DOL Update to Overtime Regulations

The following was taken from the Dance/USA website to provide a basic overview on the regulations. We understand most NAPAMA members are for-profit small businesses, however we felt the information about the regulations are important to share. We encourage our members to speak with their accountants about how the regulations affect their businesses.

In May 2016, the U.S. Department of Labor finalized an update to the Fair Labor Standards Act (FLSA) that will have a dramatic impact on nonprofit organizations. The update will double the salary threshold that exempts employees from overtime compensation from $23,660/year to $47,476/year.

What You Should Know

Employees are only exempt from overtime compensation if they pass both the salary threshold and the duties test, also known as the white collar exemption.
The updated regulation goes into effect December 1, 2016.
Nonprofits are not exempt.

Who is Covered?

Employees of any organization that has $500,000 or more of business revenue are covered by FLSA. DOL provides an example of a gift shop as business revenue, while grants, private contributions, and cash and non-cash donations do not count towards this amount. (It is unclear whether revenue from ticket sales count.)

Employees that deal in interstate commerce are covered. Interstate commerce include sending and receiving emails and phone calls, making purchases, etc. This means that most employees will be covered.

Paying employees a fixed salary when their hours are fluctuating (as well as there is a mutual understanding) may be a possible important provision for performing arts groups. Because the salary is fixed, only half time payment (as opposed to time and half) would be owed for hours worked over the 40 hour work week. (Dance/USA is continuing to research this provision.)

Resources

Overtime Final Rule and the Nonprofit Sector (DOL)
Guidance for Nonprofit Organizations (DOL)
Archived webinars and compliance and challenges to nonprofits (Independent Sector)
Independent Sector’s Comments on the Proposed Rulemaking

Background

The Department of Labor proposed new rules during the 2015 summer, with the initial threshold increase set at $50,440. DOL accepted comments on the proposed regulations in September. Dance/USA signed on to a letter from Independent Sector (Dance/USA is a member) urging the Department to provide more time to prepare comments, as the nonprofit sector needed clarity on the language. That request for an extension was denied. Independent Sector filed comments on behalf of the charitable sector that urged the Department of Labor to:

1.Have a phased in implementation should this proposed rule be finalized;
2.Account for regional economic and market differences;
3.Have an open process for any changes to the duties test.

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AuthorChrissie DiAngelus