The new overtime rules for employees come into effect on December 1 of this year. Are you ready?
The first thing to know is that if you didn’t think this rule impacts you – it does. Nonprofits are obligated to comply with the new rules. Nonprofits are complex and the rules will be applied differently depending on your organizations budget size. But know this for sure – at least one of your employees will most likely be impacted by these new rules. If your employees work a regular 40 hour work week and never work more than that, you can rest easy – you may need to reclassify employees, but your budgets most likely won’t be impacted. Click here for specific details about how this new rule might impact your nonprofit organization
A significant amount of lawsuits against nonprofits are because of employee related claims: sexual harassment, wrongful termination and wage-and-hour disputes. If you don’t understand and accommodate these new changes, you are increasing your legal risk.
Let’s begin with definitions:
An EXEMPT employee means that the employee is exempt from getting paid overtime pay for any hours over 40 in a week (nope – not 80 hours in a pay period. 40 hours in a week.)A NON-EXEMPT employee means that the employee is not exempt and their employer must pay employees overtime if they work more than 40 hours in a week.
By the way – did you know that comp time is not actually a legal “thing”? Flex time within a pay period is legal and acceptable. Comp time, meaning I work 50 hours this week and you add 10 hours to an imaginary account and I get to take 10 hours next month or next summer, is definitely not a legal thing.
So first, starting Dec 1, exempt employees must meet the following criteria:
- Is paid at least $47,476 per year (or $913 per week – prior to Dec 1, the amount has been $455 per week)
- Is paid on a salary basis
- Performs exempt job duties
The salary requirement does not apply to certain professions that pay on an hourly basis, including physicians and schoolteachers
Don't Forget to Review Employee's Duties
Most organizations have only been concerned with the increase in wages. But this new rule highlights some common no-no’s that nonprofits might also need to address.
Do you know what exempt job duties are? Many nonprofits that I work with use the salary test as the only test to determine if an employee is exempt or non-exempt. I would encourage you to ensure your job descriptions, regular duties and culture also support the these requirements:
As a rule of thumb, exempt employees tend to perform relatively high-level duties with respect to the company's overall operations (regardless of job title). The FLSA breaks this out into three main categories: executive, professional and administrative.
Exempt Job Duties: Executive
An employee is exempt from FLSA rules as an executive if he or she regularly performs all of the following:
- Supervises two or more other employees
- Primary duty of the position is management
- Has genuine input into other employees' job status (hiring, firing, assignments, etc.)
This determination is made on a case-by-case basis, as each duty leaves room for interpretation. As a rule of thumb, an employee working exempt executive duties is "in charge" or considered "the boss."
Exempt Job Duties: Professional
Exempt professional employees include lawyers, physicians, teachers, architects, registered nurses and other employees performing work requiring advanced education or training. These typically are intellectual jobs requiring specialized education and involving the use of discretion and judgment. This exemption does not include skilled trades, mechanical arts or other work that does not require a college or postgraduate degree.
This exemption also includes creative professionals such as writers, journalists, actors and musicians. Typically, such jobs require imagination, talent and some unique contribution to the employer.
Exempt Job Duties: Administrative
This exemption is for employees whose main duties involve the support of the business, such as human resource staff, public relations or payroll and accounting.
As a rule of thumb, administrative employees do not directly produce what the company sells; however, they are at a much higher level than those performing simple clerical work.
The FLSA defines exempt administrative job duties as follows:
"Office or nonmanual work, which is directly related to management or general business operations of the employer or the employer's customers, and a primary component of which involves the exercise of independent judgment and discretion about matters of significance." [emphasis mine]
I heard a lawyer recently say that if your employees work mainly by following policies, they aren’t using independent judgement. And, if your employees are being micromanaged and can’t use their own discretion, you are forfeiting their exemption, regardless of job description.
So – what now?
- Determine how the new rules impact on your business.
- Conduct an audit – if you had exempt employees, determine if it is more prudent to increase their wages or pay over time. If neither are an option, limit work weeks to 40 hours. (This includes time employees spend at home answering emails and phone calls!)
- Develop a plan – Should you increase budgets? Should you consider hiring more staff? Should you revise your compensation model?
- Look at the impact of technology – Requiring employees to track their hours will help you in the long run. What kind of time and attendance reporting systems do you use now and are they adequate?
Still have questions? Give us a call. We're here to serve you.
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