New Fair Labor Standards Act Regulation

Jill S. G. Palmeter, CPA, Principal (May, 2016)

The new regulation from the U.S. Department of Labor was unveiled by the President on May 18, 2016.  Overtime benefits will now be expanded to certain full-time, salaried employees who earn up to $47,476 per year.  The current threshold is $23,660.  This pay increase might impact as many as 4.2 million workers when it goes into effect December 1, 2016, many of whom work at not-for-profit organizations.  It is important to note that hourly employees are not affected by this new regulation, as they remain eligible for overtime pay if they work more than 40 hours a week.

The question of whether or not this regulation applies to your not-for-profit often has a complicated answer, and depends on where your employees perform their duties, the nature of your organization’s revenues, and the work that individual employees perform.  The following needs to be considered:

  1. Coverage Through State Law: New York is currently one of 11 states where changes to the federal rules will automatically apply to practically all employees and employers.  This is because New York expressly incorporates by reference the Fair Labor Standards Act (FLSA) regulations into state law by way of statute, regulation, or administrative ruling.
  2. Enterprise Coverage: For nonprofits outside those 11 states, the FLSA applies if their annual business/sales revenues are at least $500,000.  Charitable income such as contributions is not factored into this threshold.
  3. Individual Coverage: Again, if outside those 11 states, nonprofits not meeting the above standard for enterprise coverage might still have employees covered by the FLSA if they engage in interstate commerce or in the production of goods and services for interstate commerce.  Employees who handle credit card transactions or order goods from out-of-state suppliers are probably covered by the new regulation.

It is important to note there are basic requirements for claiming a white collar exemption for certain executive, administrative, and professional employees.  With the exception of doctors, lawyers and teachers, salaries must meet the threshold of $47,476 for this exemption.  Employees must also pass the standard duties test regarding their “primary duty.”

Due to the fact that there has often been confusion regarding the Fair Labor Standards Act, the Wage and Hour Division of the U.S. Department of Labor has published a new overview entitled “Guidance for Non-Profit Organizations on Paying Overtime under the Fair Labor Standards Act.”  This 10-page document can be accessed at https://www.dol.gov/whd/overtime/final2016/nonprofit-guidance.pdf, and can help your organization determine how best to comply with the new regulation.  Additional future guidance will also help nonprofit organizations navigate the many aspects of this regulation.


DB&B…Educating to Empower