Nonprofits Measure What They’ll Do in the Face of New Overtime Rules

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Overtime Review / Jan McLaughlin

September 19, 2016; Marketplace

As the date for implementation of the new overtime rules draws near, nonprofits are beginning to plan their strategies for addressing the increased staff costs. This process is likely to produce some new insights into wage fairness in the sector in general. Some service nonprofits are looking at multiple positions where the new rules will apply.

We have approximately 40 employees that right now are exempt. And with the changes, that will change to only approximately 10,” said Michele Bronson, who handles human resources at the Council on Aging. With an $8 million annual budget that funds services for 164,000 clients, Bronson said compliance is going to mean making some tough decisions about which employees, from case managers to grant writers, will receive a raise.

“The people who work here full time need to work full time. Either we pay overtime for all of those hours, we hire someone else to do that part, which costs money, or look at doing the increase in the salary so we won’t have to have this person go non-exempt,” she said.

Bronson is starting to plan by asking all to employees log their hours, and then she has to analyze whether it’s worth paying overtime.

The regulatory change will raise the non-exempt salary rate from $23,660 to $47,476 annually, meaning that workers who earn less than the threshold will need to track their time and will be paid overtime for weeks they work more than 40 hours. Nonprofits have until December, when the law goes into effect, to determine whether they will be able to raise enough funds to cover the overtime costs or higher salaries, will need to make cuts, or can, as employment attorney Mark Neuberger suggests, “get creative.”

As covered extensively by NPQ, nonprofit reactions to the new overtime rule have been wide ranging. The overall sentiment seems to be that while nonprofits support the intent of the law, they are worried about how they will implement it and feel its impact. The fear of downsizing, either in terms of staff size or reach of mission, has caused some organizations to protest the rule and a number of members of Congress to introduce opposing legislation.

Andy Schmidt may have made the best argument yet in favor of the overtime rule change in “Is Exploiting Workers Key to Your Nonprofit Enterprise Model? The New Overtime Requirements.” This article implores organizations to take a hard look at themselves and consider whether progress is being made towards mission at the cost of employees. It’s a must-read for any organization that’s facing tough decisions come December.

Rather than fight the overtime change, nonprofits need to begin looking at it through the more positive lens of offering quality over quantity. Nonprofit organizations are fighting some of the most difficult battles, which include poverty, hunger, domestic violence, and human rights. This work can be exhausting both mentally and emotionally, leading to organizations beset with employee burnout and high staff turnover—both of which can be relieved by welcoming the new overtime rule. If staff aren’t taken care of, how can they take care of constituents? Studies indicate that well-treated staff who feel valued work harder, remain with the organization longer, and deliver a higher quality of care that propels organizations towards achieving their mission.

Michael Wasser, a labor policy analyst for Jobs with Justice, notes that nonprofits that really take this challenge on with a positive approach may reap benefits in less burnout and turnover. “For many nonprofits, it’s the people who work for them that are their value add, and making sure that they can go home and recharge can have long-term sustaining benefits, because you don’t have to go out and recruit, train up, rebuild that knowledge.” Likewise, Mark Neuberger, employment attorney at Foley & Lardner LLP, says the new rules merely bring workplaces, be they nonprofit or for profit, up to date. “The law was passed at a time when men—and I mean men—went to work, and if the man wore a white shirt, they didn’t get overtime. And if they wore a blue shirt, they punched the clock and got overtime. Life today is not nearly so simple,” he said.

At the end of the day, whether your employer is nonprofit or for-profit, you and your fellow employees should be able to make ends meet, if not live comfortably. Passion and a decent wage should not be mutually exclusive.

How is your nonprofit facing the new overtime rules? Please write to us and let us know!—Sheela Nimishakavi

  • Like most issues in life, this one is complicated. I don’t know of any non-profit that does not want to pay their employees a decent living wage. However, there are so MANY different kinds of non-profits and each face different challenges. My organization provides community based and residential treatment services 24/7 to youth in foster care and juvenile justice. It is a service that local government must provide and elects to do so by contracting with organizations like mine. However, while government benefits from our commitment to mission and ability to be more cost-effective (i.e. cheaper) than if they provided these services themselves, they also set the regulations we must meet as well as the funding levels they will pay us to provide these services. About 97% of my $50 mm budget is government funding. We do our best to raise private funds but what we do is looked at by many as the reason why they pay taxes!

    I cannot just reduce my staffing because then I would not be meeting staffing ratios and levels that government requires AND that insure the safety and well-being of the youth we work with. We advocate for adequate funding from government but we all know how that goes! In NY, we just went through 7 years with no increase in funding and now we are just starting to see slight COLA increases. We end up not being able to pay better wages and then struggle with staff turnover that affects the quality of what we do and the cycle continues. Many of my staff are eligible for OT and we pay it and this is built into the funding we receive. The new Federal regs will include many more staff in this category but to date NY has chosen to look the other way. We will continue to push government to pay for the work we provide on their behalf while also staying focused on our work and our mission. We work between the rock and the hard place.
    Gerard McCaffery
    CEO, MercyFirst

  • Karin

    While I understand the intent of this law the only thing it is doing at my non-profit is taking away one of the main benefits of working there: flex time. We don’t make very much, but we are a small organization and are paid as much as possible. Since our pay is low the organization makes it up in other ways, the chief one being flextime. If I have used up all my vacation time but still want to go visit my family at Christmas it isn’t a problem. I go and make up the time later. If I am having a bad day and decide I want to go home early I do. We are never required to work a 12 hour day, but I have chosen to do so often. I like it when I get sucked into work or an event because I know I am earning time off.

    Another problem is that now we don’t get paid emergency leave. I had unexpected surgery a few years ago and was out for two weeks. I still got paid and just made up the time. Currently my dad has cancer and I need to fly home to donate my bone marrow for transplant. With flextime I could go and make it up or I could opt to not make it up and not get paid. Instead I now lose the choice and have to take unpaid leave For those 2-3 weeks.

    Our workflow can mean that one week there isn’t much to do so I only work 20 and another week I may work 60. With this law the workflow isn’t going to change. We will do what we can to even it out but I am sure that I will be clocking out and continuing to work off clock just to get things done. We are forbidden to do that, but I believe in my organization and our work so I know I won’t just stop what I’m doing at 5pm. I will stop when the work is done like I always have. The only difference is that now I will be working without compensation to do so.

    There is no way my organization can pay more money. They can’t afford overtime so we will never work more than 40 hours. All this does in the long run is reduce our pay overall. We are struggling with financial difficulties lately and I am worried that this change will kill our organization. It has certainly done a lot to kill employee morale.

    • anitagjen

      You make some excellent points that I have not seen elsewhere.

  • Margot Haliday Knight

    Every non-profit I have ever worked for or led has had an informal comp-time/flex-time policy. As the law makes no flexibility or provision for this very real benefit to both employee and employer, my guess is that these arrangements will continue “off the books,” with the hope that no one feels slighted and drops the dime. Another issue is how to do the math around positions that include room and board or both. California law outlines threshold dollar amounts to count towards minimum wage requirements. I have yet to find any guidance at the federal level (if it exists, someone share!). I fully support the intention of this move–non-profit work is work and every position deserves a living wage and benefits. But government contractors and private sector donors MUST buy in as well or this could be disastrous for more than a few non-profit organizations.

  • Simone N. Hennessee

    No way that comp time or not paying overtime is an option. This is the law and lawyers will be trolling for opportunities for unhappy employees to bring a suit. Yes there is guidelines. I recently did a workshop on overtime along with the impact on non-profits. This is a major sea change and will impact every part of your organization. Do not take this lightly.