Compensatory Time for All? Nonprofits Need to Beware of Wage and Hour Laws!

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Have you ever been desperately trying to staff a new program without the budget to cover it adequately? So you begin to think creatively about adjusting staff responsibilities and hours. Perhaps your most senior program manager, Rhonda, doesn’t mind taking on extra work this time of year. Maybe the counselors working in other programs can pick up some of the slack for a while without too many additional hours. Sam, your administrative assistant, is so committed to the new program he is willing to put in lots of extra time and energy. Besides, he would not mind taking some extra time off in a few months when his wife has a baby.

Sounds workable, even beneficial, to folks who may want to accumulate some time off, but before agreeing to this arrangement, directors and managers need to think about the legal implications.

The Fair Labor Standards Act (FLSA) is a federal law enacted in 1938 that sets minimum wage, overtime pay, equal pay, record keeping and child labor standards. It was an essential law at the time of its inception because it sought to create a maximum number of jobs paying at least a minimum, livable wage. By mandating overtime pay, employers were compelled to hire more workers rather than increase the hours worked.

This law defined two classes of employees: those covered by the law and those not covered. A person covered by this law must be paid minimum wage, paid for the hours they work, and paid time and one-half for hours worked over 40 in one week. The language used in describing how employees are paid—salaried or hourly—often creates confusion. These terms are interpreted, often incorrectly, to mean salaried pay is analogous to professional/managerial status, and hourly means non-professional. The confusion often arises when we pay those positions covered by FLSA on a weekly or biweekly basis. You need to pay those non-professional positions for the actual hours they work and not allow them to take compensatory time off in lieu of pay.

To make the distinction between covered and non-covered staff you must first look at actual job duties. The FLSA uses two tests (the short test and long test) to determine if which positions are covered. The tests look at pay rate, actual duties performed and education or advanced knowledge required to do the job. It is critical to look at the actual duties performed by the employee and not simply the job description.

If job duties meet the requirements of an “administrative, executive, or professional” position under the FLSA, they are not covered by this law, and are considered exempt employees (meaning exempt from the FLSA). You do not pay them overtime. As a means of rewarding these people for working long hours, organizations often allow them to take time off at some future point in lieu of pay, usually called compensatory (“comp”) time.

People who do not fall into the administrative, executive, or professional categories are considered “non-exempt” and are covered by the FLSA. You must pay them overtime for any hour over 40 in any week. Common jobs that fall into this classification are manual labor, clerical or administrative support, bookkeeping, service workers, data entry operators, etc. Because you must pay these people for hours that they work, you are not normally allowed to give them compensatory time off in lieu of overtime, even if the employees request it.

So if you are the executive director of the aforementioned agency and are evaluating your staffing options, you are most likely safe in asking Rhonda, the program manager, to assume more work and longer hours. Managers will more than likely meet either the executive or professional exemption under the law.

Human service counselors fall into a grey area. You will need to look closely at their jobs to see how much independent judgment they exercise, as well as if their jobs require advanced knowledge usually obtained through a degree program. At times, nonprofits may fill a counseling position with an individual lacking formal education, but having essential life experiences that qualify them for the job. Many positions exist that seem to fall on the border of a professional exemption—especially positions with high levels of responsibility and discretion, which do not require advanced academic or technical knowledge. When staffing a program with a tight budget or trying to accommodate employees’ time-off needs, it is easy to want to push these people into the professional category.

However, in many instances, the Department of Labor has determined these positions are covered (non-exempt) and therefore not eligible for compensatory time. If you are looking at classifying similar positions, you should write to the DOL for an opinion.

As for Sam, if he is performing purely administrative support functions, he is likely a non-exempt employee. You must pay him for the actual hours he works and you must pay him time and one-half his regular rate of pay for any hours he works over 40 in one week. You may grant him the time off to be with his newborn child, but do not let him use compensatory time to do it.

The Department of Labor is the enforcement agency at the federal level for violations of the FLSA. Most states have a wage and hour division that will enforce similar infractions at the state level. If you are reported for an alleged violation of the FLSA you will undergo a lengthy and painful investigation of all of your timekeeping and payroll records. If you are found in violation of the FLSA, you will be responsible for back pay and overtime for non-exempt staff who should have received pay instead of compensatory time. You could also be required to pay liquidated damages, attorney’s fees, and witness fees to the employee(s). The DOL could also sue for criminal and civil money penalties.

The bottom line is that this is a complex regulation, easily violated even with the best intentions. Organizations must show a good faith effort to classify positions correctly using the tests defined in the act and pay their staff accordingly. If you are aware of the law, chances are you will begin to question requests for compensatory time and make the right decisions.

In nonprofit organizations lacking the money to support a large amount of overtime for staff, compensatory time is often seen as a benefit and a solution. Hopefully, the Congress will soon recognize the need for more flexible work schedules, allowing staff in all occupational categories to make their own decisions about whether overtime pay or compensatory time is more valuable. Until that day comes however, managers and supervisors should be careful about saying “yes” to compensatory time requests.

    • Under the FLSA, public sector employees are eligible for compensatory time even if classified as non-exempt, at a overtime rate of at least one and one half hours for each hour worked.

 

  • You have some flexibility with compensatory time for those categories covered by FLSA (non-administrative, non-executive or non-professional categories) that are paid on a biweekly schedule. You are allowed to give compensatory time for salaried, non-exempt staff paid on at least a biweekly basis if you give it within the same pay period at a rate of at least one and one-half hours for each hour worked. For example: If Sam works 48 hours the first week of the pay period, he can take 12 hours off the second week to compensate instead of being paid the additional 8 hours. Check with the Department of Labor to ensure that your non-exempt compensatory time plans meet the requirements of the FLSA.

 

“Does providing a hyperlink on a charitable organization’s website to another organization that engages in political campaigns result in per se prohibited actions?” Chances are, you haven’t given much thought to the question, but the Internal Revenue Service wants to know—on, or before, next February 13.

At a time when AOL—with over 20-million subscribers—delivers more mail each day than the U.S. Postal Service, the IRS is considering the need for guidelines “that would clarify the application of the Internal Revenue Code to the use of the Internet by exempt organizations.” The IRS is examining the relationship between regulated activities (political advocacy and lobbying, advertising and commercial dealings, and fundraising) and the expanding on-line capabilities of tax-empted nonprofit organizations.

Already, nonprofit organizations and alliances are mobilizing across the sector with an air of urgency. Avi Schaeffer, with the public policy staff of the DC-based

Independent Sector, is convening an ad hoc working group to solicit sector-wide comments and opinions (avi@independentsector.org, or call 202-467-6112). The Alliance for Justice has announced that they are also planning to file comments and are alerting members of their Nonprofit Action Network (pomeranz@afj.org). NPTalk, a listserv maintained by OMB Watch and dedicated to support nonprofit Internet advocacy, has been covering these events and serving as an informal conduit for sector-wide information as well (www.ombwatch.org/npt/nptalk).

For an on-line copy of the IRS request for comments, you can go to the IRS site, or to OMB Watch (www.ombwatch. org/npadv/2000/eocomment.html) or the Internet Nonprofit Center (www.nonprofits.org/npofaq/misc/IRS2000-84.html).

Joanne Horgan consults with many nonprofits and is the director of human resources at Third Sector New England.

  • michael pagliaro

    How many hours can be worked, and paid for by “Comp Time” in a week ?