue. Get people to talk about these challenges and how to navigate them. It’ll make us all feel better to hear that funders are thinking about these changes and are actively working with other funders and nonprofits to make sure nonprofits and the communities we serve will be OK.

Shift in nonprofit culture

What we seriously need to discuss is the philosophical and cultural shift that we as a sector needs to make, in light of these new laws. Despite the challenges we will encounter, the new FLSA overtime law is good for the nonprofit sector and thus for our community. It will force us to address some entrenched, destructive philosophies and practices plaguing our sector. I am hoping that the new law will make us realize that:

It is not OK or normal to underpay people. I have written about our need to increase pay in chick-946790_960_720our sector. Well, now we have no choice, so let’s embrace it. One ED puts it, currently “many exempt workers also qualify for food stamps, government subsidies, and can’t afford to live in the city where they work.” This is not acceptable, that so many people in our sector qualify for the services they offer clients. Progress is being made. Another ED says, “My Fiscal staff and I have worked to move us to have no positions on our staff working for an amount that qualifies them for our low-income programs. We are at 96% of that goal.” That’s awesome, though sad that we even have to work for that. We all need to do better.  

It is not OK or normal to overwork people. As a colleague states, “Many times, for and not-for-profit employers really are offering hourly work, but offer it as salaried because it is easier and allows us to be more squishy on expectations and put the burden on the employee to do what it takes to get the work done rather than us setting up clear job descriptions and manageable workloads.”  Our sector has a culture of overworking people, and we use the exempt status to justify it. And another colleague, who heartily endorses the new law, says, “We now have a tool to assist us in encouraging/insisting that employees work a 40 hour work week. We want them to have work- life balance, and now we literally will not be able to afford it if they don’t.”

It is hypocritical for us to preach to the world against inequity while perpetuating it in our sector. So many of us fight for higher wages while underpaying our staff, for fair labor practices while overworking our people, for strong families while having regressive family policies. The Washington State Coalition Against Domestic Violence (WSCADV) did a wages and benefits survey of domestic violence program staff, and among 323 respondents, 84% reported relying on other sources of income to make ends meet, and the top three sources are spouse/family, a 2nd job, and the food bank. (Check out the survey; it has a cute little unicorn image on pages 6 and 8). As Catherine Morrison of City Fruit puts it, many of our practices “are working against the very just and thriving society we hope to create.”

It not cool or normal to be a martyr. This mentality of scrappiness, sacrifice, and poverty in penguin-429125_960_720the nonprofit sector has got to go. We attract self-effacing individuals who tend to think of the common good. But sometimes we go too far, and it’s ultimately harmful to our work and to our community. Says Michelle Douglas of the Rainbow Center, “I say down with the idea if you are not a martyr you cannot work for a non-profit. People cannot eat mission.” Another colleague adds, “I also think it will be up to those of us in nonprofit leadership to help model the way and not get stuck in the ‘well I had to work 50 hours a week for $25K and I didn’t complain’ mindset.” I am declaring that it is no longer cool to be hyper-busy, underpaid, overworked, and looking like a beat-up leather shoe while helping people.

We must stop hiding and apologizing for the actual costs of making the world better. Many of us are sick of constantly having to justify our “overhead,” which society still views as wasteful. We have been brainwashed to believe it ourselves also. But as one colleague says, “We do our field a disservice by pretending it costs less than it actually does to accomplish our mission.” Another adds, “We need to help donors understand the importance of operation dollars and IF you’re asking an entire nonprofit sector to step up to end hunger, homelessness, mental illness, addiction, as well as provide important programming for youth, families, adults, and seniors, THEN you need to support these organizations across the board. Let’s change the paradigm and value the important work we are all doing [by disclosing and funding] the true cost of our missions.”

Society needs to step up. Honestly, so many of us are so exhausted. The work is difficult enough without the restricted funding, mistrust, and unconscious (sometimes conscious) disdain of nonprofits. Once a while, we get a chance to breathe, and we realize that many of the services we struggle to provide should be the work of the government and should be paid for by taxes. Many of us are providing services because for-profits and the governments have neglected a whole bunch of people and issues. One of my colleagues says the new law “should be a call for the non-profit sector to stand in solidarity and speak out about how broken our economy is and how bankrupt our corporations are–And the need for fundamental tax reform and actual tax enforcement on the top 10-20%.” I’m inclined to agree; we need to work on getting the rest of society to pay its fair share to live in a safe and vibrant community, a community we nonprofits are working each day to build. We are carrying too much of the burden.


I know the new laws are kind of scary for many of us. Funders and donors need to increase their support, and we need to figure out how to reclassify staff, increase people’s pay, determine new work schedules and habits, and revise our budgets.

But like eating our vegetables, exercising, and flossing, the new laws are good for us, forcing to reexamine our underlying philosophies and cultures, many of which are outdated, harmful, and sometimes even unethical. Our work is the most complex and difficult and important and emotionally draining work that exists. We must ensure that our people, our hardworking, compassionate, endlessly creative people, are taken care of.chihuahua-624924_960_720

As Judy Chen of WSCADV says, “It’s understandable to want to put any new money into meeting the tidal wave of human need. But if we don’t invest in staff, then our own ship starts sinking, and then what will happen to the people we’re serving?”

In the short term, the new laws will be painful. In the long term, they are good for our sector, and thus for our community.

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  • ronnieweston

    Great explanation of the new law and suggestions for how to deal with it. Much appreciated here in Mai e

  • InStride247

    Well written, but blatant misunderstanding within. We need to fund issues left out by the private sector? Through taxation?
    Where did you miss the fundamentals in your public education?
    Supply and demand PowerPoint, at the very least?

    Those who do not produce cannot ask for something in return.

    If you feel overworked, ask for more money, work less, or leave the position.

    Free market IS the solution.
    And yes this means the have-nots will continue in their daily struggle.

    • Julia

      You can’t ask for more money in nonprofit, that goes against the whole philosophy, that’s the point of the article – the philosophy of pay and funding needs to change. And believe it or not, nonprofits are producing. They are producing results that make people more productive citizens of this country by providing services that, due to creating citizens better equipped to work and be producers in this country, bring up the production long term. You may see them as non-productive short, but long term, the less people on welfare, the less taxes you have to pay. The “free market” does none of this. Furthermore more, the more one is paid, the more they can consume – which is the backbone of a market economy. So we all win when nonprofit workers’ wages are increased, and they can consume more and are less stressed about pay – and thus can do their job better.

      • InStride247

        You can ask for more money from a man who has it and is concerned w his community.

        That man also decided how much tax money he gives to the government.

        Please. Please, keep learning about how very cyclical revolution is. Mankind is freedom. Always.

        • Ben Alexander

          Congratulations to Vu! NWB is all grown up as an interwebs blog now, complete with a troll whose sentence structure leaves much to be desired.

          • S NV Nonprofit Info Ctr

            I come late to the discussion (too busy helping people with reference questions I guess) so those comments were already deleted. I could definitely grasp the jist of them by Julia’s responses (yay Julia – same here… I probably help the relatives of your patrons LOL) and then bingo! Ben confirms it for me. Anything interesting I missed? 🙂

    • Julia

      You also realize that non-profits encompass libraries and museums? I currently work at for a large urban library system, and without taxation and nonprofit workers, there goes these cultural institutions. This is particularly true of libraries, which are free to the public and lead to more educated – and thus more productive – citizens. And we are just as underpaid as those at homeless shelters, etc. (where I worked before coming to the library). We may get paid a little more, but we are still underpaid compared to the level of our positions in the corporate world.

      • InStride247

        These cultural institutions ARE dead. The children have internet and Archive.org
        Go get a job. Thanks.

        • Julia

          I have a job. The children still read books, people still go see free concerts, etc. etc. because they know the internet and Archive.org can never replace community or create the social skills that our Summer Reading Club, Read It Foward, Homework Helpers, etc. create. Maybe they’re dead to you, but not to the millions of people who use them.

          • InStride247

            You’d make more money performing these terrific summer programs if you advertised and recruited money.

            I know I’m being aggressive w you, but saddle up Julia. I was a public servant, too.

  • Right on, Vu. The nonprofit sector currently manages an enormous array of issues that government (local, regional, state, federal) either can’t, won’t or shouldn’t handle. It would be great if we could see a shift from government and taxation policies to redress this situation, but I don’t expect that to happen in my lifetime. Maybe in yours, I’m old.

    It IS, however, time for the nonprofit sector to quit the tin-cup mentality already and start working with a more business-like attitude toward the generation of revenue. Vu, forgive me, I am not bizplaining here, just saying that for-profits simply do not apologize for their intention to pay their people appropriate salaries, provide them with competitive benefits and even, god forbid, give them satisfactory furniture. For nonprofits to get to the same point will require a less apologetic and far more confident approach to increasing income through all potential streams, from grants to corporate sponsorships, individual giving to social enterprise, and the sale of t-shirts and other chotchkes..

    None of which happens without a combination of effort and knowhow. It means a more systematic, consistent effort of marketing, branding, outreach and philanthropy (including grants, etc.) We have to stop kvetching about not being able to afford the cost of achieving the mission, and instead declare with pride that we achieve a mission that comes with a cost – AND we can bring in the money.

    Excuse me, I’m babbling, it’s early and InStride’s remarks pissed me off. InStride, let me know how you feel about caring for a disabled child or elderly parent who’s bedridden. Because they can’t produce, you’re not supposed to feed them? I’m missing something here.

    • InStride247

      Hello, Ellen! I am thankful and mildly empathetic to the emotions I pulled out of you.

      I am here to remind Americans of their history and nation. You seem to be realizing we are a corporation at the end of your career.

      Churches and charity will feed the poor/dress the wounded and elderly.

      America is a rather large and pure idea. I too am a pissed off, but rather enlightened individual.

      Work for money. Help because you choose to. I am anti government. I am pro Liberty.

      God bless America as we educate the masses.

  • House0fTheBlueLights

    “It is not ok to overwork people”

    There is a class of people in nonprofit that this law does NOT cover, and that is those of us working as “contractors”– in particular those contractors who are for all intents and purposes regular members of the staff, but who receive no benefits like vacation, health care, and who pay their own FICA. We are often paid for a set number of hours, but are assumed to (and often do) work FAR more time than we are paid for. Bringing this up elicits SadFace from the boss, who just can’t believe that you insist on being paid for your time; often other staff does not realize that you’re getting paid for 10 hours but working 30, and wonder why you seem to get a pass on never having to be at the office.

    /rant (sorry. sore spot.)

    • Julia

      Yeah, experienced this as a contracted grant writer.

    • JoeTony

      Then you’re either being taken advantage of for not billing 30 hours or you’re probably misclassified as an independent contractor instead of as an employee. The latter is a common cheap employer labor violation. View the IRS guide for information on how you should be classified: https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee

      • House0fTheBlueLights

        Thank you for explaining what an idiot I am, by pointing out things that I’m just too dumb to have figured out myself. I’ll make sure to let these hiring parties know, that will fix everything.

  • Mehitabel

    I am philosophically very much in favor of this change, for all of the reasons listed in the post. I do wish that this increased OT threshold had been phased in over 2 or 3 years, because I think the change is going to make 2017 a hard year for a lot of us.

    Society, and government, DO need to step up. They have needed to step up for quite a long time. As a consultant/contractor, I have worked in the past with a couple of nonprofits funded primarily by state contracts to provide services to certain groups of people (adults with developmental disabilities in one case, victims of domestic violence in another). What shocked and outraged me about these agencies was that the state barely paid them enough to keep their doors open. Staff providing direct care and services to clients were paid humiliatingly low wages. In one case, jobs that required a bachelor’s degree and no small degree of skill, had a starting pay rate of $13 an hour. Agency leadership wanted to pay more, but could not because that’s all the state would fund. Unsurprisingly, they had very brisk turnover and a very difficult time attracting qualified people to work for them. Administrative and operations capacity was beyond ‘lean’ – it was down to the bone. What I kept asking myself was, if the people who provide these desperately needed services to some of our most vulnerable citizens are so little valued by society that they are forced to work for less than a living wage, what does that say about the value we as a society have for the people they serve?

    It’s not right, and it has to change.

    • InStride247

      Real change begins when folks who care for the needy knock on the doors of the Haves and beg.

      The leaders of our religious institutions have the resources and communication to gather the money you seek.

    • Patrick Taylor

      This is one of the things that drives me nuts and scares me about the Right’s anti-tax position. They assume that the charitable sector will pick up the slack once government has shrunk to a drownable size. They totally ignore how much government funding dwarfs charitable giving in terms of human services. There is no way that the charitable sector could make up the slack.

    • Alek Deva


      • Alek Deva

        And I think this may be at odds with the thrust of the argument @ellenbristol:disqus made – namely that nonprofits should pulls themselves up by their bootstraps and diversify their revenue sources, bring in more money, etc.

        I work as a fundraising professional for a nonprofit theater company, and we work tirelessly to increase income – through a number of the different revenue sources mentioned in your comment, Ellen. In fact, I would say the development team works far too many hours (on average) in support of this effort, which is sort of the point of this whole article. I think we’re dealing, in part, with a kind of chicken or egg situation here. If you want development staff to up the revenue by scrounging for additional sources of funding, they will need to be paid more. But we can’t pay them more until we secure additional funding. I don’t know about other nonprofits, but our Board would have a hard time approving a budget that indicates a huge spike in salaries without also showing a huge jump in revenue. And they’ll be even more wary if we indicate (even if we do so confidently) that this additional revenue will come from previously unattained or uninvestigated sources. As any development professional will tell you, building a case for funding in the nonprofit world means building relationships with potential funders (both individual and institutional), which takes a good deal of time.

        Ellen, despite your assertion to the contrary, your comments strike me as quite bizplain-y.

        I think you touched briefly on the ultimate solution in your first paragraph, but your unwillingness to believe that any change in that direction can be accomplished in your lifetime is a bit disheartening. Some local arts councils and state agencies are starting to recognize the impact the nonprofit sector has on civic revitalization and quality of life, and are making a concerted effort to amplify this impact.

        I feel hopeful, despite the grim tone of some of the current discourse.

  • Sophia Katt

    Hey. Why are there no pictures of kittens?

  • Porter McConnell

    For those of you interested in a tax system that would make it less necessary for our sector to deliver services that government should be providing, may I direct you toward my colleagues at the Financial Accountability and Corporate Transparency (FACT) Coalition. They are working on tax reform in the U.S. right now, and you can support their hard work: http://thefactcoalition.org

  • Megan Poindexter

    OK, maybe you’ve addressed this in the past, but so something struck me while reading this post. How many of us have time-and-time-again had to explain that “nonprofit does not mean we aren’t allowed to have money”. WHAT IF we stopped calling ourselves “nonprofit” and came up with another term altogether to eliminate the misunderstanding 99.99% of the world has about our sector? Thus, we are allowed to pay our staff a reasonable salary… but also do crazy things like buy the good toilet paper for the office and (gasp) have money in savings?!?! Is really what we’re struggling against the general public’s tendency to throw shade at us every time we spend a dime, but it’s really because we are mis-branded??

  • Patrick Taylor

    No one in any full time professional position should make less than $47k. That’s crazy. Receptionists make more than that (not to knock receptionists).

    I don’t know how we get away from the starvation mentality. It’s ingrained into us as consumers. We all want something for nothing. We generally choose the cheapest thing over the higher-quality thing, all of which depends on a pool of cheap labor. Maybe impact measurement or some variation of it could provide some form of answer – an org might not be able to compete on price, but they can offer donors more sophisticated staff and more measureable results. But selling donors on the value of paying staff more will be tough – no one making $40k a year wants to hear why it is important you pay your program managers $60k.

    • Carol Clarke

      BTW, you must be in the U.S. Full-time Receptionists, especially in NPs in Toronto, usually make minimum wage – less than $20K, regardless of experience or skills (of course, employers want a plethora of both). $47K would be a dream.

      • Patrick Taylor

        I’m basing it off of the San Francisco Bay Area, which is one of the most expensive regions in the U.S.

        I was looking for a job ten years ago, and the going rate for a receptionist or entry level admin at a for-profit was more than what a program manager at a nonprofit could expect to make.

        • Carol Clarke

          All your comments are very interesting, Patrick, thank you. (That extra comma was for Vu.)

        • Kyle Erickson

          Basing things off an outlier (in terms of cost of living/wages) like San Fran is probably not a super smart way to look at the situation. Through much of the country – especially rural areas – receptionist work is slightly above minimum wage, whether at an NPO or in the private sector.

          As far as the “no professional should make less than $47k” bit, right on. Now if you can point us to the magical endless pot of money that makes that possible, we will follow your lead.

          • Patrick Taylor

            Well, the pot of money involves insider trading/a ponzi scheme, but I swear it is totally legit.

  • Alek Deva

    Excellent post, as always Vu. This is my first time commenting on one of your posts, so apologies if I ramble a bit.

    I completely agree that this new legislation will provide a much-needed shock to the system when it comes to nonprofit company culture. However, I hope the laws will experience some massaging in the coming years.

    What these laws do not take into account, and what this article doesn’t address (I know you can’t address everything) is the movement in general towards more project-based work, and less of a focus on number of hours worked. These laws assume (in many cases, rightfully) that number of hours worked indicates how much work is being achieved. This is not always the case. I have seen plenty of co-workers over the years work a 50-hour week and get almost nothing accomplished, and I’ve seen some people work a 30-hour and get twice as much done.

    I work for a nonprofit theater company, and we have a very flexible and open company culture in terms of how many hours we work and when we work them. During the summer (which is our off-season), some staff members take a week or two to go on vacation, or work a 20-hour work week. During the season (September through May), we tend to work closer to 60 or 70 hours per week on average.

    This ebb and flow is something I value, and it has less to do with working too many hours, and more to do with working hard when necessary and taking time off when possible. My company also provides housing for me and my wife (which cannot be accounted for under the new laws) and allows me a great deal of flexibility to take on outside work when I feel it is necessary either artistically or financially.

    This is not to say that we don’t also have problems with the martyr mindset, extreme workaholic tendencies, and underpaid employees – we most certainly do. And I think these laws will do a great deal to help remedy these problems (or at least get the conversation moving in the right direction). But I do think it’ll be important, moving forward, for any amendments or addendums to take into account the greater flexibility of some business models, and the pros and cons of working in certain nonprofit environments that have nothing to do with hours or salary.


  • Rachel Brookhart

    I think we need to make a Nonprofit Constitution. And I think you should write it.

  • Ryan_Williams

    I read the Department of Labor’s guidance on the new overtime rules back in May, and they seem to exempt any nonprofit with “business” revenue of $500,000 or less. I think that is meant to apply to NPO’s that sell goods/services for revenue. So it seems like these new rules don’t really apply to most NPOs. I know our management has been pretty confident they won’t apply. Any thoughts on that?

    • Mars

      One thing to be careful of is that the rules also apply to employees who routinely deal across state lines. It might not be an issue for your org, but you need to look at where you routinely order your supplies from.

      The organization I work for is located in a metro region that straddles two states. Most of our work is focused on the state we are located in, but about half of the staff routinely deals with people from the other state as well. Even though we are under the $500k rule, it would create a lot of resentment and headaches if we only enforced the new rules for the staff members that deal with our neighboring state. I also suspect that we would end up with every staff member finding reasons to routinely call our neighboring state.

    • JoeTony

      Totally wrong. As Mars states, the org has its own tests it must pass to be exempt from the ruling, but individual employees ALSO have to pass employee tests. If you basically do any interstate commerce – intentionally loosely defined – they fall under this rule. So you email or call your out of state insurance broker, your Staples Business Advantage account based in a regional hub, send funds or receive funds and interact with grantors/funders out of state – that is all interstate tasks.

      • Ryan_Williams

        I see – When I read the DOL nonprofit fact sheet (https://www.dol.gov/sites/default/files/overtime-nonprofit.pdf) I read the definition at the top of page 2 literally, which applies to types of organizations,

        But I see also in that fact sheet there’s a description that conforms with your example and Mars’s example:

        “For example, if an employee regularly calls an out-of-state
        store and uses a credit card to purchase food for a nonprofit
        that provides free meals for the homeless, that
        employee is protected by the FLSA on an individual
        basis, even though the non-profit may not be covered
        as an enterprise.”

        In practice however, regardless of whether a nonprofit is required to comply with the new rule, they can choose to limit work hours to 40 hrs per week as opposed to raising salaries, which seems to only help workers.

        • JoeTony

          Correct. It’s really going to come down to nonprofits caring about actively managing employees’ time, including prioritizing tasks, improving efficiency, flexing time, sharing responsibilities among more staff, or biting the bullet and paying OT.

          • Ryan_Williams

            And, I suppose, they could just stop working with out-of-state vendors to avoid individual coverage in cases where the org didn’t trigger coverage. Seems like a lot of ways out of it.

          • JoeTony

            Good luck. Just a few thoughts from my finance side of a nonprofit:

            Do you do payroll in house? Doubt it. Probably use ADP or Paychex. Are your account reps in state? Maybe, maybe not. What about your accounting system? Donor database? Are your case manager background checks done in state? Do you receive donations from a national corporate HQ/corporate foundation? A third party like Benevity, YourCause, Truist, Network for Good? Do you order office supplies from Staples Business Advantage, which has regional hubs? Do you ever buy anything on Amazon fulfilled out of state?

            The threshold for the employee to prove interstate commercial activity is so ridiculously low, the org would be insane to use that as their basis for not following this regulation. It would be an even bigger can of worms trying to selectively apply this to only certain employees and not all.

  • Adam Catalano

    I’ve worked for the same non-profit for 16+ years. And here are three problems I have with this law. Nope, four.
    1) $47k makes you rich in some neighborhoods (like mine) and still poor in others (like NYC). For the gov’t to jump in and toss random numbers makes no sense.
    2) I like to see our organization do well and grow, so I don’t mind a smaller salary if it means advancing the cause. Now, when I contribute my extra salary back to my favorite charity, I’ll have been taxed on it and only receive a portion of that back in April. So basically, the gov’t is now grabbing a chunk of my donation.
    3) There are times of the year when paychecks need to be held until more donations come in, so now my co-workers will have to wait even longer to get paid, because gov’t decided that I need more money.
    4) Gov’t has decided that Americans are now not capable of negotiating a salary, which is a valuable life skill, which helps you figure out the “market value” of your skills. There have been times when I asked for raises, and times when I’ve turned them down. I should have that responsibility and that freedom.
    Bonus #5) Just as a $15 minimum wage hike will push people out of work, this hike will also make job growth slower, because non-profit organizations don’t just print more money, like the gov’t. A change of the law is not going to increase the number of donations or available funds.

    • Kyle Erickson

      That’s the most sensible comment I’ve seen so far.

    • JoeTony

      1) They’ve done extensive research for years. It’s also not a new minimum wage for salaried employees, but a minimum threshold to no longer be eligible for OT. There is a huge difference.

      2) You can increase pre-tax withholding to offset that (401k/HSA) or if your employer does any United Way or similar giving drives, those payroll deductions are typically pre-tax dollars.

      3) Then your organization is already breaking labor laws, cannot afford to be in business, and you’re an idiot for staying with them. No pay, no play. Regardless of industry or mission.

      4) This takes nothing out of the salary negotiation. Many employers will still factor in a $35k salary with 5% OT is cheaper than a $47.7k salary without OT.

  • Judy Chen

    Thanks Vu, your headlines and succinct take-aways are so helpful for our field!

  • JKoz

    Top-down mandates such as $15 minimum wage, Affordable Care Act and now the overtime rules just accelerate the transition from ‘staff’ to ‘contractors’. Savvy executive directors and the nimble nonprofits that will survive the coming shake out will be those who best manage personnel costs. We’ve seen it with more part-time direct service staff hired as a way to keep everyone under 30 hours and thus avoid the Obamacare penalties.

    We’re creating an environment where managing subcontractors is THE skill separating ‘A; list executive directors from the rest of the pack. Sad, but true.

    • JoeTony

      As long as they are appropriately classifying contractors as such and not being cheapos avoiding payroll taxes when they should be classified as employees. The IRS has a great guide on it: https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee

      PT positions are increasingly harder to fulfill in times of low unemployment. They were great for orgs during the recession though.

      • JKoz

        Managing thru the IRS regs (another top down bureaucracy) is certainly one of those skills savvy executive directors need in order to survive. Another is strategic leadership in automation. A major service provider here just powered up an integrated platform that the board anticipates will allow them to cut the number of case managers from 5 to 3. If it works, the system pays for itself in 18 months.

  • David Morales

    Some little pieces of commentary from someone who is simultaneously a) a service provider at a non profit b) a member of the board at a mostly volunteer non profit c) a board member of an established non profit d) a committee person at a foundation and e) a volunteer government official.

    1) As board members and funders, it is our responsibility to make sure that everyone who is in a position to be working 40+ hours a week be paid above the threshold. Even if we can’t find the money, we can change expectations/outcomes in a way that reduces the burden on the non profit.
    2) state legislatures have been getting very used to seeing more with less every year and unless those the low income people they are cutting from actually come and visit them, they will assume that the last cut- and the next- did not result in any big harm.
    3) Many of our elders in the non profit universe joined as part of a movement and considered these jobs an act of love and rebellion; getting them to care about ergonomic furniture will take years of conversations.
    4) sometimes those who are privileged enough to donate their time start thinking that everyone else should as well. This is wrong. What is a pleasure for some may be a family sustaining job for others.
    5) Your job is not the movement/ the movement is not the meeting. Those working in the nonprofit sector need to be involved in other things that they love and can love fully without the complications of having it be your job getting in the way. This ability to still be connected with the larger struggle is the best reason why nonprofits shouldn’t work their staffs to death.
    6) Looking at the comments, I wonder what kind of pay-gap exists between the jobs a reasonable person could expect in the private sector and pay in the non profit sector. Is it 25 percent less, 50 percent less? In my field it’s 75 percent less, i.e, people joining us are often giving up 3/4 of their earning potential. The differential is growing. We are starting to look at the world where those privileged enough to be in the field are the only ones who can be part of it.

  • Sophia Katt
  • Annemaria Duran

    When ever the government gets involved they only look at one issue. In this case they were looking at the poor employees that are getting “ripped off”. They failed to account for the delicate balance of financials in the non-profit sector or the fact that many directors are passionate about the service they are giving. Many non-profit employees have chosen to work in that sector making a difference even though they can find commercial jobs that may pay more. I give my hat off to all those who seek to make a positive change in the world!

    One issue that non-profits face is the balance between the donors and the employees. While it is ideal for non-profits to be able to pay top dollar for their employees, for the comforts in the office and for other items, they also have to balance their donor expectation. Many donors look for non-profits with low bottom lines, where a larger percentage of each dollar is going to help those in need. This is a continual tightrope that the non-profit sector has to balance.

    As the new federal overtime laws have already taken affect, it does fall to non-profits to comply. For more information and articles on how the new overtime laws affect non-profits and other types of businesses check out http://www3.swipeclock.com/updated-federal-overtime-law-means-tracking-time-employees/. There are some FAQ’s videos and other resources for the non-profit directors and employees to access. Plus they are free resources!

  • Fanny Rose

    I’m confused about this. When trying to understand both the new changes to this law, as well as existing law, I keep reading that unless the non-profit is covered as an enterprise (they have annual revenue of $500,000 – and this does not include a non-profit providing services that are free of charge like a homeless shelter or a rape crisis center), or the individual worker is covered because they do a regular and significant amount of inter-state communication or business, then the FLSA does not apply…sooooo, am I missing something? That seems to leave a LOT of people working in non-profits in the exact same position they are already in.