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How will the new Overtime Regulations affect your nonprofit?

by Mary Erin Casale

The U.S. Department of Labor (DOL) issued its Overtime Final Rule yesterday. This is a complex issue for many nonprofits and there is no easy answer for implementation. However, we are here to share resources as they become available and help keep you informed. The DOL also published a special overview and guidance for nonprofit organizations. UPDATE: The DOL will be offering a special webinar for how this will effect the non-profit sector on June 7th. Sign up HERE.

Maine is one of the states where the federal rule will apply because Maine automatically incorporates Fair Labor Standards Act (FLSA) regulations into state requirements.

This new rule will go into effect on December 1, 2016 and will become part of DOL regulations. It will have an impact on many Maine nonprofits. To better understand how this could affect your organization, we encourage you to read The National Council of Nonprofits resource page. It includes all the latest information and how it will apply to the nonprofit sector. The National Council will update the page whenever new information becomes available, so we encourage you to check it frequently.

Key Details

  • Salary Level Threshold: The new regulations will raise the standard minimum level for salaried, exempt workers from $455 per week ($23,660 per year) to $913 per week ($47,476 per year). The final rule also raises the compensation level for highly compensated employees (subject to less-detailed duties tests) from its previous amount of $100,000 to $134,004 annually.
  • Effective Date: December 1, 2016. The new rule does not phase in the higher salary thresholds over a longer period of time, as had been requested by many commenters during the rulemaking process.
  • Automatic Increases: The final rule establishes a mechanism for automatically updating the salary and compensation levels every three years, with the first update to take place in 2020.
  • Does this Regulation Apply to My Nonprofit? This is a simple question with a complicated answer for each nonprofit, and depends on where your employees perform their duties, the nature of your revenues, and the work that individual employees perform. BUT as listed above, since Maine expressly incorporates the FLSA into statute, your organization should review its employee salaries and classifications.
  • Duties Tests:  The Labor Department asked during the rulemaking process whether the itemized changes were needed in the duties tests for executive, administrative, and professional employees. DOL decided not to make any changes in the new regulations.
  • Non-Enforcement Special Exception: The Labor Secretary announced that the Department will not enforce the higher salary thresholds until March 17, 2019 for providers of Medicaid-funded services for individuals with intellectual or developmental disabilities in residential homes and facilities with 15 or fewer beds. This means that those employers will have an additional 28-month grace period before being required to pay overtime for affected employees.

How to Comply

Employers have various options to comply with these changes in overtime rules, ranging from increasing exempt employees’ salaries to the new level, converting them to hourly employees (IF they meet certain guidelines) and paying overtime, or making other changes to benefits or operations. See Part III of the DOL special guidance for nonprofits for more information.

You made it to the end! And you probably have a lot more questions, so please share those in the comments or reach out via email.  If we don’t immediately have an answer, we’ll do our best to point you in the right direction. We’ll also continue to work closely with the National Council to provide new tools and educational opportunities around implementation.  Stay tuned for more updates.

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