If you work in nonprofit in the US, you have heard that new federal overtime laws/rules are coming. They affect how we categorize the professionals in our sector—“Exempt” or “Non-Exempt”—and how we pay them, whether through set salaries or through hourly wages that include overtime for hours worked over 40. If reading that sentence makes you want to hyperventilate into a paper bag for a few minutes, you’re not alone. Many people are freaking out about these new laws and how to comply with them, because they take effect this coming December!
By the way, since this post may be long and kind of dry, I’m going to insert more pictures of baby animals than normal to motivate you to keep reading. The baby animals have nothing to do with the content of this post.
Basically, to be considered Exempt starting in December, an employee must now be paid $47,476, which is double the current level of $23,660. If an employee is paid less than $47,476, they cannot be considered Exempt and must be paid overtime for any extra hours worked.
Since I am not an expert on this subject, I checked in with colleagues and organizations who are better versed and will be quoting them heavily. I highly recommend you spend some time on this page, Adjusting to New Overtime Rules, by 501 Commons. It has work duties tests, a workbook to help you calculate whether to pay overtime or increase someone’s salary, a free recorded webinar training hosted by a compensation expert, a list of other resources, and FAQs.
The key points, says Nancy Long of 501 Commons, are:
- “Most employees who are paid either hourly or on a salary below the threshold of $47,476 are eligible for overtime even if the organization does not have eligible revenues over $500,000.
- “If you are not following the law, an employee can report you and you will have to pay fines and back wages. Not paying what someone legally deserves is wage theft and being a nonprofit is no excuse for stealing from your employees!
- “Do the math! Raising someone’s salary above $47,476 if they are in a management role and are typically working overtime may save you money in the long run. (Use the overtime calculator and workbook.)”
The new requirements are going to present some challenges for many nonprofits. The ones that we can anticipate include:
- Many people, including executive directors, are not making anywhere near $47,476. They often work way more than 40 hours a week. Now organizations must increase their salary to the new exemption level, or pay them overtime, which will be a significant financial burden on many nonprofits.
- It may pose a challenge for many nonprofits who have programs in the evenings and weekends and overnight (foodbanks, shelters, taking kids camping, a fundraising event, etc.), which will incur overtime.
- There will be less flexibility in how and when we do our work, as staff who were formerly exempt but now non-exempt must keep track of their hours to avoid going overtime and over-budget. Many of us like our flexibility, as it compensates for the often low pay.
- The re-categorization of status may affect team morale, as people may wonder why their position is not exempt whereas another position is. As one colleague puts it, “I am learning that there is some perceived status in having a salaried job as opposed to an hourly job.”
- It may increase the burden on exempt staff, who may now have to take on duties of hourly staff to avoid paying overtime.
Because we nonprofits cannot pass on these additional expenses on our clients, the way for-profits may be able to, it is critical that funders and donors understand these upcoming challenges and increase their support. And we nonprofits must be vocal advocates for additional funding and reasonable accommodations, such as writing letters to funders and lawmakers (here’s a letter template for you to customize and use). Funders in particular, we need your support in the following ways, as recommended by many of my colleagues, especially James Hong of the Vietnamese Friendship Association:
- Check in with your grantees to see how they anticipate the laws will affect them and how they are doing. It’ll be nice to hear from you. Everyone is stressed, so maybe consider bringing grantees some mini-muffins.
- Provide emergency funds. By mini-muffins, I mean cold, hard cash. Emergency funds will help nonprofits be able to buffer themselves as the new laws take effect.
- Increase the level of funding in general. We need you to increase the level of investment, moving forward. Many nonprofit leaders are having even more night terrors than normal, thinking our budgets and all the upcoming challenges. Increase your pay-out rate, and increase your giving amount.
- Work with grantees to re-calibrate expectations on services and outcomes. If you cannot, or will not, increase financial support, then you must understand that it is unrealistic to expect the same level of services and outcomes, given that most of us will have to cut down staff hours to keep our budgets in line. Help nonprofits figure out if they need to cut back a day of programming, or serve fewer clients, or both. This is not something any of us want, but we may have to do it if there are no additional revenues.
- Prepare for sticker shock. As James says, “Funders should have internal discussions and prepare grant reviewers for these changes, particularly when evaluating budgets and budget proposals from organizations. We should prepare reviewers to be ready to see salaries for exempt staff at the $47,476 level and above, and not be shocked and give the applicant a lower score. We should create a dialogue where this becomes the new normal.”
- Consider small, grassroots orgs led by people of color, women, communities of disabilities, rural communities, LGBTQ communities, and other marginalized people. Laws of this nature always disproportionately affect these communities, who will struggle even more than larger organizations that may have more reserve to weather the coming changes.
- Convene meetings with other funders and with nonprofits. When there are serious changes, such as this one, funders can play an important role by serving as conveners and advocates. Get other funders to be aware of this issue. Get people to talk about these challenges and how to navigate them. It’ll make us all feel better to hear that funders are thinking about these changes and are actively working with other funders and nonprofits to make sure nonprofits and the communities we serve will be OK.
Shift in nonprofit culture
What we seriously need to discuss is the philosophical and cultural shift that we as a sector needs to make, in light of these new laws. Despite the challenges we will encounter, the new FLSA overtime law is good for the nonprofit sector and thus for our community. It will force us to address some entrenched, destructive philosophies and practices plaguing our sector. I am hoping that the new law will make us realize that:
It is not OK or normal to underpay people. I have written about our need to increase pay in our sector. Well, now we have no choice, so let’s embrace it. One ED puts it, currently “many exempt workers also qualify for food stamps, government subsidies, and can’t afford to live in the city where they work.” This is not acceptable, that so many people in our sector qualify for the services they offer clients. Progress is being made. Another ED says, “My Fiscal staff and I have worked to move us to have no positions on our staff working for an amount that qualifies them for our low-income programs. We are at 96% of that goal.” That’s awesome, though sad that we even have to work for that. We all need to do better.
It is not OK or normal to overwork people. As a colleague states, “Many times, for and not-for-profit employers really are offering hourly work, but offer it as salaried because it is easier and allows us to be more squishy on expectations and put the burden on the employee to do what it takes to get the work done rather than us setting up clear job descriptions and manageable workloads.” Our sector has a culture of overworking people, and we use the exempt status to justify it. And another colleague, who heartily endorses the new law, says, “We now have a tool to assist us in encouraging/insisting that employees work a 40 hour work week. We want them to have work- life balance, and now we literally will not be able to afford it if they don’t.”
It is hypocritical for us to preach to the world against inequity while perpetuating it in our sector. So many of us fight for higher wages while underpaying our staff, for fair labor practices while overworking our people, for strong families while having regressive family policies. The Washington State Coalition Against Domestic Violence (WSCADV) did a wages and benefits survey of domestic violence program staff, and among 323 respondents, 84% reported relying on other sources of income to make ends meet, and the top three sources are spouse/family, a 2nd job, and the food bank. (Check out the survey; it has a cute little unicorn image on pages 6 and 8). As Catherine Morrison of City Fruit puts it, many of our practices “are working against the very just and thriving society we hope to create.”
It not cool or normal to be a martyr. This mentality of scrappiness, sacrifice, and poverty in the nonprofit sector has got to go. We attract self-effacing individuals who tend to think of the common good. But sometimes we go too far, and it’s ultimately harmful to our work and to our community. Says Michelle Douglas of the Rainbow Center, “I say down with the idea if you are not a martyr you cannot work for a non-profit. People cannot eat mission.” Another colleague adds, “I also think it will be up to those of us in nonprofit leadership to help model the way and not get stuck in the ‘well I had to work 50 hours a week for $25K and I didn’t complain’ mindset.” I am declaring that it is no longer cool to be hyper-busy, underpaid, overworked, and looking like a beat-up leather shoe while helping people.
We must stop hiding and apologizing for the actual costs of making the world better. Many of us are sick of constantly having to justify our “overhead,” which society still views as wasteful. We have been brainwashed to believe it ourselves also. But as one colleague says, “We do our field a disservice by pretending it costs less than it actually does to accomplish our mission.” Another adds, “We need to help donors understand the importance of operation dollars and IF you’re asking an entire nonprofit sector to step up to end hunger, homelessness, mental illness, addiction, as well as provide important programming for youth, families, adults, and seniors, THEN you need to support these organizations across the board. Let’s change the paradigm and value the important work we are all doing [by disclosing and funding] the true cost of our missions.”
Society needs to step up. Honestly, so many of us are so exhausted. The work is difficult enough without the restricted funding, mistrust, and unconscious (sometimes conscious) disdain of nonprofits. Once a while, we get a chance to breathe, and we realize that many of the services we struggle to provide should be the work of the government and should be paid for by taxes. Many of us are providing services because for-profits and the governments have neglected a whole bunch of people and issues. One of my colleagues says the new law “should be a call for the non-profit sector to stand in solidarity and speak out about how broken our economy is and how bankrupt our corporations are–And the need for fundamental tax reform and actual tax enforcement on the top 10-20%.” I’m inclined to agree; we need to work on getting the rest of society to pay its fair share to live in a safe and vibrant community, a community we nonprofits are working each day to build. We are carrying too much of the burden.
I know the new laws are kind of scary for many of us. Funders and donors need to increase their support, and we need to figure out how to reclassify staff, increase people’s pay, determine new work schedules and habits, and revise our budgets.
But like eating our vegetables, exercising, and flossing, the new laws are good for us, forcing to reexamine our underlying philosophies and cultures, many of which are outdated, harmful, and sometimes even unethical. Our work is the most complex and difficult and important and emotionally draining work that exists. We must ensure that our people, our hardworking, compassionate, endlessly creative people, are taken care of.
As Judy Chen of WSCADV says, “It’s understandable to want to put any new money into meeting the tidal wave of human need. But if we don’t invest in staff, then our own ship starts sinking, and then what will happen to the people we’re serving?”
In the short term, the new laws will be painful. In the long term, they are good for our sector, and thus for our community.
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