The Department of Labor’s May announcement that, effective December 1, 2016, millions of additional salaried workers would qualify for overtime was greeted with very mixed reactions from the nonprofit community. As Nonprofit Quarterly noted shortly after the new rules were announced, “From the moment the new rule was put forward for public comment in 2015, the nonprofit community has seen them as asking them to make a difficult choice, balancing their mission of helping those in need with the realities of operating.” And nonprofits saw the difficulty of finding funding for a new cost when public and private sources are already stretched past the breaking point.
Last week, the simmering controversy was inflamed when the House’s Committee for Education and the Workforce held a hearing to study “The Administration’s Overtime Rule and Its Consequences for Workers, Students, Nonprofits, and Small Businesses.” The language of the hearing reflects that of the proposed “Protecting Workplace Advancement and Opportunity Act,” introduced in March with 43 Senate cosponsors and 178 House cosponsors—all Republican. In the hyper-partisan atmosphere of the U.S. Congress, the hearings became a forum only for voices that see the rule as causing serious harm and are not prepared to the larger contexts of wage stagnation, workforce equity, and the government’s underfunding of nonprofits. In short, what we saw exhibited the kind of short-term protectionism that blocks real change.
A statement issued by committee’s chair, Rep John Kline (R-MN), following the hearing reflected the impression he took away.
This rule will disrupt the lives of countless individuals and do nothing to remove the regulatory landmines that are harmful to workers and employers. That’s what small business owners, college and university administrators, state and local officials, and heads of nonprofit organizations have warned about. But these warnings were ignored. […] The department ignored the voices of those who must implement this rule in their workplaces, on their campuses, and as they serve the needs of people in their communities.
And, in fact, the witnesses present representing the nonprofit sector saw only doom and gloom. Tina Sharby, chief human resources officer of Easter Seals New Hampshire, testified that the Military and Veterans Services Coordination program is “at significant risk.”
Services are provided around the clock to respond to emergency situations for our veterans and their families. […] Because of the potential cost for overtime, Easter Seals New Hampshire will be forced to limit the number of coverage hours for this already underfunded program, limiting our ability to provide around-the-clock care and lessening these lifesaving support services.
It’s interesting that discussions of how to properly fund this “underfunded program” did not come up—only the need to limit the earnings of employees doing critical work for very modest pay. This program is part of Veterans Count, one of the charities on Donald Trump’s list.
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An especially ironic thread of the criticisms of the new rule from nonprofit spokespeople has been that it will prevent dedicated employees from working when they needed to work. This position was given voice by Michael Rounds, associate vice president for Human Resources Management at the University of Kansas:
It is inevitable that there will be a significant reduction in the services currently being provided by the University of Kansas units to students as we transition employees from their current exempt to non-exempt status without the flexibility of working more than 40 hours per week regardless of mission demands.
Are not the drastic budget cuts that Kansas has made to its university a greater threat to meeting needs of the University’s students as the new overtime provision?
Missing totally from the hearing were any of the many in the nonprofit sector who see benefit in the new rules and urge government to deal with the core issue of adequate funding for critical services. As Jared Bernstein, senior fellow at the Center on Budget and Policy Priorities, testified at the hearing, “I’ve urged members of this committee to ignore knee-jerk antipathy to the new rule and instead to deal in substance, as the [U.S. Department of Labor] did in reviews of tens of thousands of comments and listening carefully to stakeholders on all sides of this issue.” He told the Business Journals website, “the pay and work-family balance of workers at nonprofits are no less important than the pay and work-family balance of workers at for-profit institutions.”
Separating out the new overtime rule from the larger issue of properly funding social services, health and education deflects us from the most critical problem. The Human Services Council spoke to this in a statement it released shortly after the overtime changes went public.
The vast majority of nonprofit human services organizations have no way of covering the cost of this new overtime rule. The Nonprofit Finance Fund reports that nationwide, 52 percent of nonprofit organizations were unable to meet service demand in 2014, while 32 percent identified achieving long-term financial sustainability and 25 percent identified offering competitive staff pay and/or retaining staff as top challenges. As we outlined in our report New York Nonprofits in the Aftermath of FEGS: A Call to Action, the sector is struggling, and this new rule is yet another unfunded mandate piled onto an industry that is already on the brink.
Shelving the new rules and saving some dollars by not paying overtime to an estimated 4.2 million U.S. workers will solve an immediate threat, but it maintains the sector in a “stuck” place financially, one that belies the credibility of the sector. If federal, state, and local governments that depend on nonprofit organizations to deliver critical services are not willing to deal with wage justice and the overall funding problems that flow from government contracting, we are essentially agreeing to instability and subjugation for our organizations and those who work for them on the front lines.—Martin Levine