HR Roundtables Follow up: Exempt vs. Non-Exempt Overtime Pay

At a recent seminar for nonprofits, there were a number of questions regarding when an organization was covered by the Federal Fair Labor Standards Act (FLSA).  These questions were based on concern over the cost of complying with the proposed increase in the salary requirement to be exempt from overtime to $970 or more.

The FLSA applies to public agencies, hospitals, residential care facilities, and schools and colleges.  In addition, it applies to enterprises with two or more employees whose gross volume of “business done” is not less than $500,000. 29 U.S.C. Sec. 203(s)(1).  Activities that are undertaken purely for charitable purposes would not be considered as part of a business.  For example, in a Department of Labor (DOL) Opinion Letter that reviewed activities of an animal rescue organization, the DOL said that the care and shelter of homeless animals were charitable in nature and did not constitute a business.  However, fees generated by pet adoptions or the spay or neutering activities for private clients were business activities.

One way to look at whether your organization is engaging in a business is to review whether it provides services in competition with other entities.  For example, an organization that obtains government grants to provide services that might be provided by other entities is probably engaged in a business. However, an organization that provides meals to the homeless is not going to be engaged in a business, even if part of its income includes government grants.

The Opinion Letter referenced above also stated that income from charitable contributions or membership dues are not included in determining the $500,000, unless the membership dues entitled the person to certain benefits (e.g., membership in a gym).

Remember, even if your organization is exempt overall from the FLSA, you may still have individually covered employees if they engage in activities related to interstate commerce (e.g., shipping materials out of state, transporting goods or persons to another state).

If you think your organization may be exempt from coverage under the FLSA, before deciding whether to comply with the new proposed salary requirements, you should consult with your lawyer and/or contact the DOL.  If you are covered and want to know when the new salary requirements may go into effect, you should sign up for the E-Alert service of the Labor and Employment Law Department of Buchanan Ingersoll & Rooney, PC, by contacting Katie Kozora at 412-562-8437, and/or periodically review the websites of dol.gov and/or shrm.org.

Article by Peter Ennis, Shareholder at Buchanan, Ingersoll & Rooney

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