Overtime Rules for Nonprofits

On April 23, 2024, the U.S. Department of Labor (DOL) published its final overtime rule.  This rule specifies that most employees earning less than $58,656 per year will soon be entitled to overtime compensation, regardless of whether they are currently classified with an exemption.  These changes will affect many nonprofit employers.   

The Fair Labor Standards Act (FLSA), designed to protect workers from exploitation, is administered by the Wage and Hour Division (WHD) of the Department of Labor.  It includes laws about minimum wages, maximum hours, overtime compensation, payroll requirements, and equal pay for equal work, among others.

On June 11, FNA hosted a webinar about the overtime changes and their effects on nonprofits.  You can download the slides below.

Webinar Slides

Webinar Q&A

What Should My Next Steps Be as an Employer?

Here is what we recommend (but we are not attorneys and encourage you to consult legal counsel about your unique situation):

• Read the rest of this web page to learn more about the Overtime Rule Changes
• Verify that your organization needs to comply either by enterprise or individual coverage
• Assess which of your employees the changes will affect
• Discuss with your Board of Directors the options for adhering to the rules.  Our friends at the North Carolina Center for Nonprofits have prepared a great list of options for consideration (under What are some options for nonprofits to comply?)
• Have transparent and clear communications with employees, especially the ones the rule change affect.  Employees may see moving to nonexempt as a demotion or may have concerns about what this means for their employment.  Keeping the trust strong and communication lines open is vital.
• Update your personnel policies to reflect changes, including the definition of your workweek, how you track hours, and working expectations for employees.
• Engage your funders in dialogue about what these changes will do to your bottom line.  They will hopefully, and likely, be a resource and support for you.
• Do your research on compensation!  Now is a great time to evaluate if you are paying your employees appropriate wages compared to the rest of the nonprofit sector.  FNA has a new Compensation and Benefits Report out for Florida.  Purchase your copy here.
• Don't swap one issue for another - be wary of using 1099 contract workers to avoid overtime pay if they aren't truly doing contract work, and don't offer comp time in a different workweek to try to avoid overtime obligations.

Impending Changes On July 1st

The increase in salary thresholds will go into effect in two phases: the first increase (roughly 20%) takes effect on July 1, 2024, and the second increase (another roughly 20%) takes effect on January 1, 2025.  Thereafter, thresholds will be updated at three-year intervals.

Do the Changes Apply to My Organization?

Your nonprofit organization will need to adhere to these changes if at least one of the following is true:

1. Enterprise coverage - if you:
   • Are a nonprofit hospital, school, preschool, residential medical or nursing care facility AND/OR
   • Have $500,000 or more in annual commercial sales.  (Income from contributions, membership fees, dues (except any part which represents the value of a benefit, other than on token value, received by the payer) and donations (cash or non-cash) used in the furtherance of charitable activities, are not considered in determining whether an organization has met the dollar threshold required for FLSA enterprise coverage)
2. Individual coverage - if your employees:
   • Regularly engage in interstate commerce.  Interstate commerce is a broad term and encompasses things like making/receiving interstate telephone calls, shipping materials to another state, and transporting persons or property to another state.

This means that there will be nonprofit organizations in Florida that are not affected by this change, but we strongly recommend you verify this is the case before ignoring the changes to the law.

Who is Covered by These Changes?

Any employee except for:

• Independent Contractors (note: although not included in the overtime rule, there are specific definitions for independent contractors.  To ensure you have classified independent contractors appropriately, we recommend this podcast by Gunster Law Firm (episode 7) and resources from the IRS)
• Volunteers
• Interns
• Trainees

Exempt or Nonexempt from Overtime?

Nonexempt employees are by definition not exempt from the FLSA's overtime compensation requirements.  Exempt employees are not required to be paid overtime.  Generally, to be classified as exempt, an employee's job duties and responsibilities and their compensation must satisfy both:

1. The salary basis test - the employee must receive a predetermined amount at least equal to $684, increasing to $844 per week on July 1, 2024, paid on a salary or fee basis.  The predetermined amount cannot be subject to reduction because of the quality or quantity of the employee's work.  
   
   AND
   
   
2. The duties test - an employee's primary duty is generally their principal, main, major or most important duty.  It is not determined by job titles or job descriptions, and not determined by the amount of time an employee spends performing certain work.

Employees who are exempt under the duties test must fall into one of the following categories:

• Executive employees
• Administrative employees
• Learned Professional
• Creative Professional
• Computer Professional
• Highly Compensated
• Outside Sales Employee
• Commissioned Retail Employee

We recommend downloading the slides at the top of this page to see the qualifications for each exemption.

Nonexempt employees can still be paid a salary, rather than on an hourly basis, but you as the employer still need to track hours to pay overtime for hours worked over 40 per week.

Calculating Overtime

Overtime pay is required for any hours worked by a nonexempt employee over 40 per week, even if your organization has a set work week of 35 or 37.5 hours per week. 

Generally, overtime pay equals 1.5x regular rate of pay.  Regular rate of pay includes all remuneration including wages, salary, commissions, and non-discretionary bonuses.  Overtime pay is calculated on a workweek basis and averaging hours over two or more weeks is not permitted.

Employers are not permitted to offer "comp time," or hours off of work, in a different workweek in lieu of paying overtime pay.

Overtime pay is also not contingent on employer approval.  Even if you have told an employee not to work more than 40 hours in a week, you will still owe overtime if they do.  Check-ins during the week on hours worked and reminders of your organization's policies can help to mitigate this.

Minimum Wage

It is also important for Florida nonprofits to follow minimum wage requirements.  Although the federal minimum wage is $7.25, under Florida Law, employers must pay a minimum wage of $12 per hour, increasing by $1 annually to $15 per hour effectively September 30, 2026.  

NOTE: There are three pending lawsuits challenging the new overtime rule.  If the courts issue any injunctions, we will update this webpage as such.

Additional Resources

Department of Labor Fact Sheet

Florida Nonprofit Compensation and Benefits Report (discount available for FNA members)

Don’t Panic (Yet): What Your Nonprofit Needs to Know About the (Latest) New Final FLSA Overtime Rule (North Carolina Center for Nonprofits)

This web page does not constitute legal advice.  Because the facts and circumstances of your workplace are unique, your organization's rights and obligations under the FLSA may not be obvious.  To ensure FLSA compliance for your organization, we strongly encourage you to consult legal counsel and appropriate human resources and payroll professionals.