On December 1, 2016, a new rule takes effect which raises the Fair Labor Standards Act (“FLSA”) white collar exemption status salary level from $455 per week to $913 per week. This change may require non-profits to change the way they pay their executives managers, and administrative employees—either by raising their salaries, paying them hourly plus overtime, or reducing the hours they are allowed to work. Now is a good time to consider whether your non-profit organization will be in compliance with the FLSA after December 1st.
Only non-profit organizations that engage in commercial activities and have annual revenues of at least $500,000, are subject to the FLSA enterprise coverage. These employers must pay all employees at least the minimum wage and must pay time-and-one-half for work in excess of 40 hours during any workweek, unless an exemption applies.
While many non-profit organizations are not covered enterprises under the FLSA because they do not engage in ordinary commercial activities, it is possible for organizations that enjoy enterprise coverage to have employees who are subject to “individual coverage.”
Any employee who engages in interstate commerce or in the production of goods for interstate commerce is covered by the FLSA. Engagement in interstate commerce includes such mundane activities as having regular out-of-state communication by Internet, phone, mail, or email; ordering or receiving goods from a supplier in another state; and handling credit card transactions. These employees are entitled to earn at least the minimum wage and time-and-one-half for time worked in excess of 40 hours during any workweek, unless covered by an exemption.
In addition, hospitals, residential health care institutions, government employers, and schools (including colleges and universities) must pay employees at least the minimum wage and time-and-one-half for time worked in excess of 40 hours during any workweek.
A recent U.S. Department of Labor publication may be helpful in shedding some light on whether, come December 1, your non-profit will properly classify its employees as exempt or non-exempt. The article includes a chart simplifying the basic requirements for claiming a white collar exemption and options for compliance with the revised rule.
If you have questions on this new rule, contact your MSEC staff representative at 800.884.1328.